inures to the benefit of any private stockholder or individual;

117 "(6) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual;

118 "(7) Business leagues, chambers of commerce, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private stockholder or individual;

119 "(8) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare;

120 "(9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes,

no part of the net earnings of which inures to the benefit of any private stockholder or member; 121 "(10) Farmers' or other mutual hail, cyclone, or fire insurance companies, mutual ditch or irrigation companies, mutual or co-operative telephone companies, or like organizations of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting expenses;

122 "(11) Farmers', fruit growers', or like associations, organized and operated as sales agents for the purpose of marketing the products of members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produce furnished by them; or organized and operated as purchasing agents for the purpose of purchasing supplies and equipment for the use of members and turning over such supplies and equipment to such members at actual cost, plus necessary expenses;

123"(12) Corporations organized for the exclusive purpose of holding title to property, collecting income there

from, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title;

124 "(13) Federal land banks and national farm loan associations as provided in section 26 of the Act approved July 17, 1916, entitled "An Act to provide capital for agricultural development, to create standard forms of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to create Government depositaries and financial agents for the United States, and for other purposes";

125"(14) Personal service corporations.

This subdivision

shall not be in effect after December 31, 1921.”

RETURNS OF INCOME

126 A return of income is a statement "required by the Government" of the total gross income of a taxable class and such other information as may be called for, and of the several deductions and the amount of each, provided by the statute as an offset against gross income, and with such particulars of information concerning each deduction as may be called for, together with the amount of personal exemptions claimed, and such information as may be called for in connection with such claims.

Who Are Required to Make Returns of Income:

127 Individuals, Partnerships, Estates or Trusts, Corporations, Withholding Agents.

Individuals:

128 Make returns of income on Form 1040A for incomes of $5,000 and less for 1921 and for incomes of $6,000 and less thereafter;

129 On Form 1040 for incomes in excess of $5,000 for 1921 and in excess of $6,000 for subsequent years. Husband and wife having separate incomes may make separate returns, or a joint return as they may elect. If the separate income is of an amount sufficient to be subject to surtax, they should make separate returns of income. In certain states

having community property laws, husband and wife are permitted to make separate returns of income from the community property. The income tax of individuals is computed and tax paid on the basis shown by these returns. Individual income is subject to a normal tax and a surtax, according to the amount thereof.

Partnerships:

130 Make returns of income on Form 1065. These returns show gross income, deductions, and net income. Also the names and addresses of the several partners and their respective shares of the net income, separating net income into its several classes as called for by the return.

Estates or Trusts:

131 Make returns of income on Form 1041. These returns show the gross income and deductions of the estate or trust and the net income. The names and addresses of the several beneficiaries and the portions of the annual net income to which such beneficiaries are entitled and what portion, if any, of such income is to be retained by the estate or trust, are also required to be shown.

132 The trustee or fiduciary acting for the estate or trust may also be required under certain conditions specified by the statute and regulations, to make a return on Form 1040A or Form 1040 for the beneficiaries, and or for the trust itself in case of retained income on which the estate or trust is required to pay a tax.

133

Forms 1065 and 1041 are information returns and are used in connection with the returns of individuals receiving an income reported on these information Forms. Additional returns of information are required on Forms 1098 (payments to non-resident aliens) and 1099 for payments to citizens and resident aliens.

Corporations:

134 Make returns of income on Form 1120, for both the income tax and excess-profits tax.

Withholding Agents:

135 Make returns on Forms 1012 and 1013 for tax collected from interest paid on bonds, mortgages, deeds of trust, or

similar obligations of corporations which contain a tax covenant. On Form 1042 for all other tax collected at the source. 136 Sections of the Law requiring returns are 221 (c) for withholding returns; 223 for individual returns; 224 for partnership and personal service corporation returns; 225 for fiduciary returns; 226 for returns covering a period less than 12 months; 239 and 240 for corporation returns; 256, 254 and 255 for information returns.

PERIOD COVERED BY RETURNS OF INCOME

137 Returns of income are to cover a period of 12 months, except in cases where a taxpayer has had a taxable status for less than 12 months at return time, and has an amount of income or other conditions requiring the making of a return of income, or in the case of a change from one accounting period to another, as a result of which there may be a period of time less than 12 months for which return of income will be required.

138 Corporations are required to make returns of income on the basis of the calendar year, unless they have a fiscal year other than the calendar year.

A corporation which is chartered within the calendar year and does not establish a fiscal year, will be required to make a return of income as at the end of the calendar year in which it was incorporated. If it makes returns on the basis of a calendar year or a fiscal year, and desires to change to some other accounting period, by giving the notice required by regulations, it may make such change, but it will be required to make return of income for the time between the close of its old accounting period and the date designated as the close of its new accounting period; as, where a corporation has been making returns on the basis of a calendar year and desires to have a fiscal year, say, beginning July 1 and ending June 30, it would file with the Commissioner of Internal Revenue a notice of this intention and request permission to make the change, which request must be filed not later than 30 days before March 1st next preceding the date designated for close of the fiscal year and upon receiving permission to make the change, returns of income would be required for the period between December 31 and June 30, and thereafter returns would be made on

the basis of the fiscal year covering a period of 12 months. 140 Persons dying within a calendar year and having an amount of net income in excess of allowable personal exemptions at the time of death, or a gross income of $5,000, regardless of the amount of net income, have a status which makes it necessary for the personal representative to make a return of income for the decedent.

141 The section of the Law providing for returns for less than 12 months is section 226. Paragraph (c) of this section contains an entirely new provision for the computation of tax on such returns. This may be illustrated as follows: 142 Take the case of a married man living with wife but without other dependents, who dies March 31. A return of income made for him by his executor discloses a net income of $20,000 between January 1 and March 31, 1921.

The return covers three months or 1/4 of the calendar year.

Applying the rule under section 226 (c):

$20,000 X 12 months 3 months = annual

The tax to be paid under the Act of 1921 is 24.96% of the net income.

The tax which would have been payable under the Act of 1918 would have been 9.95% of the net income. In other words, the Act of 1921 increases the tax in this case 250%.

In addition to the foregoing will come, in many cases, the Federal estate tax and State inheritance taxes.

WHEN RETURNS ARE TO BE FILED-TIME AND PLACE OF FILING

143 Returns of income made on the basis of the calendar year must be filed after December 31 of the year for which return is made, and not later than March 15 next following.