(TREASURY DECISION 1937.) INCOME TAX Corporations are not permitted to deduct from gross or net income for the year 1913 any portion of specific exemption authorized under corporation tax law (Section 38, Act of August 5, 1909.) TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., January 26, 1914. Section 2 of the Act approved October 3, 1913, known as the Federal Income Tax Law, provides that all corporations, joint stock companies and all insurance companies, except those specifically enumerated as exempt, shall be subject to the normal tax imposed upon individuals—such tax to be levied, assessed and paid annually upon the entire net income arising or accruing from all sources during the preceding calendar year. The provisions of this act apply to corporations which have or may have income arising or accruing on and after March 1, 1913. For the purpose of covering the liability of corporations to special excise tax for the months of January and February, 1913, the provisions of the corporation tax law (Section 38, Act of August 5, 1909) were extended, and in subsection S of the income tax law it is provided that the net income for these two months shall be ascertained in accordance with the provisions of subsection G of Section 2 of the Act of October 3, 1913,that is, in the same manner as the net income for the remaining ten months of the year is ascertained. In the subsection G just cited all items or charges against income, which constitute allowable deductions from gross income, are specifically set out. No provision, either express or implied, is made in this subsection or elsewhere in the act for the allowance of all or any portion of the specific exemption ($5,000) allowed under the corporation tax law. As applied to the months of January and Feb UNIV. OF CALIFORNIA THE FEDERAL INCOME TAX LAW * * * ruary, 1913, the income tax law in effect amends the corporation tax law by eliminating the specific exemption previously allowed, and provides that the tax for that period shall be measured by the net income ascertained according to the rule set out in subsection G of the later act. (See the 2d proviso in subsection S, Act of October 3, 1913.) The third proviso of subsection S also provides that "for the year 1913 it shall not be necessary to make more than one return and assessment for all taxes imposed by way of income or special excise." The net income for both kinds of taxes and for both periods of the year being ascertained in exactly the same manner, but one return covering the entire calendar year 1913 is required. That return will show the entire net income ascertained in accordance with the provisions of the income tax law, and no specific exemption whatever being authorized, such net income as returned for the entire year will be the amount upon which the tax is computed. ROBT. WILLIAMS, JR., Acting Commissioner. |