surplus or as a contribution to capital, and the accumulated earnings and profits as of the close of such taxable year shall be correspondingly reduced, if such amount or any portion thereof is required to be included as a dividend in the gross income of the shareholders.

(e) BASIS OF STOCK IN HANDS OF SHAREHOLDERS.-The amount required to be included in the gross income of the shareholder under subsection (b) shall, for the purpose of adjusting the basis of his stock with respect to which the distribution would have been made (if it had been made), be treated as having been reinvested by the shareholder as a contribution to the capital of the corporation; but only to the extent to which such amount is included in his gross income in his return, increased or decreased by any adjustment of such amount in the last determination of the shareholder's tax liability, made before the expiration of seven years after the date prescribed by law for filing the return.

(f) PERIOD OF LIMITATION ON ASSESSMENT AND COLLECTION.

For period of limitation on assessment and collection without assessment, in the case of failure to include in gross income the amount properly includible therein under subsection (b), see section 275 (d).

SEC. 395. NONRESIDENT ALIEN INDIVIDUALS

* *

In the case of a shareholder taxable under section 211 (a) * his distributive share of the undistributed Supplement S net income of the corporation required to be included in the gross income shall be considered as a dividend received by him from sources within the United States.

SEC. 396. SHAREHOLDER'S TAX PAID BY CORPORATION.

* * *

If a personal service corporation is exempt for any taxable year under section 725 from excess profits tax, it shall, at the time of filing its return, pay to the collector an amount equal to the amount that would be required by section 143 (b) to be deducted and withheld by the corporation if any amount required by this Supplement to be included in the gross income of the shareholder had been, on the last day of the taxable year of the corporation, paid to the shareholder in cash as a dividend. Such amount shall be collected and paid in the same manner as the amount of tax due in excess of that shown by the taxpayer upon a return in the case of a mathematical error appearing on the face of the return.

Supplement T-Individuals with Adjusted Gross Income of Less than $5,000

SEC. 400. IMPOSITION OF TAX.

In lieu of the taxes imposed by sections 11 and 12, there shall be levied, collected, and paid for each taxable year upon the net income of each individual whose adjusted gross income for such year is less than $5,000, and who has elected to pay the tax imposed by this supplement for such year, the tax shown in the following table:

$0

$2,300 $2.325 $364 $264 $164

$64 $47

0

2, 325

2,350 369 269

169

69 48

1

1

2, 350

2,375

374 271

174

74

49

2

2, 375

146

876 766 656 546 442 342 887 777 667 557 453 353 4,750 898 788 678 568 463 363 263 4,800 909 799 689 579 473 373 273 4,850 921 811 701 591 484 384 284 184 115 4,900 932 822 712 602 494 394 294 194 117 44 44 4,900 4, 950 943 833 723 613 504 404 304 204 118 45 45 4,950 5,000 954 844 734 624 515 415 315 215 119

108 92

92

118 94

94

Normal tax exemption in case of husband and wife: If the return includes gross income of both husband and wife, the tax shall be that determined under the table, reduced by 3 per centum of the smaller adjusted gross income, but not by more than $15.00.

[See also section 103.]

153

SEC. 401. DEFINITION OF "SURTAX EXEMPTION".

As used in the table in section 400, the term "number of surtax exemptions" means the number of the exemptions allowed under section 25 (b) as credits against net income for the purpose of the surtax imposed by section 12.

SEC. 402. MANNER AND EFFECT OF ELECTION.

The election referred to in section 400 shall be exercised in the manner provided in regulations prescribed by the Commissioner with the approval of the Secretary.

For cases in which election to take the standard deduction also constitutes an election to pay the tax imposed by this supplement, see section 23 (aa) (3) (D). For cases in which election to file a return without showing tax thereon constitutes an election to pay the tax imposed by this supplement, see section 51 (f).

SEC. 403. CREDITS NOT ALLOWED.

For credits against tax and against net income not allowed, in the case of a taxpayer who elects to pay the tax imposed by this supplement, because of the fact that such election constitutes an election to take the standard deduction, see section 23 (aa).

SEC. 404. CERTAIN TAXPAYERS INELIGIBLE.

This supplement shall not apply to a nonresident alien individual, to a citizen of the United States entitled to the benefits of section 251, to an estate or trust, or to an individual making a return for a period of less than twelve months on account of a change in the accounting period.

For provisions making both husband and wife ineligible to elect to pay the tax imposed by this supplement if either does not elect to take the standard deduction, see section 23 (aa) (4).

Supplement U-Abatement of Tax for Members of Armed Forces Upon Death

SEC. 421. ABATEMENT OF TAX FOR MEMBERS OF ARMED FORCES UPON DEATH.

* * *

* * *

In the case of any individual who dies while in active service as a member of the military or naval forces of the United States or of any of the other United Nations prior to the termination of the present war as proclaimed by the President, the tax imposed by this chapter shall not apply with respect to the taxable year in which falls the date of his death, and the tax under this chapter * for preceding taxable years which is unpaid at the date of his death (including interest, additions to the tax, and additional amounts) shall not be assessed, and if assessed the assessment shall be abated, and if collected shall be credited or refunded as an overpayment.

* *

[See also the note under section 3804.]

[Subchapter D of Chapter 2 (sections 700-706) provides for a tax on unjust enrichment, which relates primarily to the processing taxes under the Agricultural Adjustment Act, held unconstitutional in 1936. These provisions have been omitted from this document on account of the small number of cases, affecting individual taxpayers, likely to arise thereunder during taxable years beginning in 1944 or later. See also section 128.]

CHAPTER 5-THE TAX COURT OF THE UNITED

STATES

SUBCHAPTER A-ORGANIZATION, JURISDICTION AND PROCEDURE

Part I-Organization and Jurisdiction

[Section 504 (c) of the Revenue Act of 1942 (56 Stat. 957) reads as follows:

"All references in any statute (except this section), or in any rule, regulation, or order, to the 'Board of Tax Appeals' or to the 'Board' when used in the sense of 'Board of Tax Appeals', or to the 'member', 'members', or 'chairman' thereof shall be considered to be made to The Tax Court of the United States, the judge, judges, and presiding judge thereof, respectively."

In accordance with this provision, throughout this document the term "The Tax Court of the United States" has been substituted for "the Board of Tax Appeals", "Tax Court" for "Board", "judge" for "member", "judges" for "members", and "presiding judge" for "chairman".

'.]

SEC. 1100. STATUS.

The Tax Court of the United States (hereinafter referred to as the "Tax Court") shall be continued as an independent agency in the Executive Branch of the Government.

SEC. 1101. JURISDICTION.

* * *

The Tax Court and its divisions shall have such jurisdiction as is conferred on them by chapters 1

SEC. 1102. MEMBERSHIP.

*

(a) NUMBER. The Tax Court shall be composed of 16 judges.

(g) DISBARMENT OF REMOVED JUDGES. A judge of the Tax Court removed from office in accordance with subsection (f) shall not be permitted at any time to practice before the Court.

SEC. 1103. ORGANIZATION.

(a) SEAL.-The Tax Court shall have a seal which shall be judicially noticed.

(b) DESIGNATION OF PRESIDING JUDGE.-The Tax Court shall at least biennially designate a judge to act as presiding judge.

(c) DIVISIONS. The presiding judge may from time to time divide the Tax Court into divisions of one or more judges, assign the judges of the Tax Court thereto, and in case of a division of more than one judge, designate the chief thereof. If a division, as a result of a vacancy or the absence or inability of a judge assigned thereto to serve thereon, is composed of less than the number of judges designated for the division, the presiding judge may assign other judges to the division or direct the division to proceed with the transaction of business without awaiting any additional assignment of judges thereto.

(d) QUORUM.-A majority of the judges of the Tax Court or of any division thereof shall constitute a quorum for the transaction of the business of the Tax Court or of the division, respectively. A vacancy in the Tax Court or in any division thereof shall not impair the powers nor affect the duties of the Tax Court or division nor of the remaining judges of the Tax Court or division, respectively.

SEC. 1104. OFFICES.

The principal office of the Tax Court shall be in the District of Columbia, but the Tax Court or any of its divisions may sit at any place within the United States. The Secretary of the Treasury shall provide the Tax Court with suitable rooms in courthouses or other buildings when necessary for hearings by the Tax Court, or any division thereof, outside the District of Columbia.

SEC. 1105. TIMES AND PLACES OF MEETINGS.

The times and places of the meetings of the Tax Court and of its divisions shall be prescribed by the presiding judge with a view to securing reasonable opportunity to taxpayers to appear before the Tax Court or any of its divisions, with as little inconvenience and expense to taxpayers as is practicable.

Part II-Procedure

SEC. 1110. FEE FOR FILING PETITION.

The Tax Court is authorized to impose a fee in an amount not in excess of $10 to be fixed by the Tax Court for the filing of any petition for the redetermination of a deficiency.

SEC. 1111. RULES OF PRACTICE, PROCEDURE, AND EVIDENCE.

The proceedings of the Tax Court and its divisions shall be conducted in accordance with such rules of practice and procedure (other than rules of evidence) as the Tax Court may prescribe and in accordance with the rules of evidence applicable in the courts of the District of Columbia in the type of proceedings which prior to September 16, 1938, were within the jurisdiction of the courts of equity of said District.

SEC. 1112. BURDEN OF PROOF IN FRAUD CASES.

In any proceeding involving the issue whether the petitioner has been guilty of fraud with intent to evade tax, the burden of proof in respect of such issue shall be upon the Commissioner.

SEC. 1113. SERVICE OF PROCESS.

The mailing by registered mail of any pleading, decision, order, notice, or process in respect of proceedings before the Tax Court shall be held sufficient service of such pleading, decision, order, notice, or process.

SEC. 1114. ADMINISTRATION OF OATHS AND PROCUREMENT OF TES

TIMONY.

(a) IN GENERAL.-For the efficient administration of the functions vested in the Tax Court or any division thereof, any judge of the Tax Court, or any employee of the Tax Court designated in writing for the purpose by the presiding judge, may administer oaths, and any judge of the Tax Court may examine witnesses and require, by