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taxes, as expressed in that instrument, and taxes on real estate; and that the tax of which the plaintiff in error complains (the income tax) is within the category of an excise or duty." Springer v. United States, 12 Otto, 586.

Question of the validity of a "succession tax" under the act of June 30, 1864, as amended. In reviewing the question of the constitutionality of this tax the court say, that, "whether direct taxes in the sense of the constitution comprehend any other tax than a capitation tax and a tax on land, is a question not absolutely decided; nor is it necessary to determine it in the present case, as it is expressly decided that the term does not include the tax on income, which cannot be distinguished in principle from a succession tax such as is involved in the present controversy." Tax held to be constitutional and valid, and rightfully levied. Scholey v. Rew, 23 Wall. 331.

Citizens of the United States residing abroad are subject to tax, in the same manner as citizens residing in this country, upon their entire incomes from all sources whatever; and the same is true of foreigners residing in this country. Int. Rev. Ruling, Series 4, No. 4.

Residents should make return in the district where they reside at the time of making return. The residence required under Sec. 116 for the purpose of taxing income is held to be a residence during the year for which income is "derived." If any person subject to income tax resides abroad, his return should be made in the district where he last resided. Int. Rev. Ruling, Series 4, No. 4.

For the purposes of the exemption of $1,000, husband and wife are to be regarded as members of the same family though living separate, unless separated by divorce or other operation of law so as to break up the family relation. Minor children and their parents should be counted members of the same family, whether living together or not. Guardians can be allowed no special deduction in favor of their wards, where such wards are members of any family composed of one or both parents and one or more minor children or husband and wife. Int. Rev. Ruling, Series 4, No. 4.

SEC. 117. And be it further enacted, That, in estimating the gains, profits, and income of any person, there shall be included all income derived from interest upon notes, bonds, and other securities of the United States; profits realized within the year from sales of real estate purchased within the year or within two years previous to the year for which income is estimated; interest received or accrued upon old [all] notes, bonds, and mortgages, or other forms of indebtedness bearing interest, whether paid or not, if good and collectible, less the interest which has become due from said person during the year; the amount of all premium on gold and coupons; the amount of sales of live stock, sugar, wool, butter, cheese, pork, beef, mutton, or other meats, hay and grain, or other vegetable or other productions, being the growth or produce of the estate of such person, not including any part thereof consumed directly by the family; all other gains, profits, and income derived from any source whatever, except the rental value of any homestead used or occupied by any person or by his family in his own right or in the right of his wife; and the share of any person of the gains and profits of all companies, whether incorporated or partnership, who would be entitled to the same if divided, whether diCertain divi- vided or otherwise, except the amount of income received from institutions or corporations whose officers, as required by law, withhold a per centum of the dividends made by such institutions, and pay the same to the officer authorized to receive the same; and except that portion of the salary or pay received for services in the civil, military, naval, or other service of the United States, including Senators, Representatives, and Dele

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Act March 2, 1867, Sec. 13.

Bources of included in esti

to be in


Salary received from United States ex


of deductions:

gates in Congress, from which the tax has been deducted. And in addition to one thousand dollars Enumeration exempt from income tax, as hereinbefore pro- res paid; vided, all national, State, county, and municipal taxes paid within the year shall be deducted from the gains, profits, or income of the person who has actually paid the same, whether such person be owner, tenant, or mortgager; losses actually sus- losses; tained during the year arising from fires, shipwreck, or incurred in trade, and debts ascertained to be worthless, but excluding all estimated depreciation of values and losses within the year on sales of real estate purchased two years previous to the year for which income is estimated; the amount actually paid for labor or interest by any person who rents payments for lands or hires labor to cultivate land, or who labor, etc. ; conducts any other business from which income is actually derived; the amount actually paid by any person for the rent of the house or premises occupied as a residence for himself or his family; the amount paid out for usual or ordinary repairs: Provided, That no deduction shall be made for ordinary reany amount paid out for new buildings, permanent improvements, or betterments, made to increase the value of any property or estate: And provided further, That only one deduction of one thousand dollars shall be made from the aggregate income of all the members of any family, composed of one or both parents, and one or more minor children, or husband and wife; that guardians shall be allowed to make such deduction in favor of each and every ward, except that in case where two or more wards are comprised in one family, and have joint property interest, only one deduction shall be made in their favor: And provided


rent of house;

further, That in cases where the salary or other compensation paid to any person in the employment or service of the United States shall not exceed the rate of one thousand dollars per annum, or shall be by fees, or uncertain or irregular in the amount or in the time during which the same shall have accrued or been earned, such salary or other compensation shall be included in estimating the annual gains, profits, or income of the person to whom the same shall have been paid.

Income tax on bonds in the hands of trustees. Reynolds v. Williams, 4 Bissell, 108.

Income tax cases of Samuel J. Tilden. United States v. Tilden, 10 Benedict, 170, 547, 566.

Income tax case.

United States v. Schillinger, 14 Blatch.


Exchange of stocks not a sale, and profits not taxable as income. United States v. Smith, 1 Sawyer, 277.

Question, whether the advance in the value of bonds over their cost during a period of four years, realized by their sale, was subject to taxation as gains, profits, or income of the plaintiff for the year in which the bonds were sold. Held, that the advance in the value of property during a series of years can in no just sense be considered the gains, profits, or income of any one particular year of the series, although the entire amount of the advance be at one time turned into money by a sale of the property. Mere advance in value in no sense constitutes the gains, profits, or income specified by the statute. It constitutes and can be treated merely as an increase of capital. Gray v. Darlington, 15 Wall. 63.

Where stocks are sold for less than actual cost, the difference between such cost and the price at which the same are actually sold may be allowed as a deduction from income of the year of sale. Int. Rev. Ruling, Series 4, No. 4.

Taxpayers frequently claim deductions for losses from depreciation in the value of stocks, or other property of a like nature. No deduction can in any case be allowed for depreciation of value of such property until it is actually

disposed of and a loss realized. The law expressly disallows deduction from income on account of any depreciation in the value of property still on hand. Int. Rev. Ruling, Series 4, No. 4.

If the manufacturer or dealer has been in the practice of estimating his annual profits by taking inventories of stock, he should take the cost value of such stock, unless he has taken the market value in making previous returns. Whichever method has been adopted by the taxpayer should be adhered to uniformly. Int. Rev. Ruling, Series 4, No. 4.

If interest accrued during the year on notes, bonds, etc., is good and collectible at the end of the year, it should be returned as income whether actually collected or not. Int. Rev. Ruling, Series 4, No. 4.

Where a person cannot be compelled to pay interest which nominally falls due in any year, it cannot be deducted from income. Except where interest money is paid, in connection with the carrying on of a business from which income is derived, only such portion of the same as is not in excess of the amount of interest received or falling due to the taxpayer is to be offset against income. Int. Rev. Ruling, Series 4, No. 4.

The fact that income is devoted to the payment of debts does not release the same from liability to income tax. Int. Rev. Ruling, Series 4, No. 4.

Costs of suits and other legal proceedings arising from ordinary business are to be treated as other expenses of such business, and may be deducted from the gross profits thereof. Int. Rev. Ruling, Series 4, No. 4.

Whenever scrip dividends are returnable as income, they should be returned at their market value. Int. Rev. Ruling, Series 4, No. 4.

Losses of capital, such as losses by robbery, losses as surety, etc., cannot be deducted from income. Int. Rev. Ruling, Series 4, No. 4.

Money received from a railroad corporation on account of personal injuries is not taxable income. Int. Rev. Ruling, Series 4, No. 4.

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