such an amount received by the corporation as does not exceed the par value of the outstanding shares plus the amount received for any part-paid stock, and that it does not mean the aggregate amount received by the corporation for the shares, the fullpaid stock receipts, and part-paid stock receipts issued by it even though said sum be in excess of the par value. (U. S. v. N. Y., N. H. & H. R. Co.) T. D. 2896. (U. S. D. C. Conn., 1919.)

Premiums received by a corporation for the sale of its stock are not a part of its outstanding capital stock and should not be added as a part of such corporation's outstanding paid-up capital stock in determining the deduction to be made in assessing corporation excise tax under section 38 of the act of August 5, 1909. (Decision of Judge Bingham, U. S. D. C., Dist. of Mass., 1919. Unreported to date- -October, 1919. Case of United States v. Boston & Maine Railroad.)

SUBDIVISION III, SECTION 38.

Third. There shall be deducted from the amount of the net income of each of such corporations, joint stock companies or associations, or insurance companies, ascertained as provided in the foregoing paragraphs of this section, the sum of five thousand dollars, and said tax shall be computed upon the remainder of said net income of such corporation, joint stock company or association, or insurance company, for the year ending December thirty-first, nineteen hundred and nine, and for each calendar year thereafter; and on or before the first day of March, nineteen hundred and ten, and the first day of March in each year thereafter, a true and accurate return under oath or affirmation of its president, vice president, or other principal officer, and its treasurer or assistant treasurer, shall be made by each of the corporations, joint stock companies or associations, and insurance companies, subject to the tax imposed by this section, to the collector of internal revenue for the district in which such corporation, joint stock company or association, or insurance company has its principal place of business, or, in the case of a corporation, joint stock company or association, or insurance company, organized under the laws of a foreign country, in the place where its principal business is carried on within the United States, in such form as the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall prescribe, setting forth (first) the total amount of the paid-up capital stock of such corporation, joint stock company or association, or insurance company, outstanding at the close of the year; (second) the total amount of the bonded and other indebtedness of such corporation, joint stock company or association, or insurance company at the close of the year; (third) the gross amount of the income of such corporation, joint stock company or association, or insurance company 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 and any of its Territories, Alaska, and the District of Columbia; also the amount received by such corporation, joint stock company or association, or insurance company within the year by way of dividends upon stock of other corporations, joint stock companies or associations, or insurance companies, subject to the tax imposed by this section; (fourth) the total amount of all the ordinary and necessary expenses actually 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 charges such as rentals or franchise 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 and its Territories, Alaska, and the District of Coumbia; (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 the case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve funds; and in the 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 or its Territories, Alaska, and the District of Columbia, not compensated by insurance or otherwise, stating separately any amounts allowed for depreciation of property, and in case of insurance companies the sums other than dividends, paid within the year on policy and annuity contracts and the net addition, if any, required by law to be made within the year to reserve fund; (sixth) the amount of interest actually paid within the year on its bonded or other indebtedness to an amount of such bonded and other indebtedness not exceeding the paid-up capital stock of such corporation, joint stock company or association, or insurance company, outstanding 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, joint stock 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 and other indebtedness not exceeding the proportion of its paid-up capital stock outstanding 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 and any of its Territories, Alaska, and the District of Columbia, 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 or any State or Territory thereof, and separately the amount so paid by it for taxes imposed by the Government of any foreign country as a condition to carrying on business therein; (eighth) the net income of such corporation, joint stock company or association, or insurance company, after making the deductions in this section authorized. All such returns shall as received be transmitted forthwith by the collector to the Commissioner of Internal Revenue.

SUBDIVISION III.-RETURNS.

Insufficient net income.

All corporations of the kind specified in the act as subject to the tax were bound to file returns, though their net profits were not sufficient to render them liable to the tax. (United States v. Military Construction Co., 204 Fed. 153, 1913, and United States v. Acorn Roofing Co., 204 Fed. 157, 1912.)

Receiver's liability.

The tax is one upon doing business in a corporate capacity, and receivers of an insolvent corporation, duly appointed by a court of equity, which corporation was not doing business when the act was passed, and has done no business since, are not within the act nor required to make returns and pay taxes on the income realized by them while acting as officers of the court and under its direction. (Pennsylvania Steel Co. v. New York City Railway Co., 198 Fed. 774, 1912. C. C. A. affirming the decision of the district court in 193 Fed. 286.)

Under corporation act, New Jersey (P. L. 1896, p. 295), sections 53-55, which provide that corporations, however dissolved, are "continued bodies corporate for the purpose of prosecuting and defending suits by or against them and of enabling them to settle and close their affairs," but may not continue their business, and make the directors trustees to settle the business, the officers of a corporation which has dissolved after becoming subject to the special tax imposed by act of August 5, 1909, on its business of the preceding year, who are also directors, have authority, and it is their duty, to make the return of such business required by the act. (United States v. General Inspection & Loading Co., 192 Fed. 223, 1911.) (Appealed, on the question of notice only, in 204 Fed. 657.)

Interest on policy loans.

* * *

A mutual life insurance company is not under necessity to return as part of its gross income interest accruing on policy loans, as such loans and the interest are not obligations which the policyholder is bound personally to liquidate with interest. (Northwestern Mutual Life Ins. Co. v. Fink, 248 Fed. 569, 1917.)

Accrued interest.

* * *

A mutual life insurance company's tax return under corporation tax act should not include premium and interest items accrued and due but not actually collected and received. (Northwestern Mutual Life Ins. Co. v. Fink, 248 Fed. 569, 1917.)

SUBDIVISION IV, SECTION 38.

Fourth. Whenever evidence shall be produced before the Commissioner of Internal Revenue which in the opinion of the commissioner justifies the belief that the return made by any corporation, joint stock company or association, or insurance company is incorrect, or whenever any collector shall report to the Commissioner of Internal Revenue that any corporation, joint stock company or association, or insurance company has failed to make a return as required by law, the Commissioner of Internal Revenue may require from the corporation, joint stock company or association, or insurance company making such return, such further information with reference to its capital, income, losses, and expenditures as he may deem expedient; and the Commissioner of Internal Revenue, for the purpose of ascertaining the correctness of such return or for the purpose of making a return where none has been made, is hereby authorized, by any regularly appointed revenue agent specially designated by him for that purpose, to examine any books and papers bearing upon the matters required to be included in the return of such corporation, joint stock company or association, or insurance company, and to require the attendance of any officer or employee of such corporation, joint stock company or association, or insurance company, and to take his testimony with reference to the matter required by law to be included in such return, with power to administer oaths to such person or persons; and the Commissioner of Internal Revenue may also invoke the aid of any court of the United States having jurisdiction to require the attendance of such officers or employees and the production of such books and papers. Upon the information so acquired the Commissioner of Internal Revenue may amend any return or make a return where none

has been made. All proceedings taken by the Commissioner of Internal Revenue under the provisions of this section shall be subject to the approval of the Secretary of the Treasury.

Where a corporation in its return deducts taxes paid not by it but in its behalf by other corporations on stock owned by it in such other corporations and such deduction is not allowed, as there was no refusal or neglect to make a return within the meaning of the act, no penalty will be allowed. (United States v. Aetna Life Ins. Co., 260 Fed. 333, 1919.)

SUBDIVISION V, SECTION 38.

Fifth. All returns shall be retained by the Commissioner of Internal Revenue, who shall make assessments thereon; and in case of any return made with false or fraudulent intent, he shall add one hundred per centum of such tax, and in case of a refusal or neglect to make a return or to verify the same as aforesaid he shall add fifty per centum of such tax. In case of neglect occasioned by the sickness or absence of an officer of such corporation, joint stock company or association, or insurance company, required to make said return, or for other sufficient reason, the collector may allow such further time for making and delivering such return as he may deem necessary, not exceeding thirty days. The amount so added to the tax shall be collected at the same time and in the same manner as the tax originally assessed, unless the refusal, neglect, or falsity is discovered after the date for payment of said taxes, in which case the amount so added shall be paid by the delinquent corporation, joint stock company or association, or insurance company immediately upon notice given by the collector. All assessments shall be made and the several corporations, joint stock companies or associations, or insurance companies shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessments shall be paid on or before the thirtieth day of June, except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns, in which cases the Commissioner of Internal Revenue shall, upon the discovery thereof, at any time within three years after said return is due, make a return upon information obtained as above provided for, and the assessment made by the Commissioner of Internal Revenue thereon shall be paid by such corporation, joint stock company or association, or insurance company immediately upon notification of the amount of such assessment; and to any sum or sums due and unpaid after the thirtieth day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of five per centum on the amount of tax unpaid and interest at the rate of one per centum per month upon said tax from the time the same becomes due.

Notice by mail.

The notice of assessment required to be given to the corporation may lawfully be given by mail, and a notice so sent by the collector in a franked envelope bearing a return card, addressed to the corporation at the place of its principal office, and not returned, was presumptively received, and the burden rests on the corporation to prove to the contrary, to avoid the penalty for nonpayment within the time prescribed. (United States v. General Inspection & Loading Co., 204 Fed. 657, 1913.)

"False" returns.

An incorrect return is "false" although made in good faith under a mistake of law, and the Commissioner has power to amend such return even after the tax under the original return has been paid. The corrected assessment is not required to be made within the three years. (Eliot National Bank v. Gill, 210 Fed. 933, 1913, and affirmed in C. C. A. decision, 218 Fed. 600, 1914.)

Construing the provisions in subdivisions 3, 4, and 5 together, the word "false" as used in subdivision 5 is not to be construed as meaning intentionally or fraudulently false, but the same as "not true," or the equivalent of "incorrect," and the Commissioner has power in such case to amend a return at any time within three years. (National Bank of Commerce in St. Louis v. Allen, 223 Fed. 472, 1915.)

The word "false" as used in section 38 (5), means "untrue" or "incorrect" and does not necessarily mean intentionally or fraudulently false. (United States v. Nashville, C. & St. L. Ry., 249 Fed. 678.)

See also Camp Bird v. Howbert (248 U. S. 590, reversing 249 Fed. 27.)

Reassessment.

Neither the limitation contained in this paragraph nor any other statute of limitations bars an action by the United States to recover the difference between the amount of the tax levied and paid and the amount which should have been levied and paid, if the corporation's return had correctly stated its income. (United States v. Minneapolis Threshing Machine Co., 229 Fed. 1019, 1915.)

The three-year clause of section 38 is not a limitation upon the right of the Government to sue for unpaid taxes but a limitation upon the right of the collecting officers to make assessment and to enforce payment by the summary statutory proceedings. (United States v. Grand Rapids & Indiana Ry. Co., 239 Fed. 153, 1915.)

The act of August 5, 1909, does not make the remedy by way of a reassessment by the Commissioner exclusive of all other remedies for collection of excise tax imposed on corporations, and suit may be brought under section 3213 Revised Statutes. (United States v. Nashville, C. & St. L. Ry., 249 Fed. 678, C. C. A. 1918.) Reversing decision of the district court.

In view of Revised Statutes, section 3213, Held that, under act of August 5, 1909, section 38, subdivisions 5, 8, United States may maintain action against corporation for excise taxes based on income omitted, though Commissioner of Internal Revenue made no reassessment, etc., within time prescribed. (U. S. v. Nashville, C. & St. L. Ry., 249 Fed. 678.)