or heads of families (with additional $200 for each dependent child).

Under the Act of October 3, 1917, an additional normal tax of two per centum shall be collected on such net income, except that the personal exemption shall be $1,000 for single persons, or $2,000 for married persons or heads of families (with additional $200 for each dependent child).

By combining the normal taxes of two per centum, net income in excess of $3,000 for single persons and $4,000 for married persons or heads of families (with additional exemptions for children), is subject to a total normal tax of four per

centum.

Illustration of Computation of Tax

The following example will show the steps in the computation of the normal tax and surtax:

"B," a married man, having two dependent children, has a net income of $17,400, including dividends amounting to $3,000; his excess profits tax amounts to $1,000.

Non-Resident Aliens

Non-resident aliens are subject to the normal tax on net income but only to the two per centum under the Act of September 8, 1916.

Surtax

Citizens and residents of the United States and non-resident aliens are also subject to an additional graduated tax, known as the surtax, which is assessed against net income in excess of $5,000, including dividends of domestic corporations, joint-stock companies or associations and insurance companies.

The chart on the following page shows the rates of normal tax and surtax under the Act of September 8, 1916, and the Act of October 3, 1917, and the total tax on residents and citizens of the United States under both laws, effective for the calendar year 1917 and each calendar year thereafter.

Gross Income

Gross income required to be reported in the annual return of the taxpayer includes gains, profits and income derived from:

1. Salaries, wages or compensation for personal service of whatever kind and in whatever form paid;

2. Professions, vocations, businesses, trade, commerce, or sales, or dealings in property,

INCOME TAX CHART

Based on the War Income Tax Law, and the Income Tax Law, as amended October 3, 1917

(Chart shows the tax payable by a married person, but does not take cognizance of the $200 exemption for each dependent child)

40,000 720 760
60,000 1,120 1,160
80,000 1,520 1,560
100,000 1,920 1,960
150,000 2,920 2,960
200,000 3,920 3,960
250,000 4,920 4,960
300,000 5,920 5,960
500,000 9,920 9,960
750,000 14,920 14,960
1,000,000 19,920 19,960
1,500,000 29,920 29,960
2,000,000 39,920 39,960
3,000,000 59,920 59,960
+Single persons, $3,000.

2,280 2% 10% 12%
3,080 3% 14% 17%
3,880 4% 18% 22%
5,880 5% 22% 27%
7,880 6% 25% 31%
9,880 7% 30% 37%
11,880 8% 34% 42%
19,880 9% 37% 46%
29,880 10% 40% 50%
750,000 125,000 297,800
39,880 10% 45% 55% 750,000 1,000,000 137,500
59,880 11% 50% 61% 1,000,000 " 1,500,000 305,000 740,300 800,180
79,880 12% 50% 62% 1,500,000 2,000,000 310,000 1,050,300 1,130,180
119,880 13% 50% 63% On excess of 2,000,000 630,000 1,680,300 1,800,180
Single persons, $1,000. **Total Surtax is the total of the Installments for the Income considered.

500,000"

435,300 475,180

20,000"

40,000

1,600

2,100

3,580

40,000"

60,000

2,400

4,500

6,780

60,000 "

80,000

3,400

7,900

10,980

327,680

whether real or personal, growing out of the ownership or use of or interest in real or personal property;

3. Interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit;

4. Gains or profits and income derived from any source whatever, including the income from all property acquired by gift, bequest, devise or descent.

Dividends Defined

The term "dividends" means any distribution made by a corporation, joint-stock company, association, or insurance company, out of its earnings or profits accrued since March 1, 1913, and payable to its shareholders, whether in cash or in stock of the corporation, joint stock company, association, or insurance company.

Stock Dividends

A stock dividend shall be considered income, to the amount of surplus, undivided profits and earnings distributed. For example, if a corporation issues a stock dividend of one hundred shares, having a par value of $100 each, and transfers to capital an amount of surplus and undivided profits equal to the value of the stock distributed, the par value of the stock received shall be returned as income, subject to the surtax.