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"(B) COMMISSIONED OFFICERS.-In the case of compensation received for active service as a commissioned officer in the armed forces of the United States for any month during any part of which such officer served in a combat zone after June 24, 1950, and prior to January 1, 1952, so much of such compensation as does not exceed $200.

"(C) DEFINITIONS.-For the purposes of this paragraph"(i) the term 'commissioned officer' does not include a commissioned warrant officer;

"(ii) the term 'combat zone' means any area which the President of the United States by Executive Order designates, for the purposes of this paragraph, as an area in which Armed Forces of the United States are or have (after June 24, 1950) engaged in combat;

"(iii) service is performed in a combat zone only if performed on or after the date designated by the President by Executive Order as the date of the commencing of combatant activities in such zone, and on or before the date designated by the President by Executive Order as the date of the termination of combatant activities in such zone; and

"(iv) the term 'compensation' does not include pensions and retirement pay.'

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SECTION 22(b) (15) - NEW.

Sec. 306, Excess Profits Tax Act of 1950, amended Sec. 22(b), IRC, by adding the following new paragraph:

"(15) PAYMENTS TO ENCOURAGE EXPLORATION, DEVELOPMENT, AND MINING FOR DEFENSE PURPOSES.-An amount paid to a taxpayer by the United States (or any agency or instrumentality thereof), whether by grant or loan, and whether or not repayable, for the encouragement of exploration, development or mining of critical and strategic minerals or metals pursuant to or in connection with any undertaking approved by the United States (or any of its agencies or instrumentalities) and for which an accounting is made or required to be made to an appropriate governmental agency, and the forgiveness or discharge of any of such amount. Any expenditures (other than expenditures made after the repayment of such grant or loan) attributable to such grant or loan shall not be deductible by the taxpayer as an expense nor increase the basis of the taxpayer's property either for determining gain or loss on sale, exchange, or other disposition or for computing depletion or depreciation, but upon the repayment of any portion of any such grant or loan which has been expended in accordance with the terms thereof such deductions. and such increase in basis shall to the extent of such repayment be allowed as if made at the time of such repayment."

LAWS

1950 POCKET SUPPLEMENT

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SECTION 22(d) (6) (A) - AMENDED.

Sec. (a), Pub. Law 756, 81st Cong., 2d Sess., approved Sept. 5, 1950, amended that part of Sec. 22(d)(6)(A), IRC, which precedes clause (i), to read as follows:

"(A) Adjustment of Net Income and Resulting Tax.-If, for any taxable year beginning after December 31, 1940, and prior to January 1, 1948, the closing inventory of a taxpayer inventorying goods under the method provided in this subsection reflects a decrease from the opening inventory of such goods for such year, and if the taxpayer elects, at such time and in such manner and subject to such regulations as the Commissioner with the approval of the Secretary may prescribe, to have the provisions of this paragraph apply, and if it established to the satisfaction of the Commissioner, in accordance with such regulations, that such decrease is attributable to the involuntary liquidation of such inventory as defined in subparagraph (B), and if the closing inventory of a subsequent taxable year, ending prior to January 1, 1951, reflects a replacement, in whole or in part, of the goods so previously liquidated, the net income of the taxpayer otherwise determined for the year of such involuntary liquidation shall be adjusted as follows:".

Sec. (b) of Pub. Law 756 makes amendment applicable to taxable years beginning after Dec. 31, 1940.

SECTION 22(0) NEW.

Sec. 203(a), RA of 1950, amended Sec. 22, IRC, by adding at the end thereof the following new subsection:

"(o) DEALERS IN TAX-EXEMPT SECURITIES.

"(1) ADJUSTMENT FOR BOND PREMIUM.-In computing the gross income of a taxpayer who holds during the taxable year a shortterm municipal bond (as defined in paragraph (2) (A)) primarily for sale to customers in the ordinary course of his trade or business

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"(A) if the gross income of the taxpayer from such trade or business is computed by the use of inventories and his inventories are valued on any basis other than cost, the cost of securities sold (as defined in paragraph (2) (B)) during such year shall be reduced by an amount equal to the amortizable bond premium that would be disallowed as a deduction for such year pursuant to section 125 (a) (2) if the definition in section 125 (d) of the term 'bond' did not exclude such short-term municipal bond; or

"(B) if the gross income of the taxpayer from such trade or business is computed without the use of inventories, or by use of inventories valued at cost, and the short-term municipal bond is sold or otherwise disposed of during such year, the adjusted basis (computed without regard to this subparagraph) of the short-term municipal bond shall be reduced by the amount of the adjustment that would be required under section 113 (b) (1) (H) if the definition in section 125 (d) of the term 'bond' did not exclude such shortterm municipal bond.

"(2) DEFINITIONS.-For the purposes of paragraph (1)—

"(A) The term 'short-term municipal bond' means any obligation issued by a government or political subdivision thereof if the interest on such obligation is excludible from gross income; but such term does not include such an obligation if (i) it is sold or otherwise disposed of by the taxpayer within thirty days after the date of its acquisition by him, or (ii) its earliest maturity or call date is a date more than five years from the date on which it was acquired by the taxpayer.

"(B) The term 'cost of securities sold' means the amount ascertained by subtracting the inventory value of the closing inventory of a taxable year from the sum of (i) the inventory value of the opening inventory for such year and (ii) the cost of securities and other property purchased during such year which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year."

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Sec. 303, Excess Profits Tax Act of 1950, amended Sec. 23(a)(1)(C), IRC, to read as follows:

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"(C) Expenditures for Advertising and Good Will.—If a corporation has, for the purpose of computing its excess profits tax credit under Chapter 2E, or subchapter D of this Chapter, claimed the benefits of the election provided in section 733 or section 451, as the case may be, no deduction shall be allowable under subparagraph (A) to such corporation for expenditures for advertising or the promotion of good will which, under the rules and regulations prescribed under section 733 or section 451, as the case may be, may be regarded as capital investments."

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Sec. 332(a), RA of 1950, amended Sec. 23(o)(2), IRC, by striking out "legislation;" and inserting in lieu thereof the following:

"legislation. For disallowance of certain charitable, etc., deductions otherwise allowable under this paragraph, see sections 3813 and 162(g) (2);".

SECTION 23 (q) (2) - AMENDED.

Sec. 332(b), RA of 1950, amended Sec. 23(q)(2), IRC, by striking out "legislation; or" and inserting in lieu thereof the following:

"legislation. For disallowance of certain charitable, etc., deductions otherwise allowable under this paragraph, see sections 3813 and 162(g)(2); or".

SECTION 23(t) - AMENDED.

Sec. 216(b), RA of 1950, amended Sec. 23(t), IRC, by striking out "section 124" and inserting in lieu thereof "section 124 and section 124A".

Sec. 216(d), RA of 1950, makes amendment applicable to taxable years ending after Dec. 31, 1949.

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Sec. 204(a), RA of 1950, amended Sec. 23, IRC, by adding at the end thereof the following new subsection:

"(bb) CIRCULATION EXPENDITURES.-Notwithstanding section 24 (a), all expenditures (other than expenditures for the purchase of land or deprecíable property or for the acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical) to establish, maintain, or increase the circulation of a newspaper, magazine, or other periodical; except that the deduction shall not be allowed with respect to the portion of such expenditures as, under regulations prescribed by the Secretary, is chargeable to capital account if the taxpayer elects, in accordance with such regulations, to treat such portion as so chargeable. Such election, if made, must be for the total amount of such portion of the expenditures which is so chargeable to capital account, and shall be binding for all subsequent taxable years unless, upon application by the taxpayer, the Secretary permits a revocation of such election subject to such conditions as he deems necessary."

Sec. 204(c), RA of 1950, provides that the amendment shall be applicable with respect to taxable years beginning after December 31, 1945, except that in the case of any taxable year beginning prior to January 1, 1950

(1) the amendments shall not be applicable with respect to expenditures for which a deduction was not allowed the taxpayer for such year, if allowance of credit or refund with respect to such year is barred on the date of the enactment of this Act by reason of any law or rule of law; and

(2) the election provided in section
23 (bb) of the Internal Revenue Code
shall not (despite the last sentence of
such section) be applicable with
respect to any expenditure for which a
deduction was claimed by the taxpayer
under his latest treatment, prior to
the date of the enactment of this Act,
of such expenditure in connection with
his tax liability for such taxable year.

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