deducted under paragraphs (2) or (3) of subdivision (a) of section 321.

(9) The right to the deduction must be fully established by the donor.

Example: The donor's father died January 1, 1920. Included in the father's gross estate was a tract of land comprising two hundred acres, upon which the Commissioner placed a value for estate tax purposes of $20,000. The tax on the father's estate was paid. The donor, having inherited the tract from his father, transferred by gift one hundred acres thereof on January 2, 1924, the total value of the two hundred acres then being $40,000. The donor included in his gift-tax return the value of the gift of the hundred acres, $20,000, which was the fair market value thereof as of the date of the gift. Since only one-half of the tract was the subject of the gift, the deduction is limited to one-half of the value placed by the Commissioner upon the whole tract when determining the value of the father's gross estate, or $10,000.

Example: On January 2, 1924, A transferred by gift to B bonds of the then value of $100,000. In due course a gifttax return was filed by A and the tax paid on that basis. On August 1, 1924, B transferred by gift the bonds to C. On the date of the gift to C the bonds were worth $80,000. In filing his gift-tax return B listed the bonds constituting the gift at a value of $80,000. Since the value of the bonds, as of the date of the gift by B to C was $80,000, the deduction is limited to that amount.

ART. 15. Property originally received. If the property originally received from the prior donor or from a decedent is included in the total amount of gifts, the description thereof must be given and its identity fully established.

ART. 16. Property acquired in exchange.- The deduction. for substituted property is limited to property acquired in exchange for the identical property received from a prior donor, or a decedent. It is limited to one exchange, and consequently when the property originally received is sold the right to the deduction is limited to the proceeds of the sale. If, however, the proceeds are reinvested, more than one exchange has been effected and the right to the deduction is lost.

In the case of an exchange the donor must describe and

identify fully both the property originally received from the prior donor, or decedent, and the property acquired in exchange therefor. He must also state the date of the transaction by which the exchange was effected and the name and address of the transferee. If the exchange was made by written instrument of public record, a precise reference must be made to the record containing a transcript of the instrument, and, if by instrument not of record, a copy of the instrument itself must be supplied. If there was no written instrument, an affidavit as to the facts of the exchange by one or more persons having personal knowledge of the matter must be furnished.

SECTION 2-GIFTS BY NONRESIDENTS

Revenue Act of 1924.

SEC. 321. In computing the amount of the gifts subject to the tax imposed by section 319, there shall be allowed as deductions:

(b) In the case of a nonresident:

(1) The amount of all gifts or contributions made within the calendar year to or for the use of the United States, any state, territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any domestic corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual, or to a trustee or trustees, or fraternal society, order, or association, operating under the lodge system, but only if such gifts or contributions are to be used within the United States by such trustee or trustees or by such fraternal society, order, or association, exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, and the amount of all gifts or contributions made within the calendar year by such corporation, trustee, or fraternal society, order, or association for a religious, charitable, scientific, literary, or educational purpose, or for the prevention of cruelty to children or animals, and the amount of all gifts or contributions made within the calendar year to the special fund for vocational rehabilitation authorized by section 7 of the vocational rehabilitation act;

(2) Gifts the aggregate amount of which to any one person does not exceed $500;

(3) An amount equal to the value of any property situated in the United States transferred by gift within the calendar year, which can be identified (A) as having been received by the donor within five years

prior to the time of his making such gift, either from another person by gift or from a decedent by gift, bequest, devise, or inheritance, or (B) as having been acquired in exchange for property so received. This deduction shall be allowed only where a gift or an estate tax under this or any prior act of Congress was paid by or on behalf of the donor of the estate of such decedent, as the case may be, and only in the amount of the value placed by the Commissioner on such property in determining the value of the gift or the gross estate of such decedent, and only to the extent that the value of such property is included within the total amount of gifts made within the calendar year of property situated in the United States and not deducted under paragraph (1) or (2) of this subdivision.

Regulations 67.

ART. 17. Nonresident donors.-All transfers made without consideration, or for less than a fair consideration in money or money's worth, by nonresidents during any calendar year of property situated within the United States (other than the gifts specified in par. (2) of subdivision (b) of sec. 321) are to be returned for the purpose of the tax. As to who is a nonresident, see article 3; and for a statement of what constitutes a "gift" within the meaning of the statute, see article 1.

ART. 18. Situs of property. The situs of property, both real and personal, for the purpose of the tax is its actual situs. The actual situs of mortgages, bonds, bills and notes, and certificates of stock in any corporation or association wherever created or organized is the place where held.

ART. 19. Deductions-Transfers for public, charitable, religious, etc., uses.-The right to deduct the amount of all gifts made by non-residents for public, religious, charitable, scientific, literary, or educational purposes is governed by the same rules as those applying to gifts made by residents (arts. 9 to 12, inclusive), subject, however, to the two following exceptions, namely: (1) that, if the gift be made to a corporation or association, such corporation or association must be one created or organized in the United States; and (2) if made to a trustee or trustees, a fraternal society, order, or association operating under the lodge system, the gift must be for use within the United States.

ART. 20. Gifts to individuals, when deductible.-The gifts deductible under this section are deductible only to the extent

that the amount thereof is included in the total amount of gifts made during the calendar year.

ART. 21. Deduction of value of transfers taxed within five years.— The right to deduct the amount of all gifts made by a nonresident of property received by him, by gift, bequest, devise, or inheritance, from any person within five years prior to the gift, or acquired in exchange for property so received, is governed by the same rules as those applying to gifts made by residents (arts. 14 to 16, inclusive), subject, however, to the following exception: That such right is limited to the extent that the amount of the value of the property, or of that acquired in exchange therefor, is not deducted under paragraphs (1) or (2) of subdivision (b) of section

321.

ART. 22. Payment of tax.-The provisions relating to rates and payments of the tax are the same in gifts made by nonresidents and by residents. The statute provides that the donor shall pay the tax on or before the 15th day of March of the year succeeding the calendar year in which the gift was made. All checks, drafts, or money orders should be made payable to the order of the collector of internal revenue. (See arts. 37 to 43, inclusive.)

The provisions relating to credits against the estate tax, in cases where a gift tax has been imposed, and thereafter, upon the death of the donor, the amount of the gift is included in his gross estate, are the same respecting gifts made by nonresident and by resident donors.

CHAPTER III

RETURNS

Revenue Act of 1924.

SEC. 322. In case a tax has been imposed under section 319 upon any gift, and thereafter upon the death of the donor the amount thereof is required by any provision of Part I of this title to be included in the gross estate of the decedent then there shall be credited against and applied in reduction of the estate tax, which would otherwise be chargeable against the estate of the decedent under the provisions of section 301, an amount equal to the tax paid with respect to such gift; and in the event the donor has in any year paid the tax imposed by section 319 with respect to a gift or gifts which upon the death of the donor must be included in his gross estate and a gift or gifts not required to be so included, then the amount of the tax which shall be deemed to have been paid with respect to the gift or gifts required to be so included shall be that proportion of the entire tax paid on account of all such gifts which the amount of the gift or gifts required to be so included bears to the total amount of gifts in that year.

SEC. 323. Any person who within the year 1924 or any calendar year thereafter makes any gift or gifts in excess of the deductions allowed by section 321 shall, on or before the 15th day of March, file with the collector a return under oath in duplicate, listing and setting forth therein all gifts and contributions made by him during such calendar year (other than the gifts specified in paragraph (3) of subdivision (a) and in paragraph (2) of subdivision (b) of section 321), and the fair market value thereof when made, and also all sales and exchanges of property owned by him made within such year for less than a fair consideration in money or money's worth, stating therein the fair market value of the property so sold or exchanged and that of the consideration received by him, both as of the date of such sale or exchange.

Regulations 67.

ART. 23. When return required-Date of filing.-A return on Form 706A is required in the case of every resident donor whose total amount of gifts in the calendar year, as defined in the statute, exceeded the authorized deductions. This