Lapas attēli

paid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252;"

This provision definitely fixes the time in which war amortization claims may be settled.

101 "(9) In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case, based upon cost including cost of development not otherwise deducted: Provided, That in the case of such properties acquired prior to March 1, 1913, the fair market value of the property (or the taxpayer's interest therein) on that date shall be taken in lieu of cost up to that date: Provided further, That in the case of mines, oil and gas wells, discovered by the taxpayer, on or after March 1, 1913, and not acquired as the result of purchase of a proven tract or lease, where the fair market value of the property is materially disproportionate to the cost, the depletion allowance shall be based upon the fair market value of the property at the date of the discovery, or within thirty days thereafter: And provided further, That such depletion allowance based on discovery value shall not exceed the net income, computed without allowance for depletion, from the property upon which the discovery is made, except where such net income so computed is less than the depletion allowance based on cost or fair market value as of March 1, 1913; such reasonable allowance in all the above cases to be made under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary. In the case of leases the deductions allowed by this paragraph shall be equitably apportioned between the lessor and lessee;'

102"(10) In the case of insurance companies (other than life insurance companies), in addition to the above (unless otherwise allowed):

(a) The net addition required by law to be made within the taxable year to reserve funds (in

cluding in the case of assessment insurance companies the actual deposit of sums with State or Territorial officers pursuant to law as additions to guarantee or reserve funds); and (b) The sums other than dividends paid within the taxable year on policy and annuity contracts. After December 31, 1921, this subdivision shall apply only to mutual insurance companies other than life insurance companies."

103"(11) In the case of corporations (except those taxed under section 243) issuing policies covering life, health, and accident insurance combined in one policy issued on the weekly premium payment plan continuing for life and not subject to cancellation, in addition to the above, such portion of the net addition (not required by law) made within the taxable year to reserve funds as the Commissioner finds to be required for the protection of the holders of such policies only. This subdivision shall not be in effect after December 31, 1921;"

104 "(12) In the case of mutual marine insurance companies,

there shall be allowed, in addition to the deductions allowed in paragraphs (1) to (10), inclusive, and paragraph (14), unless otherwise allowed, amounts repaid to policyholders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment and the payment thereof;"

105 "(13) In the case of mutual insurance companies (including interinsurers and reciprocal underwriters, but not including mutual life or mutual marine insurance companies) requiring their members to make premium deposits to provide for losses and expenses, there shall be allowed, in addition to the deductions allowed in paragraphs (1) to (10), inclusive, and paragraph (14), unless otherwise allowed, the amount of premium deposits returned to their policyholders and the amount of premium deposits retained for the payment of losses, expenses, and reinsurance reserves;"

106 "(14) If property is compulsorily or involuntarily converted into cash or its equivalent as a result of— (a) Its destruction in whole or in part, (b) Theft or seizure, or

(c) An exercise of the power of requisition or condemnation, or the threat or imminence thereof; and if the taxpayer proceeds forthwith in good faith, under regulations prescribed by the Commissioner with the approval of the Secretary, to expend the proceeds of such conversion in the acquisition of other property of a character similar or related in service or use to the property so converted, or in the acquisition of 80 per centum or more of the stock or shares of a corporation owning such other property, or in the establishment of a replacement fund, then there shall be allowed as a deduction such portion of the gain derived as the portion of the proceeds so expended bears to the entire proceeds. The provisions of this paragraph prescribing the conditions under which a deduction may be taken in respect of the proceeds or gains derived from the compulsory or involuntary conversion of property into cash or its equivalent, shall apply so far as may be practicable to the exemption or exclusion of such proceeds or gains from gross income under prior income, war-profits, and excessprofits tax Acts." (See 189.)”


Section 215




That in computing net income no deduction shall in any case be allowed in respect of—



Personal, living, or family expenses;

Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate;




(3) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made, or

(4) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy.

(b) Amounts paid under the laws of any State, Territory, District of Columbia, possession of the United States, or foreign country as income to the holder of a life or terminable interest acquired by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction allowed by this Act for the purpose of computing the net income of an estate or trust but not allowed under the laws of such State, Territory, District of Columbia, possession of the United States, or foreign country for the purpose of computing the income to which such holder is entitled."

This might refer to amortization of premiums of investments, depreciation of physical property, and depletion of natural resources, in connection with the principal of a trust or estate. If so, then the holding would be that a beneficial interest therein shall not be reduced by means of any of these considerations (as would be done were the interest not in trust) unless such deduction as would be allowable under this Act is allowable to such interests under the laws of the jurisdiction under which the estate or trust was created.

The specific reason given for this provision was stated as follows:

"Under existing law (Act 1918) persons receiving by gift, bequest or inheritance a life or other terminable interest in property frequently capitalized the expected future income, set up the value of this expectation as corpus or principal, and thereafter claimed a deduction for exhaustion of this so-called principal on the ground that with the passage of time the "principal" or corpus is gradually shrinking or wasting."


Section 231

112 "(1) Labor, agricultural, or horticultural organizations; 113 "(2) Mutual savings banks not having a capital stock represented by shares;

114 "(3) Fraternal beneficiary societies, orders, or associ


(a) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system; and

(b) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents;

115 “(4) Domestic building and loan associations substantially all the business of which is confined to making loans to members; and co-operative banks without capital stock organized and operated for mutual purposes and without profit;

116 "(5) Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit; and any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, no part of the net earnings of which

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