or Territory, prior to September 8, 1916, entered in good faith into a contract with any person, the object and purpose of which is to acquire, construct, operate, or maintain a public utility, no tax shall be levied under the provisions of this title upon the income derived from the operation of such public utility, so far as the payment thereof will impose a loss or burden upon such State, Territory, District of Columbia, or political subdivision; but this provision is not intended and shall not be construed to confer upon such person any financial gain or exemption or to relieve such person from the payment of a tax as provided for in this title upon the part or portion of such income to which such person is entitled under such contract;

65 (8) The income of a non-resident alien or foreign corporation which consists exclusively of earnings derived from the operation of a ship or ships, documented under the laws of a foreign country which grants an equivalent exemption to citizens of the United States and to corporations organized in the United States;

(9)

Amounts received as compensation, family allotments and allowances under the provisions of the War Risk Insurance and the Vocational Rehabilitation Acts, or as pensions from the United States for service of the beneficiary or another in the military or naval forces of the United States in time of war;

67 (10) So much of the amount received by an individual after December 31, 1921, and before January 1, 1927, as dividends or interest from domestic building and loan associations, operated exclusively for the purpose of making loans to members, as does not exceed $300;

68 (11) The rental value of a dwelling house and appurtenances thereof furnished to a minister of the gospel as part of his compensation.

69 (12) The receipts of shipowners' mutual protection and indemnity associations, not organized for profit,

and no part of the net earnings of which inures to the benefit of any private stockholder or member, but such corporations shall be subject as other persons to the tax upon their net income from interest, dividends and rents.

70 (c) In the case of a non-resident alien individual, gross income means only the gross income from sources within the United States, determined under the provisions of Section 217.

Income of Corporations

Section 233—

71 (a)

(a) That in the case of a corporation subject to the tax imposed by section 230 the term "gross income" means the gross income as defined in sections 213 and 217, except that mutual marine insurance companies shall include in gross income the gross premiums collected and received by them less amounts paid for reinsurance.

72 (b) In the case of a foreign corporation, gross income means only gross income from sources within the United States, determined (except in the case of insurance companies subject to the tax imposed by section 243 or 246) in the manner provided in section 217.

DEDUCTIONS

Section 214-Individuals

73 The following deductions are permitted to individuals, when they actually have any of them, or some or all of them: 74 (a) “(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition

to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity."

There is a deduction here not before given to persons traveling on business.

75 "(2) All interest paid or accrued within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations or securities (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this title."

The amendment of previous law consists in limiting deductible interest paid on indebtedness to purchase Government Bonds to such as were originally subscribed for by the taxpayer.

76 "(3) Taxes paid or accrued within the taxable year, except

77

78

79

80

(a) income, war-profits, and excess-profits taxes imposed by the authority of the United States,

(b)

(c)

so much of the income, war-profits and excess-profits taxes, imposed by the authority of any foreign country or possession of the United States, as is allowed as a credit under section 222,

taxes assessed against local benefits of a kind tending to increase the value of the property assessed, and

(d) taxes imposed upon the taxpayer upon his interest as shareholder or member of a corporation, which are paid by the corporation without reimbursement from the taxpayer. For the purpose of this paragraph, estate, inheritance, legacy and succession taxes accrue on the due date thereof except as otherwise provided by

the law of the jurisdiction imposing such taxes."

The change here is the taking away from individuals the deduction for tax paid on bank shares, etc., and giving this deduction to corporations paying the tax, unless the shareholder reimburses the corporation, in which event there would be no advantage to the shareholder, and in permitting a deduction for estate or inheritance taxes which have accrued or been paid.

81 "(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business.

82 "(5)

This refers to inventory or operating loss. Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business; but in the case of a non-resident alien individual only if and to the extent that the profit, if such transaction had resulted in a profit, would be taxable under this title. No deduction shall be allowed under this paragraph for any loss claimed to have been sustained in any sale or other disposition of shares of stock or securities made after the passage of this Act where it appears that within thirty days before or after the date of such sale or other disposition the taxpayer has acquired (otherwise than by bequest or inheritance) substantially identical property, and the property so acquired is held by the taxpayer for any period after such sale or other disposition. If such acquisition is to the extent of part only of substantially identical property, then only a proportionate part of the loss shall be disallowed."

The Act of 1921 was passed at 3:55 p. m., November 23, 1921. Sales of stock or securities completed prior to the passage of this Act are not affected by this paragraph. It has been held

that the Law does not take notice of a fraction of a day. It may be possible that the Commissioner of Internal Revenue will take the view that the Act having been passed on November 23 will require that all of that day be considered for the purposes of this provision.

The statute provides that, where within 30 days before or after a sale of stock or securities "substantially identical property” is acquired and held by the taxpayer for any period after such sale or other disposition, no loss determined upon such a sale shall be allowed as a deduction from gross income in return of income. As originally proposed, the inhibition was against the repurchase of "identical or substantially identical" property. The Act as passed omits the word "identical" except as adjectively qualified. It is to be presumed that a repurchase within 30 days after sale of the identical property sold would be covered by the language of the statute, "substantially identical."

"Identical"-Absolutely the same, as in essence or in all respects; the very same: opposed to different, and contrasted with similar; as, this is the identical volume from which he read; the identical spot.-Stand. Dic.

Clearly with this provision, the sale or acquisition, for example, of C., B. & Q. Bonds, Nos. 34, 36 First Mortgage, Series "A" 5% 20-year Bonds due May 1, 1941, would require acquisition (other than by bequest or inheritance) within 30 days prior to a sale by the purchaser thereof of bonds of the same debtor, and same issue of the same debtor, or a replacement by purchase within 30 days after sale of either the same certificates sold or other certificates of the same debtor and same issue.

A repurchase of the identical certificates would be "identical property." Purchase of other certificates of the same debtor and same issue of such