Insurance Dividends

Dividends from paid-up policies are considered income to the recipient, and should be treated the same as dividends from net earnings of corporations.

Accident and Health Insurance

Money received by the insured from accident and health insurance must be returned as income.

Rents

The gross amount of rental received from real property should be returned as income. When permanent improvements are made by a lessee, under contract, the difference between the cost of the improvements and allowable depreciation during the term of the lease is considered rental and subject to tax.

Royalty

Royalty paid to a proprietor by those who are allowed to develop or use property or operate under some right belonging to him, is to be accounted for as income.

Income Accruing to Minor Child

Where a minor child has from time to time received from his father and other relatives gifts of money and other property, usually as birthday or Christmas presents, and such money

and property has been invested on behalf of the child by the father, although he has never been legally appointed guardian, the income derived from such money and property is taxable income and shall be included in the return of the father.

Likewise, the income received by a dependent child for services is deemed income of the parent and shall be reported by the parent for taxation. This rule does not apply to the separate estate of the child which should be taxed separately from the income of the parent.

Sale of Property on Installments

In cases wherein property is sold on the install ment plan, title passing at the time of sale, the gain to be returned as income for the year in which the sale was made, will be the excess of the contract price over the fair market price or value as of March 1, 1913, if the property was acquired prior to that date, or of the contract price over the cost, if acquired subsequent to March 1, 1913. If the buyer forfeits his contract and fails to meet any of the payments contracted to be made, the selling corporation may deduct from its gross income as a loss, such proportion of the defaulted payments as was previously returned as gross income.

In the case of a contract to sell real estate or other property on the installment plan, title re

maining in the vendor until the property is fully paid for, the income to be returned by the vendor will be that proportion of each installment payment which the gross profit to be realized when the property is paid for bears to the gross contract price. If for any reason the vendee defaults in his installment payments and the vendor repossesses the property, the entire amount received on installment payments, less the proportion of profits previously returned, will be income to the vendor and returned for the year in which the property is repossessed.

Sale of Real Estate Subdivisions

Where a tract of land is purchased for the purpose of dividing it into lots or parcels of ground to sell as such, the entire value as of March 1, 1913, or the cost, if acquired subsequent to that date, shall be equitably apportioned to the several lots or parcels to the end that any gain derived from the sale of any of such lots or parcels may be returned as income for the year in which the sale is made.

Profits from Sale of Property

Profits derived from the sale of securities or other property, real or personal, are taxable income. For the purpose of ascertaining the

gain derived from the sale or other disposition of property, real, personal, or mixed, acquired before March 1, 1913, the fair market price or value of such property as of March 1, 1913, shall be the basis for determining the amount of the gain derived.

Fair Market Value

The fair market price or value of stocks and bonds as of March 1, 1913, is held to be the fair market price or value as of the entire day of March 1, 1913, which, in the case of variation between opening and closing price for the day, would mean the average price for the day. This however, would be conditioned upon showing that the exchange quotation represented the fair market price or value of the stock, as it is the fair market price or value which is to control, however that fact may be ascertained.

Parcels of Stock of Same Issue Bought and Sold at Different Dates

In cases where various parcels of stock of the same issue are bought and sold at different dates, the shares sold shall be identified, whenever possible, by the number of the certificates covering them. When stock is sold and its identity cannot be determined, it should be charged against the stock first purchased and remaining unsold.

Appreciation of Capital Assets

Any appreciation in the value of capital assets due to appraisal or adjustment and taken up on the books of the individual is held not to be income subject to tax until such appreciation, as a result of a completed and closed transaction, has been converted into cash or its equivalent: that is, has been realized as an addition to and a part of the tangible assets of the individual. A book entry reflecting only an enhanced value of assets during the year is not such income as the income tax law contemplates shall be returned for the purposes of the tax.

Promissory Notes in Payment of Income

A promissory note in settlement of an account is considered a payment of the account and so much of the amount of such note as represents net income subject to tax shall be returned as income for the year in which the note is received.

Partnership Profits

Partnerships, as such, are subject to excess profits tax, but are not subject to income tax. The individual partners must ascertain their proportionate shares in the net income and report the same in their individual returns of income, and the net income embraced in their returns