[Page 166.] Gross Income. There is specifically exempted from taxation interest received on obligations of the United States or its possessions, or on the obligations of a State or any political subdivision thereof. Therefore, in ascertaining gross income for the purposes of the tax, all interest received from such sources should be eliminated. (Report to State, schedule D, parts 1 and 4.) As accrued interest on bonds purchased is not included in the interest income reported to the State insurance department, it must not be included in the amount eliminated from gross income in the return. (Report to State, schedule D, part 3.) In the case of obligations of the United States issued after September 1, 1917, income from such obligations is exempt from tax only to the extent provided in the act authorizing their issue. Income from such obligations received by insurance companies is exempt from the 2 per cent and 4 per cent income tax. (Reg. 33 Rev., Art. 239.) [Page 174.] Dividends Dividends Provisionally Ascertained. provisionally ascertained, apportioned, or credited on deferred dividend policies cannot be excluded or deducted from gross income for the reason that the assured has no vested or enforceable right in them and cannot, at the time of the ascertainment, apportionment, or credit, nor until the maturity of the policy, avail himself of such dividends; and in the event of the death of the assured prior to the expiration of the deferred dividend period, the amount so ascertained, apportioned, or credited lapses. (Reg. 33 Rev., Art. 241.) [Page 175.] Copy of Report to State. As an assistance in audit ing the returns, wherever possible, a copy of the report to the State insurance department should be submitted with the returns; otherwise schedule D, parts 1, 3 and 4, of the report should be attached thereto showing Federal, State, and municipal obligations from which the interest omitted from gross income was derived. (Reg. 33 Rev., Art. 239.) [Page 175.] Foreign Insurance Companies. Insurance companies organized, authorized, or existing under the laws of any foreign government shall report as gross income the gross amount received within the year from all sources within the United States or its possessions. Income from business transacted by a United States branch or agency of a foreign insurance company which relates to a foreign country must be returned as gross income. Otherwise articles applicable to insurance companies in general will be followed as to income and deductions. Insurance companies organized, authorized, or existing under the laws of any foreign government, not transacting an insurance business in the United States or its possessions but receiving income from investments therein must make returns of such income, deducting therefrom the amount of such income withheld at the source. (Reg. 33 Rev., Art. 244.) CHAPTER 14 [Page 177.] FOREIGN CORPORATIONS Corporations Subject to Tax. It is not necessary that the foreign corporation shall be engaged in busi ness in this country or that it have an office, branch, or agency in the United States. Liability to the tax attaches with respect to the income, the source of which is in the United States. "Source" as here used means the place of the origin of the income. Every foreign corporation having income from sources within the United States must make returns of annual net income in accordance with the rule set out in section 12 (b) of the act of September 8, 1916, as amended by the act of October 3, 1917. (Reg. 33 Rev., Art. 66.) [Page 180.] Foreign Governments. Section 30 of the act of September 8, 1916, as amended by the act of October 3, 1917, provides that the income of foreign Governments received from investments in the United States in stocks, bonds, or other domestic securities owned by them, or from interest on deposits in banks in the United States of money belonging to such foreign Governments, is exempt from the tax imposed by this title. This does not, however, exempt from the tax any income collected by foreign Governments from investments in the United States in stocks, bonds, or other domestic securities, which are not bona fide owned by but are loaned to such foreign Governments. The exemption here provided for is predicated upon the fact that the securities or moneys from which income is derived are actually owned by such foreign Governments. (Reg. 33 Rev., Article 87.) [Page 181.] Collection of the Tax at the Source. If for any reason there is included in the return which a foreign cor poration is required to make of all income received from sources within the United States any income upon which tax has been withheld at the source, such foreign corporation may take credit against the amount of tax due for the amount of the tax so withheld at the source; provided a statement is attached to the return setting forth the source and amount of the income upon which the tax was so withheld. (Reg. 33 Rev., Art. 201.) CHAPTER 15 EXEMPT CORPORATIONS [Page 194.] Where Question as to Right of Exemption Exists. In every instance wherein exemption is conditioned upon the ground that no part of the net income received by corporations inures to the benefit of any private stockholder or individual, it will be necessary, before such organizations will be classed as exempt, for them to show to the satisfaction of the collector or the Commissioner of Internal Revenue: (1) The character and purpose of the organization; (2) The source from which all its income is derived; (3) What disposition is made of such incomes; and (4) Whether or not any of it is credited to surplus or inures or may inure to the benefit of any private stockholder or individual. (Reg. 33 Rev., Art. 78.) [Page 197.] Domestic Building and Loan Associations. A domestic building and loan association entitled to exemption is one organized under and pursuant to the laws of the United States or under and pursuant to the laws of some State or Territory thereof, and which is actually carrying on for the benefit of its members a building and loan association, business in accordance with the laws under which it is organized. The fact that such an association issues fully paid or prepaid shares, calling for a specified rate of interest or dividends, will not disqualify it for exemption. The exemption is without qualfication other than that the association is a domestic building and loan association. If a corporation by any other name is carrying on an exclusive building and loan business, before it is entitled to exemption it will be incumbent upon it to show to the satisfaction of the Commissioner of Internal Revenue that it is in fact a building and loan association. (Reg. 33 Rev., Art. 70.) [Page 199.] Cemetery Companies. A cemetery company having a capital stock represented by shares, or which is operated for profit or for the benefit of others than its members, does not come within the exempted class, and will be required to make returns of annual net income and pay any income tax thereby shown to be due. In the case of such company a reserve set aside out of profits as a "maintenance fund" is not deductible from gross income, and any accretions to such fund will be held to be income, and as such, must be returned by the corporation. The expenses of maintenance will be deductible as they are paid. (Reg. 33 Rev., Art. 71.) [Page 199.] Clubs. If a club, by reason of the comprehensive powers granted in its charter, engages in traffic, in agri |