4. Losses actually sustained during the year, incurred in the business or trade, or arising from fires, storms, shipwreck, or other casualty, and from theft when such losses are not compensated for by insurance or otherwise: Provided, that for the purposes of ascertaining the loss sustained from the sale or other disposition of property, real, personal, or mixed, acquired before March first, nineteen hundred and thirteen, the fair market value of such property as of March first, nineteen hundred and thirteen, shall be the basis for determining the amount of such loss sustained;

5. In transactions entered into for profit but not connected with the business or trade, the losses actually sustained therein during the year to an amount not exceeding the profits arising therefrom;

6. Debts due to the taxpayer actually ascertained to be worthless and charged off within the year;

7. A reasonable allowance for the exhaustion, wear and tear of property arising out of its use or employment in the business or trade;

8. (a) In the case of oil and gas wells a reasonable allowance for actual reduction in flow and production to be ascertained not by the flush flow, but by the settled production or regular flow; (b) in case of mines a reasonable allowance for depletion thereof not to exceed the market value in the mine of the product thereof, which has been mined and sold during the year for which the return and computation are made;

9. Contributions or gifts to charitable, religious, eleemosynary, etc., corporations or associations, not to exceed 15% of the Net Income.

In computing the taxable income for the purposes of the NORMAL TAX and the WAR TAX there shall be deducted from the NET INCOME as above ascertained:

(a) The amount included in the GROSS INCOME received as dividends upon the stock or from the net earnings of any corporation, joint-stock company, association, or insurance company which is taxable upon its net income, and income from 4% Liberty Bonds;

(b) The specific or personal exemption on the Normal Tax of $3,000, plus $1,000 additional if the person making the return be a head of a family or a married man with a wife living with him, or plus $1,000 addi-tional if the person making the return be a married woman with a husband living with her; and the specific exemption on the War Tax of $1,000 plus $1,000 if the person making the return be the head of a family or married. If the person making the return is the head of a family there shall be an additional exemption of $200 for each child dependent upon such person, if under 18 years of age, or if incapable of self-support because mentally or physically defective.

Only one exemption is allowed a husband and wife living together. The term "dividends" shall be held to mean any distribution made or ordered to be made by a corporation, joint-stock company, association, or insurance company, out of its earnings or profits accrued since March 1st, 1913, and payable to its shareholders, whether in cash or in stock of the corporation, joint-stock company, association, or insurance company, which stock dividend shall be considered income to the amount of the earnings or profits so distributed.

Any distribution made to the shareholders or members of a corporation, joint-stock company, or association, or insurance company, in the year 1917, or subsequent tax years, shall be deemed to have been made from the most recently accumulated undivided profits or surplus, and shall constitute a part of the annual income of the distributee for the year in which received, and shall be taxed to the distributee at the rates prescribed by law for the years in which such profits or surplus were accumulated by the corporation, joint-stock company, association, or insurance company, but nothing herein shall be construed as taxing any earnings or profits accrued prior to March 1st, 1913, but such earnings or profits may be distributed in stock dividends or otherwise, exempt from tax, after the distribution of earnings and profits accrued since March 1st, 1913, has been made. This paragraph shall not apply to any distribution made prior to August 6, 1917, out of earnings or profits accrued prior to March 1st, 1913.

Returns must be made by individuals having a Net Income of $1,000 or over in case of a single person, and $2,000 or over in case of a married person, on or before March 1st, 1918, and the first day of March of each year thereafter, to the Collector of Internal Revenue for the District in which such person has his legal residence or principal place of business. The Tax must be paid on or before the 15th day of June, of the taxable year.

Penalty imposed of 5% of tax unpaid and interest at 1% per month for failure to pay tax 10 days after notice.

Table No. 1

Rate of Normal Tax, Additional, Super or Sur Tax, War Tax and War Additional Tax imposed for the year 1917, and each year thereafte upon the Net Income of individuals.

*Net Income is Gross Income less General Deductions.

†The Normal Tax and the War Tax are computed on the Net Income less dividends and income from 4% Liberty Bonds and the Specific or Personal Exemptions. A credit of 2% of the income is allowed on which the tax has been paid at the source.

The Additional or Super Tax and the War Additional Tax are com puted on the total Net Income. Dividends are taxed at the rate prescribed by law for the year in which earned.

NOTES.-Specific or Personal Exemption allowed on the Normal Tax: Single person, $3,000; head of a family or married person, $4,000.

Specific or Personal Exemption allowed on War Tax:

Single Person, $1,000; head of a family or married person, $2,000.

A head of a family is allowed an additional exemption on the Normal Tax and the War Tax of $200 for each dependent child if under 18 years of age. See Table No. 4 for Tax Rates on War Excess Profits.

Table No. 2

Amount of Normal Tax and War Tax imposed for the year 1917 and each year thereafter upon specified Net Incomes of single or married persons, the specific or personal exemption having been allowed.

*Net Income is Gross Income less General Deductions.

NOTES. Before computing the Total Tax in Table No. 2, deduct from the Net Income the amount included therein received as dividends, income from per cent Liberty Bonds, and $200 for each dependent child if under 18 years age.

4

of

Incomes of less than $5,000 are not subject to the Additional or Sur Tax or the War Additional Tax.

A credit of 2 per cent of the income is allowed on which the Tax has been paid at the source.

To determine the Total Tax imposed for the year 1917 and each year thereafter on any Net Income from $1,000 to $5,000, not shown in the above table, proceed as follows:

EXAMPLE-A married person having two dependent children under 18 years of age, whose Net Income is $3,815 of which $300 was received in dividends.

Net Income...

2 Dependent Children at $200 is.

Amount received in dividends is.

Taxable Income.....

Total Tax on $3,100 (see Table No. 2) is..

$3,115 exceeds $3,100 by $15 and $15 at 2% (see rate shown in table

on excess of $3,100) is....

.30

Total Tax is...

$22.30

Table No. 3

Amount of Normal Tax, Additional, Super or Sur Tax, War Tax and War Additional Tax imposed for the year 1917 and each year thereafter upon specified Net Incomes of single or married persons the specific or personal exemption having been allowed.

*Net Income is Gross Income less General Deductions.

NOTES.-A deduction of $8 from the total tax shown in table is allowed a head of a family for each dependent child if under 18 years of age

Deduct 4% of the amount included in the Net Income received as dividends and income from 4% Liberty Bonds; said dividends and bonds, however, must not reduce the Net Income below $2,000 for a single person or $3,000 for a married person.

Deduct 2% of Income on which the tax has been paid at the source.

If dividends included in the Net Income were earned prior to January 1, 1917, this table does not apply.

See Table No. 4 for the Amount of War Excess Profits Tax.

To determine the Total Tax imposed for the year 1917 and each year thereafter on any Net Income over $5,000, not shown in the above table, proceed as follows:

EXAMPLE-A Single Person whose Net Income is $12,000 of which $2,000 was received in Dividends earned subsequent to January 1st, 1917.

.

Total Tax on $10,000 (see Table No. 3) is....

$395.00

$12,000 exceeds $10,000 by $2,000, and $2,000 at 7% (see rate shown on excess of $10,000 in Table No. 3) is.

140.00

Tax on Corporations

There shall be levied, assessed, collected, and paid upon the entire Net Income received in the preceding calendar year (January 1st to December 31st), from all sources, by every corporation, joint-stock company or association, or insurance company, organized in the United States, no matter how created or organized, the following taxes:

1. A Normal Tax of 2% upon such Net Income.

2. A War Tax of 4% upon such Net Income, which shall be computed, levied, assessed, collected, and paid upon the same incomes and in the same manner as the tax imposed by Act of September 8th, 1916 as amended, except that for the purpose of the tax imposed by this paragraph the income embraced in a return of a corporation, joint-stock company or association, or insurance company, shall be credited with the amount received as dividends upon the stock or from the net earnings of any other corporation, joint-stock company or association, or insurance company, which is taxable upon its Net Income.

3. An additional tax of 10% upon the amount, remaining undistributed 6 months after the end of each calendar or fiscal year, of the total Net Income of every corporation, joint-stock company or association, or insurance company, received during the year, as determined for the purpose of the tax imposed, but not including the amount of any income taxes paid by it within the year imposed by the authority of the United States.

The tax imposed by this paragraph shall not apply to that portion of such undistributed Net Income which is actually invested and em ployed in the business or is retained for employment in the reasonable requirements of the business or is invested in obligations of the United States issued after September 1st, 1917: Provided, That if the Secretary of the Treasury ascertains and finds that any portion of such amount so retained at any time for employment in the business is not so employed or is not reasonably required in the business a tax of 15% shall be levied, assessed, collected and paid thereon.

The foregoing tax rates shall apply to the undistributed Net Income received by every taxable corporation, joint-stock company or associa tion, or insurance company in the calendar year 1917 and each year thereafter, except that if it has fixed its own fiscal year under the provisions of existing law, the foregoing rates shall apply to the proportion of the taxable undistributed Net Income returned for the fiscal year ending prior to December 31st, 1917, which the period between January 1st, 1917, and the end of such fiscal year bears to the whole of such fiscal year.

4. War excess Profits Tax (see following page and Table No. 4).

The Net Income shall be ascertained by deduction from the gross amount of the income received within the year from all sources

1. All the ordinary expenses paid within the year in the maintenance and operation of its business and properties, including rentals or other payments required to be made as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity.

2. All losses actually sustained and charged off within the year and not compensated by insurance or otherwise, including a reasonable allowance for the exhaustion, wear and tear of property arising out of its use or employment.

3. The amount of interest paid within the year on its indebtedness (except indebtedness incurred for the purchase of obligations or securities the interest upon which is exempt from taxation as income) to an amount of such indebtedness not in excess of the sum of (a) the entire amount of the paid-up capital stock outstanding at the close of the year, or, if no capital stock, the entire amount of capital employed in the business at the close of the year, and (b) one-half of its interest-bearing indebtedness then outstanding.

4. Taxes paid within the year imposed by the authority of the United States (except Income and War Excess Profits Taxes) or its Territories, or possessions, or any foreign country, or under the authority of any State, county, school district, or municipality, or other taxing subdivision of any State, not including those assessed against local benefits.

Returns must be made on or before March 1st, or if it has fixed its own fiscal year, then within 60 days after the close of the fiscal year ending prior to December 31st, for each taxable year. The Tax must be paid on or before June 15th, except where it has fixed its own fiscal year, in which case the tax must be paid within 105 days after the return is required.