Taxable Years Beginning in 1944 and 1945 such payment by, or refund to, such person as may be specified in such agreement. Such agreement shall be a final settlement of the liability for tax and the claim or claims for refund covered by such agreement, except in case of fraud, malfeasance, or misrepresentation of a material fact. In the absence of fraud or mistake in mathematical calculation, any action taken or any consideration given by the Commissioner pursuant to this section shall not be subject to review by any court, or any ad PART I Sec. 710. Imposition of tax. Sec. 710. (a) Imposition. EXCESS-PROFITS TAXES 16 Sec. 710. (a) (1) General rule.-There shall be levied, collected, and paid, for each taxable year, upon the adjusted excess-profits net income, as defined in subsection (b), of every corporation (except a corporation exempt under section 727) a tax equal to whichever of the following amounts is the lesser: (A) 95 90 per centum of the adjusted excessprofits net income, or (B) an amount which when added to the tax imposed for the taxable year under Chapter 1 (other than section 102) equals 80 per centum of the corporation surtax net income, computed under section 15 or Supplement G, as the case may be, but without regard to the credit provided in section 26 (e) (relating to income subject to the tax imposed by this subchapter), and without regard to 80 per centum of the credit provided in section 26 (h) (relating to credit for dividends paid on certain preferred stock). Sec. 710 (a) (1), I. R. C., supra, amended by Sec. 202 (a) and (b), R. A. of 1943, by striking out "90" and substituting in lieu thereof "95" and by adding at the end thereof the language shown in italics. Sec. 201 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1943. See, 710, (a) (2) certain exchanges. Repealed prior to 1944. See Ninth Edition, p. 730. Sec. 710. (a) (3) Taxable years beginning in 1941 and ending after June 30, 1942.-In the case of a taxable year beginning in 1941 and end 16 Repeal of excess profits tax. Secs, 122 (a), (b) and (d), R. A. of 1945, read as follows: "Sec. 122. Repeal of excess profits tax in 1946. (a) IN GENERAL. The provisions of subchapter E of chapter 2 shall not apply to any taxable year beginning after December 31. 1945. (b) CARRY-LACKS FROM YEARS AFTER 1945, ETC.-Despite the provisions of subsection (a) of this section the provisions of subchapter E of chapter 2 shall remain in force for the purposes of the determination of the taxes imposed by such s bchapter for taxable years beginning before January 1, 1946. such determination to be made as if subsection (a) had not been enacted but with the application of the amendments made ing after June 30, 1942, the tax shall be an amount equal to the sum of (A) that portion of a tentative tax under this subchapter, computed without regard to section 203 of the Revenue Act of 1942 as if the law applicable to taxable years beginning on January 1, 1941, were applicable to such taxable year, which the number of days in such taxable year before July 1, 1942, bears to the total number of days in such taxable year, plus (B) that portion of a tentative tax under this subchapter, computed as if the amendments made by seetione 105 (e), 105 (d), 202, and 206 of the Revenue Act of 1949 the law applicable to taxable years beginning on January 1, 1941, were applicable to such taxable year, but as if the amendments made by sections 105 (a), (b) (other than those relating to dividends on the preferred stock of public utilities), (c), (d), and (e) (1), 202, and 206 of the Revenue Act of 1942 were applicable to such taxable year, which the number of days in such taxable year after June 30, 1942, bears to the total number of days in such taxable year. Sec. 710 (a) (3), I. R. C., supra, amended by Sec. 203 (b), R. A. of 1943, by omitting language in stricken through type and adding language in italics. Retroactivity Sec. 203 (c) of said Act makes amendment applicable only to taxable years beginning in 1941 and ending after June 30, 1942. Sec. 710. (a) (4) Mutual insurance companies.— In the case of a mutual insurance company other than life or marine, if the gross amount received from interest, dividends, rents, and premiums (including deposits and assessments) is over $75,000 but less than $125,000, the tax imposed under this section shall be an amount which bears the same by subsection (c) of this section and section 131 of this Act. (d) AFFILIATED GROUPS.-Subsection (b) shall be applied in the case of corporations making or required to make a consolidated return under chapter 1 for any taxable year beginning after December 31, 1945, and in the case of a corporation making a separate return for any such taxable year which was a member of a group which made or was required to make a consolidated return for any prior taxable year, in sch manner as may be prescribed in regulations prescribed by the Commissioner with the approval of the Secretary prior to the last day prescribed by law for the making of the return for the year beginning after December 31, 1945." Taxable Years Beginning in 1944 and 1945 proportion to the amount ascertained under this section, computed without reference to this paragraph, as the excess over $75,000 of such gross amount received bears to $50,000. Sec. 710. (a) (5) Deferment of payment in case of abnormality.-If the adjusted excess profits net income (computed without reference to section 722) for the taxable year of a taxpayer which claims on its return, in accordance with regulations prescribed by the Commissioner with the approval of the Secretary, the benefits of section 722, is in excess of 50 per centum of its normal tax net income for such year, computed without the credit provided in section 26 (e) (relating to adjusted excess profits net income), the amount of tax payable at the time prescribed for payment may be reduced by an amount equal to 33 per centum of the amount of the reduction in the tax so claimed. For the purposes of section 271, if the tax payable is the tax so reduced, the tax so reduced shall be considered the amount shown on the return. Notwithstanding any other provision of law or rule of law, to the extent that any amount of tax remaining unpaid pursuant to this paragraph is in excess of the reduction in tax finally determined under section 722, such excess may be assessed at any time before the expiration of one year after such final determination. Sec. 710 (a), (5), I. R. C., supra, amended by Sec. 3 (a), J. R. of June 12, 1948 (62 Stat. 387) by adding language in italics. Retroactivity Sec. 3 (b) of said J. R. makes amendment effective as if made by Sec. 222 (b), R. A. of 1942, which was applicable to taxable years beginning after Dec. 31, 1941. Sec. 710. (a) (6) Taxable years beginning in 1943 and ending in 1944.-In the case of a taxable year beginning in 1943 and ending in 1944, the tax shall be an amount equal to the sum of— (A) that portion of a tentative tax, computed as if the law applicable to taxable years beginning on January 1, 1943, were applicable to such taxable year, which the number of days in such taxable year prior to January 1, 1944, bears to the total number of days in such taxable year, plus (B) that portion of a tentative tax, computed as if the law applicable to taxable years beginning on January 1, 1944, were applicable to such taxable year, which the number of days in such taxable year after December 31, 1943, bears to the total number of days in such taxable year. Sec. 710 (a) (6), I. R. C., supra, added to I. R. C. by Sec. 203 (a), R. A. of 1943. Sec. 203 (c) of said Act makes amendment applicable only to taxable years beginning in 1943 and ending in 1944. 17 Sec. 2, T. A. A. of 1945, amended Sec. 710 (b) (1), I. R. C.. to read as follows: "(1) SPECIFIC EXEMPTION.-A specific exemption of $25,000, except that in the case of a taxable year beginning in 1945 and ending in 1946, the specific exemption shall be an amount equal to the sum of (A) an amount which bears the same relation to $10,000 which the number of days in such taxable year prior to January 1, 1946, bears to the total Sec. 710. (a) (7) Taxable years beginning in 1945 and ending in 1946.-In the case of a taxable year beginning in 1945 and ending in 1946, the tax shall be an amount equal to that portion of a tentative tax, computed as if the law applicable to taxable years beginning on January 1, 1945, were applicable to such taxable year, which the number of days in such taxable year prior to January 1, 1946, bears to the total number of days in such taxable year. Sec. 710 (a) (7), I. R. C., supra, added to I. R. Sec. 710 (a), supra, originated 1940 as Sec. 710 For any amendments prior to 1944, see- Sec. 710. (b) Definition of adjusted excess profits net income.-As used in this section, the term "adjusted excess profits net income" in the case of any taxable year means the excess profits net income (as defined in section 711) minus the sum of: Sec. 710. (b) (1) Specific exemption.-A specific exemption of $10,000 $5,000, and in the case of a mutual insurance company (other than life or marine) which is an interinsurer or reciprocal underwriter a specific exemption of $50,000; Sec. 710 (b) (1), I. R. C., supra, amended by Sec. 204 (a), R. A. of 1943, by striking out "$5,000" and inserting in lieu thereof "$10,000." Sec. 201 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1943. Sec. 710 (b) (1), supra, amended by Sec. 2 (a), T. A. A. of 1945, to read as shown in footnote 17; but said Sec. 2 (a), T. A. A. of 1945, was repealed as of the date of its enactment; viz., July 31, 1945, by Sec. 131 (b) (2), R. A. of 1945, approved Nov. 8, 1945. Sec. 710. (b) (2) Excess profits credit.-The amount of the excess profits credit allowed under section 712; and Sec. 710. (b) (3) Unused excess profits credit.— The amount of the unused excess profits credit adjustment for the taxable year, computed in accordance with subsection (c). Section 710 (b), supra, originated 1940 as Sec. For any amendments prior to 1944, see- Sec. 710. (c) Unused excess profits credit adjustment. Sec. 710. (c) (1) Computation of unused excess profits credit adjustment.-The unused excess profits credit adjustment for any taxable year shall be the aggregate of the unused excess profits credit number of days in such taxable year and (B) an amount which bears the same relation to $25,000 which the number of days in such taxable year after December 31, 1945, bears to the total number of days in such taxable year; and in the case of a mutual insurance company (other than life or marine) which is an interinsurer or reciprocal underwriter, a specific exemption of $50,000." Taxable Years Beginning in 1944 and 1945 carry-overs and unused excess profits credit carrybacks to such taxable year. Sec. 710. (c) (2) Definition of unused excess profits credit.-The term "unused excess profits credit" means the excess, if any, of the excess profits credit for any taxable year beginning after December 31, 1939, over the excess profits net income for such taxable year, computed on the basis of the excess profits credit applicable to such taxable year. For such purpose the excess profits credit and the excess profits net income for any taxable year beginning in 1940 shall be computed under the law applicable to taxable years beginning in 1941. The unused excess profits credit for a taxable year of less than twelve months shall be an amount which is such part of the unused excess profits credit determined under the first sentence of this paragraph as the number of days in the taxable year is of the number of days in the twelve months ending with the close of the taxable year. There shall be no unused excess profits credit for a taxable year beginning after December 31, 1946. The unused excess profits credit for a taxable year beginning in 1946 and ending in 1947, shall be an amount which is such part of the unused excess profits credit determined under the preceding provisions of this paragraph as the number of days in such taxable year prior to January 1, 1947, is of the total number of days in such taxable year. Sec. 710 (c) (2), I. R. C., supra, amended by Sec. 122 (c), R. A. of 1945, approved Nov. 8, 1945, by adding at end thereof the above language. Sec. 710. (c) (3) Amount of unused excess profits credit carry-back and carry-over.— Sec. 710. (c) (3) (A) Unused excess profits credit carry-back.—If for any taxable year beginning after December 31, 1941, the taxpayer has an unused excess profits credit, such unused excess profits credit shall be an unused excess profits credit carry-back for each of the two preceding taxable years, except that the carry-back in the case of the first preceding taxable year shall be the excess, if any, of the amount of such unused excess profits credit over the adjusted excess profits net income for the second preceding taxable year computed for such taxable year (i) by determining the unused excess profits credit adjustment without regard to such unused excess profits credit, and (ii) without the deduction of the specific exemption provided in subsection (b) (1). Sec. 710. (c) (3) (B) Unused excess profits credit carry-over.-If for any taxable year beginning after December 31, 1939, the taxpayer has an unused excess profits credit, such unused excess profits credit shall be an unused excess profits credit carry-over for each of the two succeeding taxable years, except that the carry-over in the case of the second succeeding taxable year shall be the excess, if any, of the amount of such unused excess profits credit over the adjusted excess profits net income for the intervening taxable year computed for such intervening taxable year (i) by determining the un used excess profits credit adjustment without regard to such unused excess profits credit or to any unused excess profits credit carry-back, and (ii) without the deduction of the specific exemption provided in subsection (b) (1). For the purposes of the preceding sentence, the unused excess profits credit for any taxable year beginning after December 31, 1941, shall first be reduced by the sum of the adjusted excess profits net income for each of the two preceding taxable years (computed for each such preceding taxable year (i) by determining the unused excess profits credit adjustment without regard to such unused excess profits credit or to the unused excess profits credit for the succeeding taxable year, and (ii) without the deduction of the specific exemption provided in subsection (b) (1)). Sec. 710. (c) (4) No carry-back to year prior to 1941.-As used in this subsection, the term "preceding taxable year" and the term "preceding taxable years" do not include any taxable year beginning prior to January 1, 1941. Section 710 (c), supra, originated 1941 as Sec. For any amendments prior to 1944, see- Sec. 711. Excess profits net income. Sec. 711. (a) Taxable years beginning after December 31, 1939.-The excess profits net income for any taxable year beginning after December 31, 1939, shall be the normal-tax net income, as defined in section 13 (a) (2), for such year except that the following adjustments shall be made: Sec. 711. (a) (1) Excess profits credit computed under income credit.-If the excess profits credit is computed under section 713, the adjustments shall be as follows: Sec. 711. (a) (1) (A) Income subject to excess profits tax.-In computing such normal-tax net income the credit provided in section 26 (e) (relating to income subject to the tax imposed by this subchapter) shall not be allowed; Sec. 711. (a) (1) (B) Gains and losses from sales or exchanges of capital assets.—There shall be excluded gains and losses from sales or exchanges of capital assets held for more than 6 months. Sec. 711. (a) (1) (C) Income from retirement or discharge of bonds, and so forth.-There shall be excluded, in the case of any taxpayer, income derived from the retirement or discharge by the taxpayer of any bond, debenture, note, or certificate or other evidence of indebtedness, if the obligation of the taxpayer has been outstanding for more than 6 months, including, in case the issuance was at a premium, the amount includible in income for such year solely because of such retirement or discharge; Sec. 711. (a) (1) (D) Refunds and interest on Agricultural Adjustment Act taxes.-There shall be excluded income attributable to refund of tax Taxable Years Beginning in 1944 and 1945 paid under the Agricultural Adjustment Act of 1933, as amended, and interest upon any such refund; Sec. 711. (a) (1) (E) Recoveries of bad debts.There shall be excluded income attributable to the recovery of a bad debt if a deduction with reference to such debt was allowable from gross income for any taxable year beginning prior to January 1, 1940; Sec. 711. (a) (1) (F) Dividends received.—The credit for dividends received shall apply, without limitation, to dividends on stock of domestic corporations. Seer 711, (a) (1) (G) Computatio table, eten deductions Repealed prior to 1944. See Ninth Edition, p. 746. Sec. 711. (a) (1) (H) Life insurance companies. -In the case of a life insurance company, there shall be deducted from the normal tax net income, the excess of (1) the product of (i) the figure determined and proclaimed under section 202 (b) and (ii) the excess profits net income computed without regard to this subparagraph over (2) the adjustment for certain reserves provided in section 202 (c). Sec. 711. (a) (1) (1) Nontaxable income of certain industries with depletable resources.-In the case of a producer of minerals, or a producer of logs. or lumber from a timber block, or a lessor of mineral property, or a timber block, as defined in section 735, there shall be excluded nontaxable income from exempt excess output of mines and timber blocks and nentaxable bonus income provided in section 735; in the case of a natural gas company, as defined in section 735, there shall be excluded nontaxable income from exempt excess output provided in section 735; and in the case of a producer of minerals, or a producer of logs or lumber from a timber block, there shall be excluded nontaxable bonus income provided in section 735. In respect of nontaxable bonus income provided in section 735 (c), a corporation described in section 735 (c) (2) shall be deemed a producer of minerals for the purposes of this subparagraph. Sec. 711 (a) (1) (I), I. R. C., supra, amended by Sec. 208 (d), R. A. of 1943, by adding language shown in underlined boldface type and language in italics and by omitting language in stricken through type. Retroactivity Sec. 208 (f) of said Act provides that said amendment with respect to lessors of mineral properties which were in operation during the base period and with respect to lessors of timber blocks, as defined without regard to said amendment, which were in operation during the base period and with respect to natural gas companies shall be applicable with respect to taxable years beginning after Dec. 31, 1941. With these exceptions, the presumption is that the amendment is applicable to taxable years beginning after Dec. 31, 1943 as provided in Sec. 201. Sec. 711. (a) (1) (J) Net operating loss deduction adjustment.-The net operating loss deduction shall be adjusted as follows: (i) In computing the net operating loss for any taxable year under section 122 (a), and the net income for any taxable year under section 122 (b), no deduction shall be allowed for any excess profits tax imposed by this subchapter, and, if the excess profits credit for such taxable year was computed under section 714, the deduction for interest shall be reduced by the amount of any reduction under paragraph (2) (B) for such taxable year; and (ii) In lieu of the reduction provided in section 122 (c), such reduction shall be in the amount by which the excess profits net income computed with the exceptions and limitations specified in section 122 (d) (1), (2), (3), and (4) and computed without regard to subparagraph (B), without regard to any credit for dividends received, and without regard to any credit for interest received provided in section 26 (a) exceeds the excess profits net income (computed without the net operating loss deduction). Section 711 (a) (1) (J), supra, originated 1940 as For any amendments prior to 1944, see- Sec. 711. (a) (2) Excess profits credit computed under invested capital credit.—If the excess profits credit is computed under section 714, the adjustments shall be as follows: Sec. 711. (a) (2) (A) Dividends received.-The credit for dividends received shall apply, without limitation, to all dividends on stock of all corporations, except that no credit for dividends received shall be allowed with respect to dividends (actual or constructive) on stock of foreign personal-holding companies or dividends on stock which is not a capital asset; Sec. 711. (a) (2) (B) Interest.-The deduction for interest shall be reduced by an amount equal to 50 per centum of so much of such interest as represents interest on the indebtedness included in the daily amounts of borrowed capital (determined under section 719 (a)); Sec. 711. (a) (2) (C) Income subject to excess profits tax.-In computing such normal-tax net income the credit provided in section 26 (e) (relating to income subject to the tax imposed by this subchapter) shall not be allowed; Sec. 711. (a) (2) (D) Gains and losses from sales or exchanges of capital assets.-There shall be excluded gains and losses from sales or exchanges of capital assets held for more than 6 months. Sec. 711. (a) (2) (E) Income from retirement or discharge of bonds, and so forth.-There shall be excluded, in the case of any taxpayer, income derived from the retirement or discharge by the taxpayer of any bond, debenture, note, or certificate or Taxable Years Beginning in 1944 and 1945 other evidence of indebtedness, if the obligation of the taxpayer has been outstanding for more than 6 months, including, in case the issuance was at a premium, the amount includible in income for such year solely because of such retirement or discharge; Sec. 711. (a) (2) (F) Refunds and interest on Agricultural Adjustment Act taxes.-There shall be excluded income attributable to refund of tax paid under the Agricultural Adjustment Act of 1933, as amended, and interest upon any such refund; Sec. 711. (a) (2) (G) Interest on certain government obligations.-The normal-tax net income shall be increased by an amount equal to the amount of the interest on obligations held during the taxable year which are described in section 22 (b) (4) any part of the interest from which is excludible from gross income or allowable as a credit against net income, if the taxpayer has so elected under section 720 (d); and Sec. 711. (a) (2) (H) Recoveries of bad debts.There shall be excluded income attributable to the recovery of a bad debt if a deduction with reference to such debt was allowable from gross income for any taxable year beginning prior to January 1, 1940. Beer 711. (a) (2) (1) Computation sable, eten deductions, Repealed prior to 1944. See Ninth Edition, p. 754. Sec. 711. (a) (2) (J) In the case of a life insurance company, there shall be deducted from the normal tax net income, 50 per centum of the excess of (1) the product of (i) the figure determined and proclaimed under section 202 (b) and (ii) the excess profits net income computed without regard to this subparagraph, over (2) the adjustment for certain reserves provided in section 202 (c). Sec. 711. (a) (2) (K) Nontaxable income of certain industries with depletable resources. In the case of a producer of minerals, or a producer of logs or lumber from a timber block, or a lessor of mineral property, or a timber block, as defined in section 735, there shall be excluded nontaxable income from exempt excess output of mines and timber blocks and nontaxable bonus income provided in section 735; in the case of a natural gas company, as defined in section 735, there shall be excluded nontaxable income from exempt excess output provided in section 735; and in the case of a producer of minerals, or a producer of logs or lumber from a timber block, there shall be excluded nontaxable bonus income provided in section 735. In respect of nontaxable bonus income provided in section 735 (c), a corporation described in section 735 (c) (2) shall be deemed a producer of minerals for the purposes of this subparagraph. Sec. 711 (a) (2) (K), I. R. C., supra, amended by Sec. 208 (e), R. A. of 1943, by adding language shown in underlined boldface type and language in italics and by omitting language in stricken through type. Retroactivity Sec. 208 (f) of said Act provides that said amendment with respect to lessors of mineral properties which were in operation during the base period and with respect to lessors of timber blocks, as defined without regard to said amendment, which were in operation during the base period, and with respect to natural gas companies shall be applicable beginning after Dec. 31, 1941. With these exceptions, the presumption is that the amendment is applicable to taxable years beginning after Dec. 31, 1943 as provided in Sec. 201. Sec. 711. (a) (2) (L) Net operating loss deduction adjustment.-The net operating loss deduction shall be adjusted as follows: (i) In computing the net operating loss for any taxable year under section 122 (a), and the net income for any taxable year under section 122 (b), no deduction shall be allowed for any excess profits tax imposed by this subchapter, and, if the excess profits credit for such taxable year was computed under section 714, the deduction for interest shall be reduced by the amount of any reduction under subparagraph (B) of this paragraph for such taxable year; and (ii) In lieu of the reduction provided in section 122 (c), such reduction shall be in the amount by which the excess profits net income computed with the exceptions and limitations provided in section 122 (d) (1), (2), (3), and (4) and computed without regard to subparagraph (D), without regard to any credit for dividends received, and without regard to any credit for interest received provided in section 26 (a) exceeds the excess profits net income (computed without the net operating loss deduction). Section 711 (a) (2), supra, originated 1940 as For any amendments prior to 1944, see- Sec. 711. (a) (3) Taxable year less than twelve months. Sec. 711. (a) (3) (A) General rule.-If the taxable year is a period of less than twelve months the excess profits net income for such taxable year (referred to in this paragraph as the "short taxable year") shall be placed on an annual basis by multiplying the amount thereof by the number of days in the twelve months ending with the close of the short taxable year and dividing by the number of days in the short taxable year. The tax shall be such part of the tax computed on such annual basis as the number of days in the short taxable year is of the number of days in the twelve months ending with the close of the short taxable year. Sec. 711. (a) (3) (B) Exception.—If the taxpayer establishes its adjusted excess profits net income for the period of twelve months beginning with the first day of the short taxable year, computed as if such twelve-month period were a taxable year, under the law applicable to the short taxable year, and using the credits applicable in determining the adjusted excess profits net income for such short taxable year, then the tax for the short taxable year shall be |