(b) Section 144 of the Internal Revenue Code is amended by striking out "except that in the case of dividends the rate shall be 10 per centum, and" and by striking out "of 10 per centum." (c) The amendments made by this section shall take effect on June 26, 1940. SEC. 202. RATES OF WITHHOLDING. Section 143 of the Internal Revenue Code is amended by inserting at the end thereof the following new subsection: (h) RATES UNTIL JANUARY 1945.-For the period after June 25, 1940, and before January 1, 1945, the rate provided in this section and section 144, of 15 per centum shall be 161⁄2 per centum. This subsection or section 15 shall not apply in any case where its operation would be contrary to any treaty obligation of the United States, nor to a resident of, or a corporation organized under the laws of, a contiguous country so long as there is in effect with such country a treaty, ratified prior to August 26, 1937, relating to rates of income tax. (6) Section 19.144-1 is amended as follows: (a) By inserting in the first paragraph thereof the word "and" immediately preceding "(2)", by striking out ", and (3) dividends" and by inserting at the end of such paragraph the following sentence: However, in accord with article VII of the tax convention and protocol between the United States and Sweden, effective January 1, 1940, the rate of withholding shall, for a period of at least two years beginning with such date, be 10 percent with respect to dividends paid to a corporation or other entity created or organized under the laws of Sweden. (b) By inserting in the third paragraph after the words "10 percent" wherever occurring therein the words, (15 percent on and after June 26, 1940 except as otherwise provided herein). (c) By adding at the end thereof the following new paragraph: With respect to income paid on or after June 26, 1940, and prior to January 1, 1945, the rate of withholding (except with respect to dividends paid to corporations organized under the laws of Canada and to corporations or other entities created or organized under the laws of Sweden) is 161⁄2 percent instead of 15 percent. (7) Section 19.144-2 is amended as follows: (a) By striking out the words "Sorting Section" in the first paragraph and inserting in lieu thereof the words, "Withholding Returns Section." (b) By inserting, immediately preceding the table in the last paragraph thereof, the following heading: For the period prior to June 26, 1940 (c) By inserting in the last column of line numbered 7 of the table the symbol "(2)" and adding a footnote to such table as follows: (2) Interest on any non-corporate security the owner of which is unknown to the withholding agent is subject to withholding at the rate of 10 percent. (d) By inserting at the end thereof the following new paragraph: The following table of withholding rates under the Internal Revenue Code as amended and the tax conventions between the United States and Canada and United States and Sweden has been prepared for the purpose of making a summary of such rates readily available to withholding agents: For the period on and after June 26, 1940, and prior to Jan. 1, 1945 1 Salary or compensation for personal services rendered in the United States is not subject to withholding in the case of nonresident aliens, residents of Canada or Mexico, who enter and leave the United States at frequent intervals. In the case of dividends paid to a corporation organized under the laws of Canada, the rate is 5 percent. In the case of a resident of Sweden or a corporation or other entity organized under the laws of Sweden the rate with respect to dividends is 10 percent for at least two years beginning Jan. 1, 1940. Interest on any noncorporate security the owner of which is unknown to the withholding agent is subject to withholding at the rate of 162 percent. (8) Section 19.262-4 is amended as follows: (a) By inserting after the words "10 percent" wherever appearing therein the words, (15 percent on and after June 26, 1940, except as otherwise provided herein). (b) By striking out the last sentence thereof and inserting in lieu thereof the following: As to reduction in rate of withholding (a) in the case of nonresident alien individuals who are residents of Canada or of Sweden, see section 19.143-1; (b) in the case of non-resident foreign corporations organized under the laws of Canada, or corporations or other entities created or organized under the laws of Sweden, see section 19.144-1. With respect to income paid on or after June 26, 1940, and prior to January 1, 1945, the rate of withholding (except with respect to dividends paid to residents of, or corporations organized under the laws of, Canada or to residents of, or to corporations or other entities created or organized under the laws of, Sweden) is 161⁄2 percent instead of 15 percent. (This Treasury decision is issued under the authority of sections 143 and 144 of the Internal Revenue Code (53 Stat. 60, 62), as amended by section 5 and section 202 of the Revenue Act of 1940 (Public, No. 656, Seventy-sixth Congress, third session); and section 62 of the said Internal Revenue Code, 53 Stat. 32.) Approved July 1, 1940: GUY T. HELVERING, Commissioner of Internal Revenue. HERBERT E. GASTON, Acting Secretary of the Treasury. [Filed with the Division of the Federal Register July 2, 1940, 3:22 p. m.] (T. D. 4980) Regulations 103 amended-Improvements by lessee TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C. To Collectors of Internal Revenue and Others Concerned: Improvements by lessee.—If buildings are erected or other improvements are made by a lessee, the lessor shall include in gross income as of the date he acquires possession or control of the real estate with such improvements thereon, at the termination of the lease by forfeiture or otherwise, an amount equal to the excess of the value as of such date of the real estate with such improvements thereon over the value as of such date of the real estate without such improvements. If for taxable years ending prior to January 1, 1940, other than the year in which the taxpayer acquired possession or control of the real estate with the improvements thereon, there has been included in gross income the value of such improvements or the several parts thereof fixed by reference to an option granted in any income tax regulations, then such inclusion shall not be disturbed and the taxpayer, for all taxable years subsequent to the one in which there was first so included any of such income, may continue to return income with respect to such property on such basis, if within 90 days after the approval of this Treasury Decision, or within such later period as may be acceptable to the Commissioner, he files Form 968, in duplicate, with the Commissioner of Internal Revenue, Washington, D. C., Attention Income Tax Unit, Records Division, signifying his election to have income in respect of such property for all taxable years determined upon the basis heretofore employed, and expressly waiving any right which he might have had to claim or receive any refund, credit, or other tax advantage which would result from the exclusion of such items from income for the years for which included. The rule stated in the first paragraph of section 19.22 (a)-13 of Regulations 103, as amended by this Treasury decision, shall be applicable with respect to taxable years beginning prior to January 1, 1939, unless the taxpayer files Form 968 pursuant to section 19.22 (a)–13 of Regulations 103, as amended by this Treasury decision, in which case the rule stated herein shall be disregarded and the rule stated in prior regulations shall be applicable. (This Treasury decision is prescribed pursuant to sections 22 (a), 62, and 3791 (b) of the Internal Revenue Code (53 Stat. 9, 32, 467), and the corresponding provisions of prior internal revenue laws.) GUY T. HELVERING, Approved: July 2, 1940: JOHN L. SULLIVAN, Commissioner of Internal Revenue. Acting Secretary of the Treasury. [Filed with the Division of the Federal Register July 5, 1940, 12:52 p. m.] (T. D. 4981) Amending section 19.22 (c)-1 of Regulations 103 relative to need of inventories— Inventories of containers TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C. To Collectors of Internal Revenue and Others Concerned: Sec. 19.22 (c)-1. Need of inventories.—In order to reflect the net income correctly, inventories at the beginning and end of each taxable year are necessary in every case in which the production, purchase, or sale of merchandise is an incomeproducing factor. The inventory should include all finished or partly finished goods and, in the case of raw materials and supplies, only those which have been acquired for sale or which will physically become a part of merchandise intended for sale, in which class fall containers, such as kegs, bottles, and cases, whether returnable or not, if title thereto will pass to the purchaser of the product to be sold therein. Merchandise should be included in the inventory only if title thereto is vested in the taxpayer. Accordingly, the seller should include in his inventory goods under contract for sale but not yet segregated and applied to the contract and goods out upon consignment, but should exclude from inventory goods sold (including containers), title to which has passed to the purchaser. A purchaser should include in inventory merchandise purchased (including containers), title to which has passed to him, although such merchandise is in transit or for other reasons has not been reduced to physical possession, but should not include goods ordered for future delivery, transfer of title to which has not yet been effected. (But see section 19.22 (d)-1.) (This Treasury decision is issued under the authority contained in sections 22 and 62 of the Internal Revenue Code (53 Stat., 9, 32).) GUY T. HELVERING, Commissioner of Internal Revenue. Approved July 3, 1940: HERBERT E. GASTON, Acting Secretary of the Treasury. [Filed with the Division of the Federal Register July 8, 1940, 10:03 a. m.] (T. D. 4982) Basic permit procedure under Federal Alcohol Administration Act TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, To District Supervisors and Others Concerned: Section 1. By virtue of and pursuant to the provisions of the Federal Alcohol Administration Act, as amended (U. S. C. Sup., title 27), Section 3170 of the Internal Revenue Code (53 Stat., part 1), and section 161 of the Revised Statutes (U. S. C., title 5, sec. 22), part 171 of title 26 of the Code of Federal Regulations is hereby amended by inserting between subpart B (A) and subpart C thereof a new subpart, designated B (B), to read as follows: SUBPART B (B)-BASIC PERMIT PROCEDURE UNDER FEDERAL ALCOHOL ADMINISTRATION ACT Sec. 171.4c Delegation of Functions to District Supervisors. The power and duty heretofore vested in the Deputy Commissioner of the Bureau of Internal Revenue in charge of the Alcohol Tax Unit, by Treasury department Order No. 30, dated June 12, 1940 (5 F. R. 2212 DI), to issue, amend, deny, revoke, suspend and annul basic permits under the provisions of the Federal Alcohol Administration Act, shall continue to be exercised by him, and are also hereby delegated to District Supervisors of the Alcohol Tax Unit, to be exercised by them, subject to the supervision and direction of the said Deputy Commissioner. Sec. 171.4d Procedure. Except as otherwise provided herein, the procedure prescribed by existing regulations for the issuance, amendment and denial of permits, issuance of citations, holding of hearings, revocation of permits, and appeals to the Commissioner under Part II of Subchapter C of Chapter 26 of the Internal Revenue Code is hereby extended to the issuance, amendment, denial, revocation, suspension and annulment of basic permits under the Federal Alcohol Administration Act, in so far as applicable and in so far as such procedure is not in conflict with the provisions of such Act. Appeals to the Deputy Commissioner in charge of the Alcohol Tax Unit from orders denying permits shall be taken in conformity with the procedure applicable to appeals from orders revoking permits. (a) An application for basic permit must be filed, and permit issued, to cover each individual plant or premises where any of the businesses specified in Section 3 of the Federal Alcohol Administration Act is engaged in, such application to be filed with and permit issued by the District Supervisor for the district wherein such plant or premises is located, provided, that in the case of persons engaged in the business of importing into the United States distilled spirits, wine or malt beverages, and in the case of persons engaged in the business of purchasing for resale at wholesale distilled spirits, wine, or malt beverages, only one basic permit shall be required, which basic permit shall be issued by the District Supervisor of the district wherein the applicant has his main office or place of business. In the case of importers or wholesalers maintaining branch offices or places of business, there shall be kept posted and available for inspection at all times in each such branch office or place of business a copy of the basic permit, and a copy of the basic permit shall also be filed with the appropriate District Supervisor. |