State or Territorial officers, pursuant to law, as additions to guarantee or reserve funds shall be treated as being payments required by law to reserve funds.

In regard to the provision beginning with (first) in the act of 1909, "actually" appears after "expenses" and "out of income" after "year"; and the clause "including all charges such as rentals or franchise payments" is in the present act "including rentals or other payments."

In regard to the provision beginning with (second) in the present act the words "by use, wear and tear" after "depreciation" and the clause as to mines are new. The order of the last clause as to insurance companies is changed, and the provisions which follow as to mutual fire and marine and as to life insurance companies are new.

The provision (third) in the act of 1909 is as follows: "(third) interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other indebtedness not exceeding the paid-up capital stock of such corporation, joint stock company or association, or insurance company, outstanding at the close of the year, and in the case of a

bank, banking association, or trust company, all interest actually paid by it within the year on deposits."

The provision (fourth) in the act of 1909 is as follows: "all sums paid by it within the year for taxes imposed under the authority of the United States or of any State or Territory thereof, or imposed by the Government of any foreign country as a condition to carrying on business therein."

In the act of 1909 there is (fifth) as to amounts received as dividends upon stock of other corporations, etc., which does not appear in the present act. The writer in the Wall St. Journ. in Art. X declares that there is a deliberate purpose to introduce punitive legislation into the present act. "The idea seems to be, indeed, is frankly avowed, that holding companies are bad in themselves and should be discouraged by indirection. At the same time they make easy subjects for taxation." As to the act of 1909, see 28 Atty. Gen. Op. 140.

The remainder of this sub-section relative to corporations, etc., organized under the laws of a foreign country, differs somewhat from the provisions of the act of 1909, and is in many respects similar to the provisions of the first part of this sub-section relative to corporations, etc., organized in this country.

The writer in the Wall St. Journ. in Art. XV says: "Real estate corporations also benefit under an amendment, dealing with the subject of a tax on the interest on indebtedness, where such indebtedness exceeds the capital employed. In the House bill, as pointed out in the Wall Street Journal of June 23 and 24, no deduction from gross income is allowed for interest paid on debt in excess of capital, thus forcing the payment of an income tax on outgo. It is now provided that in computing net income a corporation may deduct from gross the interest not exceeding 'one-half of the sum of its interest bearing indebtedness and its paid-up capital stock outstanding.'

"Thus, in the case cited in Article VII of this series, where a corporation has bought a loft building for $100,000, paying its entire capital of $20,000 for its equity and executing a mortgage for $80,000, it would be required to pay an income tax on the interest it pays out on only $20,000 instead of on $60,000, as under the House bill.

"So, also, in the case cited in Article VI of this series, where the Interborough Rapid Transit Co., with capital of $35,000,000 and a bonded debt of $170,000,000, would have been called on to pay an income tax on the interest it paid out on $135,000,000 of its bonds,

under the Senate amendment, this income tax on debt would be reduced to 1% on the interest it paid on $50,000,000 instead of on $135,000,000."

As to premium dividends of a life insurance company not being taxable as part of the company's "net income," see Mutual Benefit Ins. Co. v. Herold, 198 Fed. Rep. 199; 201 Id. 918. As to a dividend in case of a full-paid participating policy, see 198 Fed. Rep. 199. As to the "net income" of a mining company, see Stratton's Independence v. Howbert, 23 Treas. Decis. (1796). The word "income" was held to mean that already received, and "net income" in the case of insurance companies was held not to include uncollected and deferred premiums and interests, accrued and due, but not actually received. Mutual Benefit Ins. Co. v. Herold, 198 Fed. Rep. 199.

An ordinary expenditure by a mutual life insurance company for renewal of office furniture and equipment was held an expense of maintenance and operation, which it was entitled to deduct. Mutual Benefit Ins. Co. v. Herold, 198 Fed. Rep. 199.

That the amount paid by a corporation as a tax could not be deducted as an expense of business. See 10 Int. Rev. Rec. 57. But that the amount paid as taxes on the capital, cir

culation, and deposits during the period covered by the return might be deducted like other expenses. See 5 Int. Rev. Rec. 74.

That the amount paid as premium upon United States bonds purchased by the corporation was not deductible as a loss from gross earnings, as it was a part of the investment. See 5 Int. Rev. Rec. 74.

That to get at the amount of taxable gains only such losses as had been ascertained and settled during the period covered by the return should be deducted. See 5 Int. Rev. Rec. 74. And that no deduction was to be made on account of a part of the earnings being the interest upon railroad bonds owned by the corporation, and upon which a tax had been withheld, or on account of tax withheld by other corporations from dividends payable to it. See 5 Int. Rev. Rec. 91.

That the value of ore cannot be charged off as depreciation, see Stratton's Independence v. Howbert, 23 Treas. Decis. (1796). See pp. 164 et seq. The contention that the tax was on the corpus and thus unconstitutional was not sustained. Same case. As to a mutual insurance company being allowed to deduct a certain reserve from its income, see Mutual Benefit Ins. Co. v. Herold, 198 Fed. Rep. 199.