(b) ALLOCATION OF DEDUCTIONS.-In the case of a taxpayer, other than an individual, the deductions allowed in this section shall be allowed only for and to the extent that they are connected with income arising from sources within the District and taxable under this title to a nonresident taxpayer; and the proper apportionment and allocation of the deductions with respect to sources of income within and without the District shall be determined by processes or formulas of general apportionment under rules and regulations to be prescribed by the Commissioners. The so-called charitable contribution deduction allowed by subparagraph (10) of paragraph (a) of this section shall be allowed whether or not connected with income from sources within the District. Allocation of deduc tions. Charitable contribu. tions. Corporations to file (c) CORPORATIONS TO FILE RETURN OF TOTAL INCOME.-A corpora- return of total in tion shall receive the benefits of the deductions allowed to it under come. GAINS OR LOSSES FROM SALE OF ASSETS Items not nized. recog "Capital assets" de SEC. 6. (a) GAIN OR LOSS IN CAPITAL ASSETS NOT RECOGNIZED.-No gain or loss from the sale or exchange of a capital asset shall be recognized in the computation of net income under this title. For the purposes of this title, "capital assets" means property held by the fined. taxpayer for more than two years (whether or not connected with his trade or business) but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of a taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. (b) GAIN OR LOSS IN ASSETS OTHER THAN CAPITAL.-Gains or losses from the sale or exchange of property other than a capital asset shall be treated in the same manner as other income or deductible losses, and the basis for computing such gain or loss shall be the cost of such property or, if acquired by some means other than purchase, the fair market value thereof at the date of acquisition. EXCHANGES Assets other than capital. Treatment of prop SEC. 7. Where property is exchanged for other property, the property received in exerty received in exchange for the purpose of determining the gain or change. loss shall be treated as the equivalent of cash to the amount of its fair market value; but when in connection with the reorganization, merger, or consolidation of a corporation a taxpayer receives, in place of stock or securities owned by him, new stock or securities of the reorganized, merged, or consolidated corporation, no gain or loss shall be deemed to occur from the exchange until the new stock or securities are sold or realized upon and the gain or loss is definitely ascertained, until which time the new stock or securities received shall be treated as taking the place of the stock and securities exchanged; provided such reorganization, merger, or consolidation is a "reorganization" within the meaning of the term "reorganization" as defined in section 112 (g) of the Federal Revenue Act of 1936. DEDUCTIONS NOT ALLOWED SEC. 8. (a) GENERAL RULE.-In computing net income no deductions shall be allowed in any case in respect to (1) personal, living, or family expenses; (2) any amount paid out for new buildings or for permanent improvements or betterments, made to increase the value of any property or estate; Conditional upon being a "reorganization." 49 Stat. 1681. 26 U. S. C., Supp. IV, § 112 (g). Property restoration, etc. Life insurance premiums for employees, etc. Holders of life or terminable interest. Exceptions. Credits. Personal exemption. Credit for dependents. Change of status. In return for fractional part of year. Net income computed on basis of annual accounting period. (3) any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; and (4) premiums paid on any life-insurance policy covering the life of any officer or employee or of any person financially interested in any trade or business carried on by the taxpayer when the taxpayer is directly or indirectly a beneficiary under such policy. (b) HOLDERS OF LIFE OR TERMINABLE INTEREST.-Amounts paid under the laws of any State, Territory, District of Columbia, possession of the United States, or foreign country as income to the holder of a life or terminable interest acquired by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction allowed by this Act (except the deductions provided for in subsections (1) and (m) of section 23 of the Federal Revenue Act of 1926 as amended) for the purpose of computing the net income of an estate or trust but not allowed under the laws of such State, Territory, District of Columbia, possession of the United States, or foreign country for the purpose of computing the income to which such holder is entitled. PERSONAL EXEMPTIONS AND CREDIT FOR DEPENDENTS SEC. 9. (a) CREDITS.-There shall be allowed to individuals the following credits against net income: (1) PERSONAL EXEMPTION.-In the case of a single person or married person not living with husband or wife, a personal exemption of $1,000; in the case of the head of a family or a married person living with husband or wife, a personal exemption of $2,500; a husband and wife living together shall receive but one personal exemption, the amount of such personal exemption shall be $2,500. If such husband and wife make separate returns the personal exemption may be taken by either or divided between them. (2) CREDIT FOR DEPENDENTS.-$400 for each person (other than husband or wife) dependent upon and receiving his chief support from the taxpayer if such dependent person is under eighteen years of age or is incapable of self-support because mentally or physically defective. (b) CHANGE OF STATUS.-If the status of the taxpayer, insofar as it affects personal exemption or credit for dependents, changes during the taxable year, the personal exemption and credit shall be apportioned under rules and regulations prescribed by the Commissioners, in accordance with the number of months before and after such change. For the purpose of such apportionment a fractional portion of a month shall be disregarded unless it amounts to more than half a month in which case it shall be considered as a month. (c) IN RETURN FOR FRACTIONAL PART OF YEAR.-In the case of a return made for a fractional part of a year, the personal exemption and credit for dependents shall be reduced respectively to amounts which bear the same ratio to the full credits provided as the number of months in the period for which the return is made bears to twelve months. ACCOUNTING PERIODS SEC. 10. The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such Calendar year, if no other accounting pe method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the assessor does clearly reflect the income. If the taxpayer's annual accounting period is other than a fiscal year as defined in section 43 riod. or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year. If the taxpayer makes a Federal income-tax return, his income shall be computed, for the purposes of this title, on the basis of the income-tax return. same calendar or fiscal year as in such Federal income-tax return. PERIOD IN WHICH ITEMS OF GROSS INCOME INCLUDED Post, p. 1106. Computation, if taxpayer makes a Federal Period in which items of gross income In case of death of taxpayer. SEC. 11. The amount of all items of gross income shall be included in the gross income for the taxable year in which received by the included. taxpayer unless, under methods of accounting permitted under section 10, any such amounts are to be properly accounted for as of a different period. In the case of the death of a taxpayer there shall be included, in computing net income for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly includible in respect to such period or a prior period. PERIOD FOR WHICH DEDUCTIONS AND CREDITS TAKEN which "paid or accrued" or "paid or incurred.” SEC. 12. The deductions and credits provided for in this title shall or taxable year in be taken for the taxable year in which "paid or accrued" or "paid or incurred", dependent upon the method of accounting upon the basis of which the net income is computed unless, in order to clearly reflect the income, the deductions or credits should be taken as of a different period. In the case of the death of a taxpayer there shall be allowed as deductions and credits for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly allowable in respect to such period or a prior period. INSTALLMENT BASIS SEC. 13. (a) DEALERS IN PERSONAL PROPERTY.-Under regulations prescribed by the Commissioners, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed bears to the total contract price. Allowance on death of taxpayer. Dealers in personal property. Sales of realty and casual sales of per (b) SALES OF REALTY AND CASUAL SALES OF PERSONALTY.-In the case of (1) a casual sale or other casual disposition of personal prop- sonalty. erty (other than property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year) for a price exceeding $1,000, or (2) of a sale or other disposition of real property, if in either case the initial payments do not exceed 30 per centum of the selling price, the income may, under regulations prescribed by the Commissioners, be returned on the basis and in the manner above prescribed in this section. As used in this section the term "initial payments" means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. "Initial payments" defined. Change from accrual to installment basis; (c) CHANGE FROM ACCRUAL TO INSTALLMENT BASIS.-If a taxpayer entitled to the benefits of subsection (a) elects for any taxable year to computation. report his net income on the installment basis, then in computing his income for the year of change or any subsequent year, amounts actually Gain or loss upon disposition of installment obligations. Basis. received during any such year on account of sales or other disposition of property made in any prior year shall not be excluded. (d) GAIN OR LOSS UPON DISPOSITION OF INSTALLMENT OBLIGATIONS.— If an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and (1) in the case of satisfaction at other than face value or a sale or exchange-the amount realized, or (2) in case of a distribution, transmission, or disposition otherwise than by sale or exchange the fair market value of the obligation at the time of such distribution, transmission, or disposition. Any gain or loss so resulting shall be considered as resulting from the sale or exchange of the property in respect to which the installment obligation was received. The basis of the obligation shall be the excess of the face value of the obligation over an amount equal to the income which would be returnable were Transmission at the obligation satisfied in full. This paragraph shall not apply to the transmission at death of installment obligations if there is filed with the assessor, at such time as he may by regulation prescribe, a bond in such amount and with such sureties as he may deem necessary, conditioned upon the return as income, by the person receiving any payment in such obligations, of the same proportion of such payment as would be returnable as income by the decedent if he had lived and had received such payment. death. Inventories to determine taxpayer's income; basis. Requirement. Net income $1,000 or over, M single, etc. Net income $2,500 or over, if married and living with husband or wife. Gross income of $5,000 or over. Husband and wife. Separate return. Persons under disability. Fiduciaries. INVENTORIES SEC. 14. Whenever in the opinion of the assessor the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the assessor may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. INDIVIDUAL RETURNS SEC. 15. (a) REQUIREMENT.-The following individuals shall each make under oath a return stating specifically the items of his gross income and the deductions and credits allowed under this title and such other information for the purpose of carrying out the provisions of this title as the Commissioners may by regulations prescribe: (1) Every individual having a net income for the taxable year of $1,000 or over, if single, or if married and not living with husband or wife; (2) Every individual having a net income for the taxable year of $2,500 or over, if married and living with husband or wife; and (3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income. (b) HUSBAND AND WIFE.-If a husband and wife living together have an aggregate net income for the taxable year of $2,500 or over, or an aggregate gross income for such year of $5,000 or over— (1) Each shall make a return, or (2) The income of each shall be included in a single joint return, in which case the tax shall be computed on the aggregate income. (c) PERSONS UNDER DISABILITY.-If the taxpayer is unable to make his own return, the return shall be made by a duly authorized agent or by the guardian or other person charged with the care of the person or property of such taxpayer. (d) FIDUCIARIES.-For returns to be made by fiduciaries, see section 23. CORPORATION RETURNS Requirement for making. By receivers, trustees, or assignees. Collections. SEC. 16. Every corporation not expressly exempt from the tax imposed by this title shall make a return and pay a filing fee of $25 which shall be credited against the tax. Such returns shall state specifically the items of its gross income and the deductions and credits allowed by this title, and such other information for the purpose of carrying out the provisions of this title as the Commissioners may by regulations prescribe. The return shall be sworn to by the president, vice president, or other principal officer, and by the treasurer, assistant treasurer, or chief accounting officer. In cases where receivers, trustees in bankruptcy, or assignees are operating the property or business of corporations, such receivers, trustees, or assignees shall make returns for such corporations in the same manner and form as corporations are required to make returns. Any tax due on the basis of such returns made by receivers, trustees, or assignees shall be collected in the same manner as if collected from the corporations of whose business or property they have custody and control. TAXPAYER TO MAKE RETURN WHETHER RETURN FORM IS SENT OR NOT SEC. 17. Blank forms of returns for income shall be supplied by to le return. the assessor. It shall be the duty of the assessor to obtain an incometax return from every taxpayer who is liable under the law to file such return; but this duty shall in no manner diminish the obligation of the taxpayer to file a return without being called upon to do so. TIME AND PLACE FOR FILING RETURNS Duty of taxpayer Time and place for SEC. 18. All returns of income for the preceding taxable year shall filing returns. be made to the assessor on or before the 15th day of March in each year, except that such returns, if made on the basis of a fiscal year, shall be made on or before the 15th day of the third month following the close of such fiscal year, unless such fiscal year has expired in the calendar year 1939 prior to the approval of this Act, in which event returns shall be made on or before the 15th day of the third month following the approval of this Act. EXTENSION OF TIME FOR FILING RETURNS SEC. 19. The assessor may grant a reasonable extension of time for filing income returns whenever in his judgment good cause exists and shall keep a record of every such extension. Except in case of a taxpayer who is abroad, no such extension shall be granted for more than six months, and in no case for more than one year. In the event time for filing a return is deferred, the taxpayer is hereby required to pay, as a part of the tax, an amount equal to 6 per centum per annum on the tax ultimately assessed from the time the return was due until it is actually filed in the office of the assessor. ALLOCATION OF INCOME AND DEDUCTIONS SEC. 20. In any of two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in the District of Columbia, and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the assessor is authorized to distribute, apportion, or allocate gross income or deductions between or among such organizations, trades, or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades, or businesses. The provisions of this section shall apply, but shall not be limited in application to any Extension of time. Limitation. Interest. Allocation of income and deductions. Application of provisions. |