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income received by the agent, or that it covers all of the income of the principal from sources within the United States, as the case may be. The affidavit on the corporation's form is prepared for execution by two officers of the corporation. When the return is signed by an agent for a foreign corporation, an affidavit that he is the properly authorized agent, and that the report covers income from all sources within the United States, or income passing through his hands, as the case may be, should be attached to the return and duly executed. The return may be filed in the district in which the agent resides or has his principal place of business.
Paying the Tax for Non-Resident Principal. After filing the return, the agent will in due course receive a notice of assessment showing the amount of tax assessed on the income reported.18 The tax becomes due and pay. able at the same time and in the same manner as the tax assessed on the income of a resident, and may be paid in the same way.19 Upon paying the tax, the agent may demand a separate receipt for the amount paid on behalf of his non-resident principal, and such receipt is sufficient evidence to justify the agent in withholding the amount therein expressed from his next payment to the principal, if he has not already withheld a sufficient amount to satisfy the tax. The principal may demand this receipt from the agent upon giving him a full written receipt acknowledging the payment of the tax as a satisfaction of the agent's debt to that extent.20
18 A special ruling was made to cover cases in 1916, where the agent for a non-resident alien had received income from corporate interest or dividends and paid the same over to his principal prior to September 8. In such cases, if the agent did not have, between September 8 and the end of the year, any income of the nonresident alien from which to pay the tax he was relieved from liability, leaving the tax a charge against the non-resident alien to be collected direct from him by the Treasury Department. T. D.
19 See Chapter 36 on assessment and payment of the tax.
Abatement and Refund. Taxes improperly or illegally assessed or collected may be abated or refunded in the manner indicated in the chapter dealing with that subject. 21
20 Act of September 8, 1916, § 17.
For convenience in handling financial transactions, stock certificates are sometimes issued in the names of persons other than the actual owners of the stock. The persons so holding the nominal title to the stock are known as nominal stockholders, or stockholders of record, and, of course, are agents for the actual owners within the meaning used in the preceding chapter, when the actual owners are non-resident aliens or non-resident foreign corporations. Nominal stockholders, acting by arrangement between the parties, are, of course, aware of the name and status of the actual owner, but in some cases one may become a nominal stockholder without any knowledge of who the actual owner is. Thus, stock certificates, endorsed in blank by an actual owner and sold on the market, may pass by delivery to several consecutive purchasers before the stock is transferred on the books of the corporation. In such cases, the original transferor remains the record owner until the transfer is made on the corporate books, and, as such, is presumed to be the real owner of the dividends declared on the stock, unless he proves that actual ownership of the stock does not rest in him. If, however, the record owner has not only parted with his certificate endorsed in blank, but has also given the corporation a “dividend order” to pay the dividends to another, his responsibility for the tax on such dividends ceases, and the one to whom the corporation pays the dividends becomes liable for any tax thereon, unless he in turn shows that actual own. ership does not rest in him. Where the stockholder of record continues to receive the dividends and subsequently pays them over to the one claiming to be the actual owner, or agent for the actual owner, he should ascertain the name and address of the one to whom the payment is made, and, if such payee is not a nonresident alien or a non-resident foreign corporation, the nominal stockholder is under no further duty than, perhaps, to report the name and address of the payee under the provisions of law requiring information at the Thus, if
nominal stockholder pays over the dividend to a resident, even though he knows such resident to be the agent of a non-resident alien, he is under no duty as agent, since it is the one who collects the dividend for a non-resident or who finally pays it over to a non-resident, who has impressed upon him the duty of agent within the meaning of the preceding chapter.
Procedure When Actual Owner Is a Resident or Citizen. The Treasury Department has as yet issued no regulation requiring the nominal or record owner of stock to disclose the names of actual owners who are residents or citizens. The primary purpose of requiring disclosure of the actual owner is to assist in administering that provision of the 1916 Law which makes dividends on domestic stocks taxable when paid to non-resident aliens and requires withholding when paid to nonresident foreign corporations. The actual owner is, of
i The rulings on this subjeet have not always been consistent but it seems that the statements contained in this chapter represent the present attitude of the Treasury Department.
2 Letter from Treasury Department dated November 21, 1916; I. T. S. 1917, 1183.
course, in all cases under the duty of reporting the dividends and paying tax thereon, if he is liable; the nominal stockholder is under no duty to report the dividends as his income, but should be prepared, if question arises, to show that the actual ownership does not rest in him.
Procedure When Actual Owner Is Non-Resident. Where the nominal stockholder is a resident of this country and is acting for, or paying the dividends to an actual owner who is a non-resident alien individual, or a foreign corporation or partnership having no office or place of business in this country, a certificate 3 should be obtained by the nominal owner from the actual owner, disclosing the facts of such ownership, which certificate is required to be forwarded by the nominal owner to the collector of internal revenue in the manner stated below. A certificate of actual ownership once filed is held to be sufficient until ownership changes, when it is necessary to disclose the new actual owner, as in the first instance. In such cases, the nominal stockholder is deemed to be an agent in this country for the non-resident actual owner and will be required to make a return of net income and to pay any tax due on the dividends which pass through his hands, just as other agents for non-resident aliens are required to do under the law.4 The certificates disclosing actual ownership should be attached in such cases to the return of income filed for the 'actual owner. If the amount of income is so small that no annual return is required, the certificates disclosing actual own
3 This certificate is officially known as Form 1087.
4 See Chapter 6 for duties of agent as to making returns and paying tax for non-resident aliens and non-resident foreign corporations,