COMPENSATION FOR SERVICES-CANCELATION OF INDEBTED-

NESS

Compensation for services. When compensation is included

as taxable income. Receipts representing additional compensation.

Distinction between compensation for services and other forms of

receipt. Military exemptions. Non-taxable compensation. For-

giveness of indebtedness. Accounts payable as taxable income.

TAX-FREE INCOME-SUMMARY

XII

Insurance. Illustrations of exempt interest. Property acquired

by gift, bequest, devise, and inheritance. Damages. Dividends

and interest from building and loan associations. Other tax-free

income. General summary of income.

143

153

PART IV: DEDUCTIONS

XIII

DEPRECIATION AND OBSOLESCENCE

Other names for depreciation. Basis for depreciation. Appraisals

for depreciation and other purposes. Basis in reorganizations.

Rates of depreciation. Testing depreciation provisions. Deprecia-

tion to life tenants. Reserve for depreciation. Intangibles. Basis

for computing obsolescence.

Amortization. Length of amortization period. Depletion of

mines, and oil and gas wells. Depletion of timber.

INTEREST AND TAXES

XV

Interest on loans to purchase or to carry tax-free securities.

Methods of computing non-taxable interest paid. Taxes. Items

not deductible as taxes.

163

180

189

XVI

BAD DEBTS AND LOSSES

Bad debts. Deduction of bad debts: the reserve and non-reserve

methods. Losses from trade or business, from transactions

entered into for profit, and from casualty or theft.

XVII

NET LOSSES AND CONTRIBUTIONS

Net losses. Losses under 1918 act. Losses under 1921 act.

Contributions in general. Donations to religious, charitable, and

educational institutions. Gifts to cities. Contributions may

be money or property. Proportionate shares. Valuation of

contributions. Amounts paid into pension funds not deductible

by corporations.

XVIII

INSURANCE TRAVELING AND OTHER EXPENSES

Insurance premiums as a business expense. Traveling expenses.

Compensation to employees. Rentals. Professional expenses.

Miscellaneous business expenses.

XIX

VALUATION OF INVENTORIES

Taking the inventory. Pricing. Cost basis. Market-raw mate-

rials and goods bought for resale. Market-goods in process.

Rules applicable to certain businesses.

XX

NON-DEDUCTIBLE EXPENDITURES

Non-deductible expenditures in general. Personal expenses. Other

losses. Non-allowable deductions of corporations. General sum-

mary of deductions.

PART V: INVESTED CAPITAL

XXI

197

207

214

224

232

INVESTED CAPITAL: CAPITAL STOCK-PAID-IN SURPLUS ..

Theory of invested capital. Present importance. Effect on tax

payable, 1919-1921. Illustrations. Capital stock. Status of

unpaid subscriptions. Values in excess of par value of stock; paid-

in surplus recorded and not recorded in books.

239

XXII

INVESTED CAPITAL: EARNed Surplus-INTANGIBLES

Earned surplus. Deductible and non-deductible reserves.

tions to earned surplus. Intangibles: limitation thereon.

XXIII

....

Addi-

INVESTED CAPITAL: CHANGES DURING YEAR-INADMISSIBLES

Changes in invested capital during year. Additions and deduc-

tions: Federal taxes, dividends, stock sold and retired. Inad-

missible assets.

249

257

XXIV

INVESTED CAPITAL: REORGANIZATIONS—SPECIAL CASES-

SUMMARY

Reorganizations and invested capital. Reorganizations prior

and subsequent to March 3, 1917. Special cases. Abnormal

conditions affecting the income or invested capital of a corpora-

tion. Summary.

PART VI: APPLICATION OF INCOME TAXES

XXV

RETURNS PAYMENT OF TAXES

Withholding at source. Information at source. Interest. Other

required information returns. Illustration of individual tax

return. Illustration of corporation tax return. Payment of taxes.

XXVI

265

275

INDIVIDUALS SUBJECT TO TAX-FARMERS-ESTATES AND

TRUSTS

Individuals liable to tax. Joint and separate returns of husband

and wife. Income of minors. Farmers. Returns of executors

and administrators. Taxability of trusts. Incidence of tax on

trusts and estates and their beneficiaries.

XXVII

PARTNERSHIPS-PERSONAL SERVICE CORPORATIONS

......

Taxation of partnership profits. Credits taken by partners. Re-

turns necessary. Taxation of personal service corporations.

Corporations classed as personal service corporations. Corpo-

rations partly personal service.

298

312

XXVIII

RESIDENT AND NON-RESIDENT ALIENS AND FOREIGN CORPO-

RATIONS

Taxation of income of resident aliens. Determination of who is

a resident alien. Income of non-resident aliens and foreign cor-

porations. Residents of Mexico and Canada. Income from

possessions of the United States.

XXIX

ORGANIZATIONS SUBJECT TO THE CORPORATE TAX-CON-

SOLIDATED RETURNS

Powers of a corporation determine its exemptions. Agricultural

and horticultural organizations, mutual savings banks, fraternal

beneficiary organizations, building and loan associations, cemetery

companies, community chests, funds and foundations for re-

ligious, charitable, scientific, literary, and educational purposes.

Business leagues, civic leagues and social clubs. Mutual insurance

companies, cooperative associations. Insurance companies

divided into three groups for tax purposes. Requirements for

consolidated returns. Retroactive provision of 1921 act.

XXX

REVIEW OF RETURNS-CLAIMS-PENALTIES

Audit of returns by collectors. Audit by Income Tax Unit.

Hearings before the Treasury Department and the Board of

Tax Appeals. Statute of Limitations relating to additional as-

sessments and refunds. Waivers. Extending time of payment.

Claims for refund. Non-payment of taxes. Publicity of tax

information. Penalties.

321

329

347

I.

FORMS

Income taxes applicable to individuals and corporations
for the years 1922 to 1926. An individual married,
but without dependents, has been assumed; no deduc-
tion is made for earned income .... between 40 and 41

First page of Individual Income Tax Return

281

2.

3. Page of Individual Income Tax Return

282

4. Certificate of Inventory attached to Individual Income Tax Return

283

5. First page of Corporation Income Tax Return

288

6. Page 2 of Corporation Income Tax Return

289

7. Page 3 of Corporation Income Tax Return

8. Page 4 of Corporation Income Tax Return 9. Schedule G attached to Corporation Income Tax Return 292 10. Certificate of Inventory attached to Corporation Income

Tax Return

.. 293

290

291