ITEM 3.

Distributive share of Net Income, earned during
period by personal service corporations not re-
ceived or accrued on books.

Amount necessary to adjust book profit or loss with
the amounts reported in items 22 and 23, Schedule
A (unless entry belongs on line 8).

(b) Interest on obligations of States, Territories, and political subdivisions thereof.

(c) Interest on Farm Loan Bonds issued under

Federal Farm Loan Act.

(d) Dividends on stock of domestic corporations
and from foreign corporations taxable
by United States upon any portion of
their incomes.

(e) Dividends on stock of personal service cor-
porations out of earnings upon which a
federal income tax has been imposed...
Other items of non-taxable income (to be
detailed)

(f)

(g)

CALCULATION OF INCOME TAX-CORPORATION-FOR FISCAL YEAR ENDING MARCH 31, 1919 In computing the amount subject to income tax, form 1120A provides for crediting against income the excess profits tax as computed for a fiscal year ending in 1919, but it is believed the method here shown of making separate computations is that prescribed by section 205 (b).

AT 1918 RATES:

Taxable Net Income.

Exemptions:

War and Excess Profits Tax (full year at 1918 rates) Specific..

Amount subject to Income Tax.

Proportion (3/12 or 4) which number of months in 1919 is of number of months in fiscal period..

Total Income Tax for fiscal year ending March 31, 1919

This form is designed to meet the requirements of all domestic corporations, except personal service corporations (section 218
(e), and 335 (c), corporations that conduct business in part of the character engaged in by personal service corporations (section
303), corporations subsidiary to corporations that make returns on the basis of consolidated statements, corporations making returns
for a period less than twelve months in the process of changing the fiscal year (section 226, 239, 305 and 311), insurance companies,
corporations deriving more than $10,000 income in the taxable year 1919 from government contracts and certain organizations
specifically exempted from federal income taxes (section 231).

RECONCILEMENT OF BOOK NET INCOME WITH NET INCOME SUBJECT TO INCOME AND EXCESS
PROFITS TAXES

I.

614

2.

Net income for fiscal year according to the books (any income and expense items entered in Surplus Account during the year should be combined with Profit and Loss Accounts.) 1, 2.

Add expenses charged on the books but not deductible on Tax Return:

Federal income and excess profits taxes (also foreign income and excess profits taxes), (Art. 131). 3. Local assessments, if the assessment is consideration for a benefit received increasing the value of the property and not a tax (Art. 133).

617 679

4.

627, 679

5.

Amounts reserved for uncollectible accounts or bad debts (Art. 151).

Amounts reserved for losses and contingencies other than depreciation and depletion and uncollectible accounts (T. D. 2433).

Premiums paid for life insurance (less any rebates) (Art. 294).

Donations paid which are actual gifts (Art. 562).

Payments in excess of reasonable compensation to officers who are stockholders (Art. 105).

Interest paid or accrued on indebtedness incurred or continued to purchase or carry tax-exempt securities other than 4% and 44% Liberty Bonds and Victory Notes (Art. 121).

Depreciation and depletion charged on books but not allowable in tax returns.

Add income not credited as such on books, but taxable:

Interest credited to sinking fund reserve account.

Adjustment of proceeds of life insurance to taxable amount, if addition (Art. 541)
Total (sum of items I to 17).

Deduct: Income credited on the books but not taxable:

Dividends received from domestic corporations and foreign corporations, any part of whose income is subject to income tax imposed by the United States..

Interest on obligations of states and political subdivisions thereof (Art. 74).

Interest on Liberty Bonds, bonds of the War Finance Corporation and other federal obligations (Arts. 77 to 82 incl.).

Credits to establish Cash Surrender Value of life insurance policies (Art. 294).

479

19.

45

20.

421

Refunds of federal income and excess profits taxes overassessed.

674,681

29.

680, 681

30.

325

31.

32.

33.

421

Items not charged to Profit and Loss Accounts but deductible on tax return:

Bad debts charged to Reserve Account (Art. 151).

Losses actually sustained charged to Reserve Accounts.

Adjustment of proceeds of life insurance to taxable amount, if deduction (Art. 541).

Total adjustments to be deducted (sum of items 19 to 31).

Net income subject to income tax (item 18 minus item 32).

Add: Interest on Liberty Bonds and Certificates of Indebtedness and 44% Victory Notes and
Bonds of the War Finance Corporation in excess of special exemptions.
Net Income (item 33 plus item 34) subject to excess profits tax 13,

1Consolidated Statements. If corporation is a holding or controlling company, the figures should represent the specified items of income and expense as
shown by the consolidated profit and loss statement.

*But not including the net income of any affiliated corporation organized after August 1, 1914, and not successor to a then existing business, 50 per cent or more of whose gross income was derived from government contracts or subcontracts made between April 6, 1917, and November 11, 1918. Such corporation shall be assessed separately. (Section 240.)

In the case of any corporation engaged in the mining of gold, the portion of net income derived therefrom shall be exempt from war profits and excess profits taxes beginning January 1, 1918. (Section 304.)

price.

Excess profits tax on proceeds from the sale by "discoverer" of mines, oil and gas wells, or any interest therein, shall not exceed 20 per cent of selling (Section 337.)