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Internal Revenue or the collector in pursuance of law, the Commissioner shall add to the tax 25 per centum of its amount, except that when a return is filed after such time and it is shown that the failure to file it was due to a reasonable cause and not to willful neglect, no such addition shall be made to the tax. In case a false or fraudulent return or list is willfully made, the Commissioner shall add to the tax 50 per centum of its amount.

The amount so added to any tax shall be collected at the same time and in the same manner and as a part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax.

SECTIONS 502 (d), 1114, AND 1123 OF THE REVENUE ACT OF 1926; AND SECTION 3184 OF THE UNITED STATES REVISED STATUTES

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SEC. 502 58 (d) * * * If the tax is not paid when due, there shall be added as part of the tax interest at the rate of 1 per centum a month from the time when the tax became due until paid.

SEC. 3184 (Revised Statutes). Where it is not otherwise provided, the collector shall in person or by deputy, within ten days after receiving any list of taxes from the Commissioner of Internal Revenue, give notice to each person liable to pay any taxes stated therein, to be left at his dwelling or usual place of business, or to be sent by mail, stating the amount of such taxes and demanding payment thereof. If such person does not pay the taxes within ten days after the service or the sending by mail of such notice, it shall be the duty of the collector or his deputy to collect the said taxes with a penalty of five per centum additional upon the amount of taxes, and interest at the rate of one per centum a month."

SEC. 1114. (a) Any person required under this Act to pay any tax, or required by law or regulations made under authority thereof to make a return, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any tax imposed by this Act, who willfully fails to pay such tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than one year, or both, together with the costs of prosecution.

(b) Any person required under this Act to collect, account for and pay over any tax imposed by this Act, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this Act or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution. (c) Any person who willfully aids or assists in, or procures, counsels, or advises, the preparation or presentation under, or in connection with any matter arising under, the internal-revenue laws, of a false or fraudulent return, affidavit, claim, or document, shall (whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document) be guilty of a felony and, upon convic

33 Modified by section 404 of the Revenue Act of 1935, which is as follows: SEC. 404. INTEREST ON DELINQUENT TAXES

Notwithstanding any provision of law to the contrary, interest accruing during any period of time after the date of the enactment of this Act upon any internal-revenue tax (including amounts assessed or collected as a part thereof) or customs duty, not paid when due, shall be at the rate of 6 per centum per annum.

39 Section 3184 of the Revised Statutes was amended by section 805 (a) of the Revenue Act of 1938, enacted at midnight, May 27, 1938, by striking out at the end thereof the words "and interest at the rate of 1 per centum a month" and inserting in lieu thereof the following: "and interest at the rate of 6 per centum per annum from the date of such notice to the date of payment". Section 805 (b) of the said Revenue Act of 1938 provides that said amendment shall apply only where notice is served or sent after the date of the enactment of the Revenue Act of 1938.

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tion thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution.

(d) Any person who willfully fails to pay, collect, or truthfully account for and pay over, any tax imposed by Titles IV, V, VI, VII, VIII, and IX, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty of the amount of the tax evaded, or not paid, collected or accounted for and paid over, to be assessed and collected in the same manner as taxes are assessed and collected. No penalty shall be assessed under this subdivision for any offense for which a penalty may be assessed under authority of section 3176 of the Revised Statutes, as amended, * *.

(e) Any person in possession of property, or rights to property, subject to distraint, upon which a levy has been made, shall, upon demand by the collector or deputy collector making such levy, surrender such property or rights to such collector or deputy, unless such property or right is, at the time of such demand, subject to an attachment or execution under any judicial process. Any person who fails or refuses to so surrender any of such property or rights shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of the taxes (including penalties and interest) for the collection of which such levy has been made, together with costs and interest from the date of such levy.

(f) The term "person" as used in this section includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

SEC. 1123. Whoever in connection with the sale or lease, or offer for sale or lease, of any article, or for the purpose of making such sale or lease, makes any statement, written or oral, (1) intended or calculated to lead any person to believe that any part of the price at which such article is sold or leased, or offered for sale or lease, consists of a tax imposed under the authority of the United States, or (2) ascribing a particular part of such price to a tax imposed under the authority of the United States, knowing that such statement is false or that the tax is not so great as the portion of such price ascribed to such tax, shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not more than $1,000 or by imprisonment not exceeding one year, or both.

100.56 Penalties and interest. Sections 500 (d), 502 (d), 1114, and 1123 of the Revenue Act of 1926 are not affected by the Revenue Acts of 1928 and 1932 and continue in force.

The scope of the penalties applicable to the tax on admissions and dues is so broad that reference will be made only to their most common applications. Every individual, corporation, partnership, club, or association, on which there rests a duty to file a monthly return on Form 729, that fails to file such return, and to pay over the tax due thereon, during the month which follows that for which such return should be made, is subject to certain penalties and interest. A mere failure to file the return within the following month causes to accrue under section 3176 of the Revised Statutes (26 U.S.C. 1512 (d) (1)), as amended, a penalty of 25 percent of the amount of the tax.10 Failure to pay to the collector on or before the last day of the month which follows that for which such return should be made, all taxes due under that return, causes to accrue under section 502 (d) of the Act interest at 1 percent a month 1 from the time when the

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40 The 25 percent penalty provided in section 3176 of the Revised Statutes was modified by section 406 of the Revenue Act of 1935. See footnote on page 860. "The provision for interest at the rate of 1 percent a month was modified to 6 percent per annum by section 404 of the Revenue Act of 1935. See footnote 38 on page 861.

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tax became due until assessed, or until paid prior to assessment. The due date of the tax for the purpose of computing interest is the last day of the month within which the return should have been filed and tax paid.

Where assessment is made of tax, 25 percent penalty, or interest, and payment is not made within 10 days after the date of issuance of Form 17 (First Notice and Demand), based on assessment approved by the Commissioner, there will accrue under section 3184, Revised Statutes, a 5 percent penalty and interest at the rate of 1 percent per month computed upon the entire assessment from 10 days after issuance of Form 17 until date of payment. Where assessment is settled by partial payments, interest is computed from the expiration of the first 10-day notice through the date of first payment, and from the next succeeding day to the date of the next payment, until the assessment is paid in full.

If a claim for abatement is filed with the collector within 10 days after the date of the issuance of the first notice and demand, the 5 percent penalty does not attach. If the assessment is not paid within 10 days after receipt of notice of rejection of the claim, the 5 percent penalty imposed by the statute applies. The filing of the claim does not stay the collection of interest, which continues to run for the full period that intervenes between the date of expiration of the first notice and demand and the date of payment.

If a false or fraudulent return be wilfully made, the penalty under section 3176 of the Revised Statutes is 50 percent of the total tax due for the entire period involved, including any tax previously paid.

Under section 1114 of the Revenue Act of 1926, any person who willfully fails to pay or collect any tax due, file return, or keep records, or attempts in any manner to evade or defeat the tax, is subject to a fine of $10,000, or imprisonment, or both, with costs of prosecution, and is also liable to a penalty equal to the amount of the tax not collected or paid. These penalties apply to an officer or employee of a place, or attraction, or ticket-selling business, or club or organization, who, as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs, as well as to a person who fails or refuses to perform any of the duties imposed by the Act, i. e., pay the tax, make return, keep records, supply information, etc.*+

AMENDMENT OF LAW

SECTION 711 (e) oF THE REVENUE ACT of 1932, as AMENDED

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SEC. 711. (e) Effective July 1, 1939, section 500 (a) (1) of the Revenue Act of 1926, as amended by subsection (a) of this section, is amended by striking out "less than 41 cents" wherever appearing in such paragraph, and inserting in lieu thereof "$3 or less."

"By section 212 of the Act of June 16, 1933 (48 Stat. 206), "1935" was inserted in lieu of "1934"; by Joint Resolution of June 28, 1935 (49 Stat. 431), "1937" was inserted in lieu of "1935"; by Joint Resolution of June 29, 1937 (50 Stat. 358), "1939" was inserted in lieu of "1937."

**For statutory and source citations, see note to § 100.1.

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100.57 Effective date of change in exemption. The sums paid for admission which are not subject to tax under section 500 (a) (1) of the Revenue Act of 1926, as amended by section 711 (a) of the Revenue Act of 1932, are those which are "less than 41 cents." Effective July 1, 1939, any sum of "$3 or less" paid for admission will not be taxable. The time of payment and not the time of admission will govern in determining which exemption is applicable. Consequently, if a person should purchase a ticket of admission for an amount in excess of 40 cents where the payment was made before July 1, 1939, for an admission to take place after that date, the payment so made would be subject to tax.t [As amended by T.D. 4753, July 21, 1937, 2 F.R. 1285]

PART 110 TAX ON CONTRACTS OF SALE OF COTTON FOR FUTURE DELIVERY

[Unless otherwise indicated, the statutory references are to the Act of August

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110.1 Execution of the law by Com- 110.12 Returns to be made by persons

missioner of Internal Reve

nue.

110.2 Designation of contracts.

dealing in future contracts. 110.13 Returns to be made by clearing associations.

110.3 Sales of spot cotton exempt 110.14 Persons failing to make return, from tax.

110.4 All tenders of cotton must be

for full number of bales. 110.5 Exchange rules and other matters not to affect contracts exempt from tax under section 5, section 6A, or section 10 of the Act.

110.6 Provisions

deemed inconsistent and in conflict with requirements.

110.7 Disputes as to classification to be referred to Secretary of Agriculture.

United States cotton futures agent authorized to do so.

110.15 Agents.
110.16 Stamps.

110.17 Affixing stamps.
110.18 Canceling stamps.
110.19 Penalties.

110.20 Additional penalty.
110.21 United States attorneys to pros-
ecute.

110.22 Contracts made prior to Act
going into effect.

110.23 Procedure for disclosure of evi dence.

110.8 Records of contracts of sale of 110.24 Provisions of internal revenue cotton for future delivery.

laws applicable.

110.9 Records to be kept by cotton 110.25 Regulations of the Secretary of clearing associations.

Agriculture.

CROSS REFERENCES

Cotton classification under the United States Cotton Futures Act: See Agriculture, 7 CFR Part 27.

Special provisions applicable to cotton : See Commodity and Securities Exchanges, 17 CFR Part 3.

Section 110.0 Authority for regulations.42 Under Part A of the Act of Congress entitled "An act making appropriations for the

42 [Unless otherwise indicated, the statutory references are to the Act of August 11, 1916, 39 Stat. 476, as amended by section 6 of the Act of March 4, 1919, 40 Stat. 1350, the Act of May 31, 1920, 41 Stat. 725, and the Act of February 26, 1927, 44 Stat. 1248 (26 U.S.C. 1090-1106).]

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**For statutory and source citations, see note to § 100.1.

Department of Agriculture for the fiscal year ending June thirtieth, nineteen hundred and seventeen, and for other purposes," approved August 11, 1916, known as the "United States Cotton Futures Act," section 11 provides:

That the tax imposed by section three of this Act shall be paid by the seller of the cotton involved in the contract of sale, by means of stamps which shall be affixed to such contracts, or to the memoranda evidencing the same, and canceled in compliance with rules and regulations which shall be prescribed by the Secretary of the Treasury.

And section 13 provides:

That the Secretary of the Treasury is authorized to make and promulgate such rules and regulations as he may deem necessary to collect the tax imposed by this Act and otherwise to enforce its provisions. Further to effect this purpose, he shall require all persons coming within its provisions to keep such records and statements of account, and may require such persons to make such returns verified under oath or otherwise, as will fully and correctly disclose all transactions mentioned in section three of this Act, including the making, execution, settlement, and fulfillment thereof; he may require all persons who act in the capacity of a clearing house, clearing association, or similar institution for the purpose of clearing, settling, or adjusting transactions mentioned in section three of this Act to keep such records and to make such returns as will fully and correctly disclose all facts in their possession relating to such transactions; and he may appoint agents to conduct the inspection necessary to collect said tax and otherwise to enforce this Act and all rules and regulations made by him in pursuance hereof, and may fix the compensation of such agents. The provisions of the internal-revenue laws of the United States, so far as applicable, including sections thirty-one hundred and seventy-three, thirty-one hundred and seventy-four, and thirty-one hundred and seventy-five of the Revised Statutes, as amended, are hereby extended and made to apply to this Act. In pursuance thereof, the following regulations in this part are hereby made, prescribed, and promulgated.*

*88 110.0 to 110.25, inclusive, issued under the authority contained in secs. 11, 13, 39 Stat. 480; 26 U.S.C. 1090 (c), 1098 (a): interpret generally the provisions of Part A, 39 Stat. 476-482; 26 U.S.C. 1090-1105.

110.1 Execution of the law by Commissioner of Internal Revenue. The execution of the law as far as relates to the Treasury Department is delegated to the Commissioner of Internal Revenue subject to the supervison of the Secretary of the Treasury.*†

In 88 110.1 to 110.25, inclusive, the numbers to the right of the decimal point correspond with the respective article numbers in Regulations 36 (1916 Edition), Bureau of Internal Revenue, Aug. 29, 1916.

110.2 Designation of contracts. Contracts made in compliance with section 5 43 of the Act shall be known as "Section five contracts;" contracts made in compliance with section 6A of the Act shall be known as "section 6A contracts," and contracts made in compliance with section 10 of the Act shall be known as "Section 10 contracts."**

110.3 Sales of spot cotton exempt from tax. No tax is imposed on any sale of spot cotton, but contracts of sale of specific cotton for future delivery made at, on, or in any exchange, board of trade, or similar institution or place of business must comply with section 5, section 6A, or section 10 of the Act to be exempt from tax.*†

"Section 5 of the Act was amended by section 6, 40 Stat. 1351, and section 1, 41 Stat. 725; 26 U.S.C. 1092.

*For statutory citation, see note to § 110.0. †For source citation, see note to § 110.1.

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