deduct the amount from such interest and dividends, the dividends paid direct to the stockholders as rent must be treated as corporate "income" subject to taxation, for the provision for payment directly by the lessee was a mere labor-saving device. (Rensselaer & S. R. Co. v. Irwin, 239 Fed. 739, Aff. in 249 Fed. 726, 1918.) Similar income held taxable in the case of Northern Railroad Co., of New Jersey v. Lowe (250 Fed. 856).

Case 6. Where a street railway company demised its lines and property to another company, under an agreement that the lessee should on stipulated dates in each year pay to the persons holding shares of stock, and certified by the lessor as entitled to dividends, stipulated sums per share, the total amount so paid by the lessee was income of the lessor street railway corporation and was subject to tax under income-tax act October 3, 1913 (c. 16, 38 Stat. 166, 172), for the lease was made by the corporation only, and the stockholders had no interest in the demised property entitling them to rent, but they received their payments merely by virtue of their holding of the stock, and the lessor company could, by suit in its own name, without joining the stockholders, recover the agreed payments if withheld. (West End St. Ry. Co. v. Malley, 246 Fed. 625, 1917.)

INCOME DEFINED.

Case 7. We must reject in this case, as we have rejected in cases arising under the corporation excise-tax act of 1909 (Doyle v. Mitchell Bros. Co., and Hays v. Gauley Mountain Coal Co., decided May 20, 1918), the broad contention submitted in behalf of the Government that all receipts-everything that comes in-are income within the proper definition of the term "gross income," and that the entire proceeds of a conversion of capital assets, in whatever form and under whatever circumstances accomplished, should be treated as gross income. Certainly the term "income" has no broader meaning in the 1913 act than in that of 1909 (see Stratton's Independence v. Howbert, 231 U. S. 399, 416, 417), and for the present purpose we assume there is no difference in its meaning as used in the two acts. This being so, we are bound to consider accumulations that accrued to a corporation prior to January 1, 1913, as being capital, not income, for the purposes of the act. (So. Pacific v. Lowe, 247 U. S. 330, 1918, following Lynch v. Hornby, 247 U. S. 339, reversing 238 Fed. 847.)

"ACCRUED" INCOME.

Case 8. An annual dividend received by a corporation on the stock of another corporation is subject to the tax imposed by this section, for the calendar year in which it was declared and paid, as income "accruing" during such year, although half of the profits out of

which the dividend was paid accrued prior to the passage of the act. (Skinner v. Union Pacific Coal Co., 249 Fed. 152, 1918; petition for certiorari granted, 247 U. S. 511, pending in the U. S. Supreme Court.)

Case 9. The taxes levied upon "net income received" was intended to include only the receipt of actual cash and did not include contemplated revenue due and unpaid, and the term "net income accrued" did not include that which did not exist except on paper. (Maryland Casualty Co. v. United States, 52 Ct. Cls. 201, 1917; see also 52 Ct. Cls. 288.) This case now pending in the United States Supreme Court, 1919.

RELEASED RESERVE FUNDS.

Case 10. The sums released from reserve funds are not exempt from taxation as reserve funds, for when they cease to be reserve funds they are then income and subject to taxation as "income from all sources." (Maryland Casualty Co. v. U. S. 52 Ct. Cls. 201, 1917; see also 52 Ct. Cls. 288.) This case now pending in United States Supreme Court, 1919.

INCOME OF AGENTS.

Case 11. An insurance company is obligated to report in full the total sums received in cash, both amounts received at the home office and those paid to its lawful agencies during the calendar year. (Maryland Casualty Co. v. U. S. 52 Ct. Cls. 201, 1917; see also 52 Ct. Cls. 288.) This case now pending in United States Supreme Court, 1919.

DIVIDENDS PAID TO POLICYHOLDERS BY LIFE INSURANCE COMPANIES.

Case 12. The proviso in this section treats policyholders individually and separately, and not in mass, and a company may not exclude from its income a dividend paid to a policyholder, even though for redundancies in premiums previously paid, unless it has received premiums from him during the tax year and then only to the extent of the amount of premiums so received from him, either actually or theoretically. (Lederer v. Penn Mutual Life Ins. Co., 258 Fed. 81, 1919, reversing 247 Fed. 599.)

Case 13. So-called dividends paid to policyholders by a mutual level premium life insurance company, consisting of excess premiums collected, are covered by the noninclusion clause of section 2 G (b), and may not be deducted from gross income in ascertaining net income under the deduction clause, as sums paid on "policy * * contracts." (Id.)

Deductions.

Case 14. The fact that different deductions are allowed in the case of individuals and that of corporations, and that mining corporations are allowed different deductions from other corporations, does not render the act invalid. (Knowlton v. Moore, 178 U. S. 41; Flint v. Stone Tracy Co., 220 U. S. 107; Billings v. U. S., 232 U. S. 608; National Bank v. Commonwealth, 9 Wall. 353; National Safe Deposit Co. v. Illinois, 232 U. S. 58; Brushaber v. Union Pacific Ry. Co., 240 U. S. 1, followed in Stanton v. Baltic Mining Co., 240 U. S. 103, 1916.)

DEPRECIATION.

Case 15. In computing for assessment of income taxes the amount of depreciation of property held for rental purpos ́s, the depreciation to be allowed is for the wear and tear suffered by the building during the tax year, assuming that it is kept in good repair, and no allowance can be made for change in neighborhood or diminished rental value because of the erection of more modern buildings. (Cohen v. Lowe, 234 Fed. 474, 1916.)

NET ADDITION TO RESERVE FUNDS-INSURANCE COMPANIES.

Case 16. Only the net additions to reserve funds required by State statutes is deductible from gross income. No State law has been pointed out which requires the maintenance of reserve funds to secure payments of taxes, salaries, and brokerage and agents' commissions. (Maryland Casualty Co. v. U. S., 52 Ct. Cls. 201, 1917; see also 52 Ct. Cls. 288, pending in U. S. Sup. Ct. 1919.)

"SUMS OTHER THAN DIVIDENDS PAID ON INSURANCE POLICIES.

* *

* * *

Case 17. Under life insurance policies providing for payment to the beneficiaries in installments on death of insured, and for interest on deferred installments, interest so paid is not a dividend, but a "sum other than dividends paid * on policy contracts," and deductible by the company from gross income under this section. (Lederer v. Penn. Mut. Life Ins. Co., 258 Fed. 81, 1919, reversing 247 Fed. 559.)

Case 18. Interest on redundancies of premium for previous years paid by a policyholder in a life insurance company and allowed to remain with the company under the contract when paid to the policyholder constitutes a "dividend" within the meaning of this section providing for a deduction from gross income of "sums other than dividends paid within the year on policy tracts," and may not be deducted thereunder. (Id.) See also cases 12 and 13 under paragraph G (b).

con

PARAGRAPH G (c).

(c) The tax herein imposed shall be computed upon its entire net income accrued within each preceding calendar year ending December thirty-first: Provided, however, That for the year ending December thirty-first, nineteen hundred and thirteen, said tax shall be imposed upon its entire net income accrued within that portion of said year from March first to December thirty-first, both dates inclusive, to be ascertained by taking five-sixths of its entire net income for said calendar year: Provided further, That any corporation, joint-stock company or association, or insurance company subject to this tax may designate the last day of any month in the year as the day of the closing of its fiscal year and shall be entitled to have the tax payable by it computed upon the basis of the net income ascertained as herein provided for the year ending on the day so designated in the year preceding the date of assessment instead of upon the basis of the net income for the calendar year preceding the date of assessment; and it shall give notice of the day it has thus designated as the closing of its fiscal year to the collector of the district in which its principal business office is located at any time not less than thirty days prior to the date upon which its annual return shall be filed. All corporations, joint-stock companies or associations, and insurance companies subject to the tax herein imposed, computing taxes upon the income of the calendar year, shall, on or before the first day of March, nineteen hundred and fourteen, and the first day of March in each year thereafter, and all corporations, joint-stock companies or associations, and insurance companies, computing taxes upon the income of a fiscal year which it may designate in the manner hereinbefore provided, shall render a like return within sixty days after the close of its said fiscal year, and within sixty days after the close of its fiscal year in each year thereafter, or in the case of a corporation, joint-stock company or association, or insurance company, organized or existing under the laws of a foreign country, in the place where its principal business is located within the United States, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, shall render a true and accurate return under oath or affirmation of its president, vice president, or other principal officer, and its treasurer or assistant treasurer, to the collector of internal revenue for the district in which it has its principal place of business, setting forth (first) the total amount of its paid-up capital stock outstanding, or if no capital stock, its capital employed in business, at the close of the year; (second) the total amount of its bonded and other indebtedness at the close of the year; (third) the gross amount of its income, received during such year from all sources, and if organized under the laws of a foreign country the gross amount of its income received within the year from business transacted and capital invested within the United States; (fourth) the total amount of all its ordinary and necessary expenses paid out of earnings in the maintenance and operation of the business and properties of such corporation, joint-stock company or association, or insurance company within the year, stating separately all rentals or other payments required to be made as a condition to the continued use or possession of property, and if organized under the laws of a foreign country the amount so paid in the maintenance and operation of its business within the United States; (fifth) the total amount of all losses actually sustained during the year and not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policyholders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the

payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policyholders on account of premiums previously paid by them, and interest paid upon such amounts between the ascertainment thereof and the payment thereof and life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policyholder as shall have been paid back or credited to such individual policyholder, or treated as an abatement of premium of such individual policyholder, within such year; and in case of a corporation, joint-stock company or association, or insurance company, organized under the laws of a foreign country, all losses actually sustained by it during the year in business conducted by it within the United States, not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided further, That mutual fire insurance companies requiring their members to make premium deposits to provide for losses and expenses shall not return as income any portion of the premium deposits returned to their policyholders, but shall return as taxable income all income received by them from all other sources plus such portions of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves: Provided further, That mutual marine insurance companies shall include in their return of gross income gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policyholders on account of premiums previously paid by them and interest paid upon such amounts between the ascertainment thereof and the payment thereof and life insurance companies shall not include as income in any year such portion of any actual premium received from any individual policyholder as shall have been paid back or credited to such individual policyholder, or treated as an abatement of premium of such individual policyholder, within such year; (sixth) the amount of interest accrued and paid within the year on its bonded or other indebtedness not exceeding one-half of the sum of its interest bearing indebtedness and its paid-up capital stock, outstanding at the close of the year, or if no capital tock, the amount of interest paid within the year on an amount of indebtedness not exceeding the amount of capital employed in the business at the close of the year, and in the case of a bank, banking association, or trust company, stating separately all interest paid by it within the year on deposits; or in case of a corporation, jointstock company or association, or insurance company, organized under the laws of a foreign country, interest so paid on its bonded or other indebtedness to an amount of such bonded or other indebtedness not exceeding the proportion of its paid-up capital stock outstanding at the close of the year, or if no capital stock, the amount of capital employed in the business at the close of the year, which the gross amount of its income for the year from 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; (seventh) the amount paid by it within the year for taxes imposed under the authority of the United States and separately the amount so paid by it for taxes imposed by the Government of any foreign country; (eighth) the net income of such corporation, joint-stock company or association, or insurance company, after making the deductions in this subsection authorized. All such returns shall as received be transmitted forthwith by the collector to the Commissioner of Internal Revenue.

All assessments shall be made and the several corporations, joint-stock companies or associations, and insurance companies shall be notified of the amount for which