excess of 15% of the net income of such non-resident aliens including the amount of such contribution or gift.64 AMORTIZATION. Non-resident aliens are permitted a reasonable deduction of such part of the cost of buildings, machinery, equipment or other facilities constructed, erected, installed or acquired on or after April 6, 1917, for the production of articles contributing to the prosecution of the war with Germany and vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the war with Germany as has been borne by them but not again including any amount otherwise allowed under the Revenue Act of 1918 or previous income tax laws as a deduction in computing net income. The subject of such amortization, however, in the case of non-resident aliens must be connected with income arising from a source within the United States and a proper apportionment and allocation of this deduction with respect to sources of income within and without the United States must be determined.65 Certain rules pertaining to the re-examination of returns and redetermination of the amount of tax for purposes of amortization and also pertaining to the collection of underpayments and credit or refund of over-payments are set forth elsewhere in this book.66

CREDIT OF DIVIDENDS. Non-resident aliens are permitted a credit of certain dividends for the purpose of the normal tax only in certain cases. This subject is discussed elsewhere in this chapter.67

CREDIT OF INTEREST. Non-resident aliens are permitted a credit for purposes of the normal tax of interest upon obligations of the United States and bonds issued by the War Finance Corporation which is included in gross in

64 Revenue Act of 1918, § 214 (a) 11; Reg. 45, Art. 271. Prior to the enactment of the Revenue Act of 1918 gifts or contributions were in no case deductible by non-resident aliens.

65 Revenue Act of 1918, § 214 (a) 9 and (b).

66 See Chapter 31.

67 See paragraph on Dividends, supra, page 69.

come. This subject is discussed elsewhere in this chap

ter.

68

TAX WITHHELD AT THE SOURCE.

As the law requires the normal tax to be withheld by the one in this country who pays fixed or determinable income to a non-resident alien,69 a due credit for the amount so withheld may be claimed in filing the annual return. The non-resident alien should therefore keep a record of the amount of tax withheld at the source from time to time on payments made to him, and should report the aggregate sum so withheld in his annual return, in order that the normal tax may not be twice collected with respect to the same in

come.

PERSONAL EXEMPTION. A non-resident alien individual, similarly to a citizen or resident, is entitled for the purpose of the normal tax to a personal exemption, and $200 for each dependent, except that if he is a citizen or subject of a country which imposes an income tax the personal exemption is allowed only if his country allows a similar credit to citizens of the United States not residing in such country. By "similar credit" is meant the same personal exemption or credit for dependents to citizens of the United States as is allowed citizens of such country, not necessarily the same amount as in the United States statute.70

Returns. A non-resident alien individual must make or have made for him a full and accurate return of income received from sources within the United States, regardless of amount, unless the tax on such income has been fully paid at the source.71 A non-resident alien may

68 See paragraph on Interest, supra, page 70.

69 See Chapter 40 on Collection of the Tax at the Source.

70 Reg. 45, Art. 305.

71 Revenue Act of 1918, § 223; Reg. 45, Art. 403. Form 1040 (revised) is used for this purpose. Under the 1916 Law the same form (Form No. 1040) was prescribed for the use of all individuals, resident and non-resident. A non-resident alien made such changes as were necessary to indicate that the return covered in his case only income from sources within this country. The additional information F. T.-6

have had the tax on all his income arising from sources within this country withheld at the source although he may be taxable on a lesser amount by reason of expenses, interest, losses and other deductible items. Only by filing a return may he claim these deductions and secure the return to him of any amount withheld in excess of his tax liability. Such return must include such information as may be deemed necessary by the Commissioner for the calculation of any deductions and credits to which he may be entitled. But, unless the country of which the nonresident alien is a subject or citizen imposes an income tax and does not allow a subject or citizen of the United States not residing therein a similar credit, the personal exemption and the credit for dependents may be allowed to nonresident aliens in the discretion of the Commissioner without the filing of the above return of income from all sources within the United States, such credits being received in such case by the filing of a claim therefor with the withholding agent.72 The Commissioner has ruled, however, that for the present the benefit of the credits allowed against net income for the purpose of the normal tax may not be received by a non-resident alien by filing a claim with the withholding agent, but only by claiming them upon filing a return of income. Unless a non-resident alien individual renders a return of income, the tax will be collected on the basis of his gross income (not his net income) from sources within the United States. Where non-resident aliens have various sources of income within the United States, so that from any one source or from all sources combined the amount of income calls for the assessment of a surtax, and a return of income is not filed by or on behalf of a nonresident alien, the Commissioner will cause a return of income to be made and include therein the income of such non-resident alien from all sources concerning which he

required in order to compute the amount of deductible interest (deductions and credits under the present law) was made on a supplementary statement attached to the return.

72 Revenue Act of 1918, § 217.

has information, and he will assess the tax and collect it from one or more of the sources of income within the United States of such non-resident alien, without allowance for deductions or credits.73 For the purpose of obtaining a refund of any amount withheld in excess of his tax liability as above indicated, a non-resident alien was required under the 1916 Law to attach to his return a statement giving the names and post office addresses of all persons, firms or corporations who had withheld the tax on income paid to him during the year, and the amount of tax withheld by each respectively.74 Under the present law it is ruled that there should be attached to the return a statement showing accurately the amounts of tax withheld with the names and post office addresses of all withholding agents.75 Upon the basis of such information the Treasury Department thereupon orders the withholding agent to release the excess withheld.76

RETURNS BY AGENTS. If a non-resident alien is unable to make his own return it may be made on his behalf by a duly authorized agent and in proper cases may also be made by guardians or other persons charged with the care of the person or property of such taxpayer.77 It should be borne in mind that a non-resident alien may have an agent in this country for the purpose of making returns without having appointed one. The responsible representatives of non-resident aliens in connection with any sources of income which such non-resident aliens may have within the United States must make a return of such income, and must pay any and all tax, normal and additional, assessed upon the income received by them in behalf of their non-resident alien principals, in all cases where

73 Reg. 45, Art. 315.

74 Telegram from Treasury Department dated January 25, 1917; I. T. S. 1918, ¶ 91.

75 Reg. 45, Art. 403.

76 Telegram from Treasury Department dated January 25, 1917; I. T. S. 1918, ¶ 91.

77 Revenue Act of 1918, § 223.

the tax on income so in their receipt, custody or control shall not have been withheld at the source. The agent of a non-resident alien is responsible for a correct return of all income accruing to his principal within the purview of the agency. The agency appointment will determine how completely the agent is substituted for the principal for tax purposes.78 Any individual, partnership or corporation having the control of, receipt, custody, disposal or payment of fixed or determinable income payable to any nonresident alien, such income with certain exceptions, being required to be withheld at the source, makes a return thereof on or before March 1st of each year and pays the tax due thereon on or before June 15th.79

WHERE FILED. A non-resident alien files his return in the district in which he has his principal place of business in this country, and if he has none, then with the Collector of Internal Revenue at Baltimore, Maryland.80

WHEN FILED. The return of a non-resident alien should be filed on or before March 15th or on or before the 15th day of the third month following the close of such nonresident's fiscal year accordingly as he reports for income tax purposes on the basis of the calendar or a fiscal year, 81

EXTENSION OF TIME. Non-resident aliens are allowed a reasonable extension of time for filing returns whenever in the judgment of the Commissioner good cause exists for such extension.82

FAILURE TO FILE RETURN. In general, non-resident aliens are subject to the same penalties for failure to file returns as are citizens and residents.83 In case of failure to file a return the collector will collect the tax on the

78 Reg. 45, Art. 403.

79 Revenue Act of 1918, § 221. See Chapter 40 on Collection of the Tax at the Source, and Chapter 6 on Resident Agents.

80 Revenue Act of 1918, § 227 (b).

81 Revenue Act of 1918, § 227 (a).

82 Revenue Act of 1918, § 227 (a). See Chapter 34 on Returns. 83 See Chapter 36 on Penalties.