and the owner undertakes to replace the converted property from this value. Let us suppose it requires, under regulations prescribed by the Commissioner. $145,000 to replace the property converted-we would then have a gain of......$ 5,000 .96-2/3% of the value would have been used in replacement and this proportion of the gain would be an allowable deduction under this paragraph:

90

"(b)

In the case of a nonresident alien individual the deductions allowed in subdivision (a), except those allowed in paragraphs (5), (6), and (11), shall be allowed only if and to the extent that they are connected with income from sources within the United States; and the proper apportionment and allocation of the deductions with respect to sources of income within and without the United States shall be determined as provided in section 217 under rules and regulations prescribed by the Commissioner with the approval of the Secretary. In the case of a citizen entitled to the benefits of section 262 the deductions shall be the same and shall be determined in the same manner as in the case of a nonresident alien individual.

Partnerships and Personal Service Corporations (Section 218, Law).

91 Have the same deductions as individuals, except that they are not permitted to deduct contributions or gifts for charitable and other purposes as are individuals. Estates and Trusts (Section 219, Law).

92 The net income of an estate or trust is computed as in the case of a single individual for such portion of the income as is taxed to the estate or trust, except in lieu of the

deduction for contributions or gifts for charitable purposes, etc., which, pursuant to the terms of the will or deed creating the trust, is during the taxable year paid or permanently set aside for the purposes and in the manner specified as controlling in the case of individuals.

Deductions Allowed Corporations (Section 234, Law). Corporations are allowed the following deductions: 93 "(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, and including rentals or other payments required to be made as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity;"

94 "(2) All interest paid or accrued within the taxable year on its 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;"

Limitation of taxable interest, on indebtedness to purchase or carry Government obligations, to such indebtedness as relates only to original purchases by the taxpayer, is new.

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

(a) Income, war-profits, and excess-profits taxes imposed by the authority of the United States. (b) 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 238, and

(c) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed. In the case of obligors specified in subdivision (b) of section 221 no deduction for the payment of the tax imposed by this title, or any other tax paid pursuant to the contract or provision referred to in that subdivision, shall be allowed, nor shall such tax be included in the gross income of the obligee. The deduction allowed by this paragraph shall be allowed in the case of taxes imposed upon a shareholder or member of a corporation upon his interest as shareholder or member, which are paid by the corporation without reimbursement from the shareholder or member, but in such cases no deduction shall be allowed the shareholder or member for the amount of such taxes. 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 new provisions under this paragraph

are:

Specific authority for not including in individual returns of income amount of tax collected from such individuals at the source; the giving to corporations a deduction for tax paid by them, and not reimbursed, for their shareholders upon shares of stock issued by corporations required to collect this tax at the source; allowance of estate, inheritance, legacy and succession taxes.

96 "(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise; unless, in order to clearly reflect the income, the loss should in the opinion of the Commissioner be accounted for as of a different period. No deduction shall be allowed 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 30 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, unless such claim is made by a dealer in stock or securities and with respect to a transaction made in the ordinary course of its business. 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. In case of losses arising from destruction of or damage to property, where the property so destroyed or damaged was acquired before March 1, 1913, the deduction shall be computed upon the basis of its fair market price or value as of March 1, 1913;"

Restriction upon reduction of loss from sale of securities is broader here than in paragraph (5) section 214 (182) for individuals, in that, in this paragraph corporate dealers in securities would appear to be exempt from this provision in respect to transactions in the ordinary course of their busi

ness.

97 "(5) Debts ascertained to be worthless and charged off within the taxable year (or in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts); and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part;"

Provision for charge-off of a reserve or fractional loss is new.

98 "(6) The amount received as dividends—

(a) from a domestic corporation other than a corporation entitled to the benefits of section 262, or

(b) from any foreign corporation when it is shown to the satisfaction of the Commissioner

that more than 50 per centum of the gross income of such foreign corporation for the three-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of such period as the foreign corporation has been in existence) was derived from sources within the United States as determined under section 217."

99 "(7) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. In the case of such property acquired before March 1, 1913, this deduction shall be computed upon the basis of its fair market price or value as of March 1, 1913;"

100 "(8) In the case of buildings, machinery, equipment, or other facilities, constructed, erected, installed, or acquired, on or after April 6, 1917, for the production of articles contributing to the prosecution of the war against the German Government, and in the case of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of such war, there shall be allowed, for any taxable year ending before March 3, 1924 (if claim therefor was made at the time of filing return for the taxable year 1918, 1919, 1920, or 1921) a reasonable deduction for the amortization of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again including any amount otherwise allowed under this title or previous Acts of Congress as a deduction in computing net income. At any time before March 3, 1924, the Commissioner may, and at the request of the taxpayer shall, re-examine the return, and if he then finds as a result of an appraisal or from other evidence that the deduction originally allowed was incorrect, the income, war-profits, and excessprofits taxes for the year or years affected shall be redetermined and the amount of tax due upon such redetermination, if any, shall be paid upon notice and demand by the collector, or the amount of tax over