(2) in conformity with the rules and regulations, prevailing from time to time, of the Board of Governors of the Federal Reserve System pertaining to the collective investment of trust funds by national banks.

(b) TAXATION OF COMMON TRUST FUNDS.-A common trust fund shall not be subject to taxation under this title, Title IA, or section 105 or 106 of the Revenue Act of 1935, and for the purposes of such titles and sections shall not be considered a corporation.

(c) INCOME OF PARTICIPANTS IN FUND.—Each participant in the common trust fund shall include in computing its net income its proportionate share, whether or not distributed and whether or not distributable, of the net income of the common trust fund. The net income of the common trust fund shall be computed in the same manner and on the same basis as in the case of an individual. The proportionate share of each participant in the amount of interest specified in section 25 (a) received by the common trust fund shall for the purposes of this Supplement be considered as having been received by such participant as such interest.

(d) ADMISSION AND WITHDRAWAL.-No gain or loss shall be realized by the common trust fund by the admission or withdrawal of a participant. The withdrawal of any participating interest by a participant shall be treated as a sale or exchange of such interest by the participant.

(e) RETURNS BY BANK.-Every bank (as defined in section 104) maintaining a common trust fund shall make a return under oath for each taxable year, stating specifically, with respect to such fund, the items of gross income and the deductions allowed by this title, and shall include in the return the names and addresses of the participants who would be entitled to share in the net income if distributed and the amount of the proportionate share of each participant. The return shall be sworn to as in the case of a return filed by the bank under section 52.

(f) DIFFERENT TAXABLE YEARS OF COMMON TRUST FUND AND PARTICIPANT.-If the taxable year of the common trust fund is different from that of a participant, the proportionate share of the net income of the common trust fund to be included in computing the net income of the participant for its taxable year shall be based upon the net income of the common trust fund for any taxable year of the common trust fund (whether beginning on, before, or after January 1, 1936) ending within the taxable year of the participant.

Supplement F-Partnerships

SEC. 181. PARTNERSHIP NOT TAXABLE.

Individuals carrying on, business in partnership shall be liable for income tax only in their individual capacity.

SEC. 182. TAX OF PARTNERS.

There shall be included in computing the net income of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year.

SEC. 183. COMPUTATION OF PARTNERSHIP INCOME.

The net income of the partnership shall be computed in the same manner and on the same basis as in the case of an individual.

SEC. 184. CREDITS AGAINST NET INCOME.

The partner shall, for the purpose of the normal tax, be allowed as a credit against his net income, in addition to the credits allowed to him under section 25, his proportionate share of such amounts (not in excess of the net income of the partnership) of dividends and interest specified in section 25 (a) as are received by the partnership.

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SEC. 185. EARNED INCOME.

In the case of the members of a partnership the proper part of each share of the net income which consists of earned income shall be determined under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary and shall be separately shown in the return of the partnership.

SEC. 186. TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF UNITED STATES.

The amount of income, war-profits, and excess-profits taxes imposed by foreign countries or possessions of the United States shall be allowed as a credit against the tax. of the member of a partnership to the extent provided in section 131.

SEC. 187. PARTNERSHIP RETURNS.

Every partnership shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowed by this title and such other information for the purpose of carrying out the provisions of this title as the Commissioner with the approval of the Secretary may by regulations prescribe, and shall include in the return the names and addresses of the individuals who would be entitled to share in the net income if distributed and the amount of the distributive share of each individual. The return shall be sworn to by any one of the partners.

SEC. 188. DIFFERENT TAXABLE YEARS OF PARTNER AND PARTNERSHIP.

(a) GENERAL RULE.If the taxable year of a partner is different from that of the partnership, the distributive share of the net income of the partnership to be included in computing the net income of the partner for his taxable year shall be based upon the net income of the partnership for any taxable year of the partnership

(whether beginning on, before, or after January 1, 1934 1936) ending within the taxable year of the partner.

(b) PARTNERSHIP YEARS BEGINNING IN 1933. For the purpose of computing the net income of a partner for a taxable year beginning after December 31, 1923, the partnership net income for any taxable year of the partnership beginning before January 1, 1934, shall be computed under the Revenue Act of 1932; without regard to sections 101 and 186 thereef (relating to capital net gain and capital net loss) but as if section 117 of this Act (except subsection (d) thereof) had formed a part of Title I of the Revenue Act of 1932.

Supplement G-Insurance Companies

SEC. 201. TAX ON LIFE INSURANCE COMPANIES.

(a) DEFINITION.-When used in this title the term "life insurance company" means an insurance company engaged in the business of issuing life insurance and annuity contracts (including contracts of combined life, health, and accident insurance), the reserve funds of which held for the fulfillment of such contracts comprise more than 50 per centum of its total reserve funds.

(b) RATE OF TAX IMPOSITION OF TAX.

(1) IN GENERAL.-In lieu of the tax imposed by section sections 13 and 14, there shall be levied, collected, and paid for each taxable year upon the normal-tax net income of every life insurance company a tax as follows of 15 per centum of the amount thereof:

In the ease of a domestie life insurance company, a tax at the rates specified in section 13 upon the amount of its net income in excess of the eredit provided in subsection (e) of this section;

NOTE.-Section 103 of the Revenue Act of 1935, approved August 30, 1935, substituted in the above paragraph the words "a tax at the rates specified in section 13 upon" for the words "1334 per centum of". Under section 107 of the 1935 Act the amendment applied only in the case of taxable years beginning after December 31, 1935.

(2) In the ease of a foreign life insurance company, a tax at the rates specified in section 13 upon the amount of its net income from sources within the United States in excess of the credit provided in subsection (e) of this section.

NOTE.-Section 103 of the Revenue Act of 1935, approved August 30, 1935, substituted in the above paragraph the words "a tax at the rates specified in section 13 upon" for the words "1334 per centum of". Under section 107 of the 1935 Act the amendment applied only in the case of taxable years beginning after December 31, 1935.

(2) NORMAL-TAx net income of foreign life INSURANCE COMPANIES.—In the case of a foreign life insurance company, the normal-tax net income shall be an amount which bears the same ratio to the normal-tax net income, computed without regard to this paragraph, as the reserve funds required by law and held by it at the end of the taxable year upon business transacted within the United States bear to the reserve funds held by it at the end of the taxable year upon all business transacted.

(3) No UNITED STATES INSURANCE BUSINESS.— Foreign life insurance companies not carrying on an insurance business within the United States and holding no reserve funds upon business transacted within the United States, shall not be taxable under this section but shall be taxable as other foreign corporations.

(e) For the purpose only of the tax imposed by this section there shall be allowed as a credit against net income for, in the ease of a foreign life insurance company, against net income from sources within the United States) the amount received as interest upon obligations of the United States or of corporations organized under Act of Congress which is allowed to an individual as a eredit for purposes of normal tax by section 25 (a) (2) or (3). In the ease of a foreign life insurance company the eredit shall not exceed an amount which bears the same ratio to the amount otherwise allowed as a credit as the reserve