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interested in these provisions at all, are interested in them and pertinent decisions and rulings to their last detail. No attempt, therefore, is made to digest these provisions herein.

Especially Regarding Foreign Organizations


137. The statute does not provide a separate list of Deductions deductions for foreign organizations authorized, organ- Foreign ized or existing, under the laws of any foreign country. Organizations Generally speaking, the difference between the deductions allowed foreign organizations and those granted to similar domestic organizations as above discussed is that foreign organizations shall deduct only those items which have arisen in respect to their business or interests in the United States.

138. A foreign organization shall compute the amount of interest paid on its indebtedness along the same lines as laid down in respect to domestic organizations, but the foreign organization is allowed deduction of only such a proportion of that interest as the gross amount of its income on business transacted and capital invested within the United States bears to the gross amount of its income derived from all sources within and without the United States. And in the case of taxes paid, there may be deducted all domestic and foreign taxes (except income, war profits and excess profits taxes paid to the United States Government, or to any foreign country, and taxes against local benefits) on property or business the income from which is subject to this tax.


Interest on

of Foreign


Under the 1916 Act, for the first time, the system of "deduction at the source" was applied to certain income accruing in the United States to foreign organiza- Source"

at the



tions "not engaged in business or trade within the United States and not having any office or place of business therein." The law of 1918 contains a section with similar purpose.

The provisions affecting corporations and individuals are generally the same, although the rates are different. This subject has already been discussed at Sections 88-97.

140. It will be recalled that "deduction at the source" does not apply to all corporate bond interest paid to citizens and residents of the United States. If the particular bond on which interest is paid contains the so-called taxfree covenant, deduction at the source applies; otherwise it does not. But in the case of non-resident alien individuals and foreign organizations not engaged in busiess in this country and having no place of business here, deduction at the source applies regardless of the tax-free


It seems worth repeating that deduction at the source and Foreign does not apply to all foreign organizations; it applies only to those "not engaged in business or trade within the United States and not having any office or place of business therein."


Deduction at the source does not apply to domestic organizations; thus, the tax-free covenant does not benefit organizations of the United States which hold domestic corporation bonds, etc., containing such provisions.

141. Every taxable corporation and every personal service corporation is required to make a return stating specifically the items of gross income and the allowable deductions and credits. This return must be sworn to by the president or other principal officer and by the

treasurer. In the case of a foreign corporation with no place of business in the United States, the returns should be made by its agents in the United States, if there be any. Receivers, trustees in bankruptcy and assignees must make returns for such property or business as they are operating. A corporation may make its return on either the calendar or fiscal year, as allowed the individual.

142. The Law of 1918 contains a new provision requiring consolidated returns of affiliated corporations. Two or more domestic corporations are deemed to be affiliated, (1) if one corporation owns directly or controls through closely affiliated interests, etc., all the stock, or (2) if substantially all the stock of two or more corporations is owned or controlled by the same interests.

In the case of consolidated returns, the total tax will be computed as a unit and then assessed on the respective affiliated corporations in such proportion as may be agreed to by them, or on the basis of the net income.

143. The returns of a corporation shall be made at the same time and in the same manner as is provided for the individual. Payment of the tax by a corporation is also subject to the same regulations as are provided for payment by an individual. Returns shall be made to the collector of the district in which is located the principal place of business or principal office or agency of the corporation, or, if it has no principal place of business or principal office or agency in the United States, then to the Collector of Internal Revenue, Baltimore, Maryland.


Returns and


144. By a recent announcement, the Treasury Department permits a corporation to return the estimated tax Return


May Make


Returns are

and make a revised return within forty-five days. This will enable the government to collect the first installment of the tax due March 15th. If the installment exceeds the amount shown to be due by the completed return, the excess will be credited on the next payment.

145. The Treasury Department formerly ruled that in cases where foreign corporations or domestic corporations doing business in foreign countries, are unable to assemble their data in time to make their returns of annual income within the prescribed time, it is permissible for such corporations, upon showing of this fact, to file with the Collector of Internal Revenue a tentative return in which there shall be approximated as nearly as possible the actual business transacted during the year. In place of this tentative return, a true and accurate return shall be substituted as soon as the necessary data to make the same shall be available.

Some ruling similar to the above and along the lines of the extensions suggested in Section 114, will doubtless be made this year.

146. Returns are due not later than the fifteenth day of the third month after the close of the calendar or fiscal year (March 15th for the usual corporation).

General Provisions

147. Except as regards payment of the tax at the source, the tax may be paid on making the return; if not so paid, it shall be paid in four installments, each consisting of one-fourth of the total tax. The first installment shall be paid at the time of filing the return and the second, third and fourth installments, on the fifteenth day of the third, sixth and ninth months respectively,

thereafter. The time for payment of the first installment shall be postponed until the date of the expiration of a period of extension, if one can be obtained, but other installments shall not be postponed without express permission at the time of granting the extension. Provisions are made for charging interest at the rate of one-half of one per cent. per month from the time the tax is due; and if any installment be not paid the whole amount of the tax unpaid shall become due and payable on demand.

148. Returns are to be examined by the Internal RevPenalty for enue Bureau as soon as possible after filing, and the Underproper readjustments made. If, through the negligence statement of the taxpayer, an understatement has been made he is liable to a penalty of five per cent. plus interest at one per cent. per month. In the case of fraud on the part of the taxpayer, the penalty is fifty per cent. in addition to certain penalties otherwise provided for by the Revised Statutes. A fine of $1,000 (and imprisonment if the disobedience be willful) is imposed for failure to carry out any of the requirements of this law.

149. The taxpayer is entitled, upon request, to a full written or printed receipt or receipts for payments made. Any previous tax payment in excess of the amount due may be credited on the tax now due.


Means of

150. Aside from the usual means of paying a tax, which has been accomplished ordinarily by certified check, the statute now provides that Collectors of Inter- Payment nal Revenue may receive uncertified checks under regulations issued by the Treasury Department. Collectors may also receive in payment of any taxes, at par and accrued interest, certificates of indebtedness of the United

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