from the court, at which time the Government assumes a definite liability of the collector, which does not include the payment of interest thereafter; neither is there any further personal liability on the part of the collector. The interest which may be recovered is that put into the judgment before there is any certificate of probable cause, and if none has been put in, the Government assumes no part of the liability of the defendant. The liability assumed by the Government includes interest and costs forming part of the recovery, but does not include interest after judgment.65

Costs. The Revised Statutes 66 authorize the Commissioner to repay to any collector or deputy collector the full amount of such sums of money as may be recovered against him in any court, for any internal revenue taxes collected by him, with the cost and expenses of suit; also all damages and costs recovered against any assessor, assistant assessor, collector, deputy collector, agent or inspector in any suit brought against him by reason of anything done in the due performance of his official duty. Under this section costs may be recovered against the collector.67 Judgment is usually given in the District Court for costs and interest.

65 White v. Arthur, 10 Fed. 80.

The

66 R. S., § 3220, as amended by the Revenue Act of 1918. amendment extends the provision to assessors, assistant assessors and agents.

67 De Bary v. Carter, 102 Fed. 130. However, see Treat v. Farmers Loan and Trust Co., 185 Fed. 760, 763, as to costs in the Supreme Court and Circuit Court of Appeals.

CHAPTER 39

INFORMATION AT THE SOURCE

To assist in the administration of the Income Tax Law, certain information is required to be furnished by brokers as to their customers, by corporations as to dividend and interest payments, by first or last banks or collection agencies as to foreign items, and by individuals, partnerships and corporations generally (including lessees or mortgagors of real or personal property, fiduciaries, and employers) as to payments of income to others, in order that the Treasury Department may have data on which to audit. returns of annual income.1 The several classes of payments which are required to be reported, and the provisions with respect to each, are discussed in the following paragraphs.

Miscellaneous Income, Gains and Profits. It is provided that payments of interest, rent, salaries, wages, premiums, annuities, compensations, renumerations, emoluments or other fixed or determinable gains, profits and income of $1,000 or more (or any valuable gain) must be reported.2 "Fixed or determinable gains, profits and income," as used in the law,3 would seem to include payments of all the kinds expressly enumerated and all payments of a similar nature. In the case of collection at the source payments must be annual or periodical, while in the case of information at 1Revenue Act of 1918, §§ 254, 255, and 256. These administrative provisions first appeared in the 1916 Law by amendment in 1917. 2 Revenue Act of 1918, § 256. There must be payment. Interest accrued on bank deposits before it has passed to the credit of the depositor need not be reported. T. D. 2670.

3 Id.

the source the law does not contain such a limitation. Hence any payments of the kind described in the law, whether made in isolated cases, or from time to time, must be reported. If the aggregate of several payments made to the same payee equals or exceeds $1,000 in any taxable year, the gross amount should be reported. The payments may be from different forms of income, as for instance, from interest and rent, or interest and salary. In such cases, it seems the total is required by law to be reported, if the aggregate of all payments in the year to the same payee equals or exceeds $1,000.

SALARIES, WAGES OR COMPENSATION. The names of all employees to whom payments exceeding $1,000 a year are made, whether such total sum is made up of wages, salaries, commissions or compensation in any other form, must be reported. Heads of branch offices and subcontractors employing labor, who keep the only complete record of payments therefor, should file returns of information in regard to such payments directly with the Commissioner. When both main office and branch office have adequate records, the return should be filed by the main office. In the case of an employer having a large number of employees who are moved from place to place as the exigencies of the service require, and who consequently has no complete record of annual payments to them at any one place, the salary of two representative months may be taken to establish a fair monthly wage, and unless the yearly payment based on this estimate in the case of an employee amounts to $1,000 or more, no return of payments to such employee is required. When living quarters such as camps are furnished for the convenience of the employer, the ratable cost need not be added to the cash compensation of the employee in determining whether it equals $1,000 annually. But where a person receives as compensation for services rendered a salary and in addition thereto living quarters, the value to

4 Payments made to corporations, associations, and insurance companies for the year 1917 did not require reporting.

such person of the quarters furnished constitutes income subject to tax, and a return of information is required in such case where the cash compensation received plus the value of living quarters furnished equals $1,000 for the year. Bills paid to employees for board and lodging while. traveling under orders or when the employee is employed on a salary basis, are not part of the employee's salary. Commissions paid to soliciting agents for personal services in securing insurance contracts must be reported at the source, but if the agent conducts a branch office or is employed by the company under a contract that makes it necessary to bear the expenses of the branch office and all pay. ments received are intended to cover such expenses; they need not be reported."

PAYMENTS WHICH NEED NOT BE REPORTED. Payments of the following character, although over $1,000, need not be reported in returns of information on Form 1099 (revised): (a) payments of interest on obligations of the United States; (b) dividends paid by domestic or resident corporations; (c) payments by a broker to his customers; (d) payments made to corporations; (e) bills paid for merchandise, telegrams, telephone, freight, storage and similar charges; (f) payments to employees for board and lodging while traveling in the course of their employment; (g) annuities representing the return of capital; (h) payments of rent made to real estate agents (but the agent must report payments to the landlord if they amount to $1,000 or more annually); (i) payments made by branches of business houses located in foreign countries to alien employees serving in foreign countries: and (j) payments made by

5 Reg. 45, Art. 1072; T. D. 2670; Reg. 33 Rev., Art. 34; Letter from Treasury Department, dated October 25, 1917; I. T. S., 1918, § 1015.

6 T. D. 2670.

7 Letter from Treasury Department dated March 28, 1918; I. T. S., 1918, § 3231. See also T. D. 2670 and Letter from Treasury Department dated March 27, 1918; I. T. S. 1918, § 3236.

the United States Government to sailors and soldiers not in excess of $3,500.8

Gains and Losses of Customers of Brokers. Every individual partnership or corporation, doing business as a broker must, when directed either specially or by general regulation by the Commissioner, disclose to the Commissioner the names and addresses of customers for whom such broker has transacted any business, with such details as to the profits, losses, or other information which the Commissioner may require, as to each of such customers.9

Dividends on Stock of Taxable Corporations. When directed by the Commissioner, either specially or by general regulation, every domestic or resident corporation and every personal service corporation is required to render a return of its payments of dividends, and distributions to stockholders for such period as may be specified, stating the name and address of each stockholder, the number and class of shares owned by him, the date and amount of each dividend paid him, and when the surplus out of which it was paid was accumulated.10 It will be noted that foreign corporations are subject to this duty if they are resident within the meaning of that term, as discussed in another chapter.11

8 Reg. 45, Art. 1073.

9 Revenue Act of 1918, § 255; Reg. 45, Art. 1061; Reg. 33 Rev., Art. 33. The new law omits the clause of the old defining brokers, "on any exchange or board of trade or other similar place of business." It will be noted that under this provision the Commissioner is given discretion to require or not to require such returns. Form No. 1100 is to be used in making such returns.

10 Revenue Act of 1918, § 254; Reg. 45, Art. 1051. This section omits the catch-all phrase in modification of payments of dividends"Whether made in cash, or its equivalent, or in stock." See, however, the definition of the term "dividend" in Revenue Act of 1918, $ 200. It will be noted that under this provision the Commissioner is given discretion to require or not to require such returns. Form No. 1097 is to be used in making such returns.

11 See Chapter 14. See also Telegram from Treasury Department dated October 14, 1918, I. T. S. 1918, § 3642.