Treasury Department ureau of Interna Revenue

Interna Revenue uetn

Cumuatve uetn 19 8-2
ULY-D C M R 19 8
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SP CI L TT NTION ecte to the cautonary notce on ths page that pnb-
__ . shed rungs of the ureau do not have the force and effect
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed case
Treasury Department : : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn 19 8-2
ULY-D C M R 19 8
IN T IS ISSU
Page
Introductory Notes I
Contents
Rungs Nos. 128 2-12998
Ta Court of the Unted States, The, formery Unted
States oard of Ta ppeas 1-6
Income Ta
Part I (Interna Revenue Code) 7-130
Part II (Revenue ct of 1938 and pror Revenue
cts) , 131-133
mpoyment Ta es 135-152
Msceaneous Ta es
state and Gft Ta es 153-156
cse Ta es, Stamp Ta es, etc 157-206
Msceaneous Rungs 207-316
Legsaton 317-32
Inde 325-33
The rungs reported n the Interna Revenue uetn ere for (he nformaton of ta payers and ther counse as
showng the trend of offca opnon n the admnstraton of the ureau of Interna Revenue; the rungs other than
Treasury Decsons hare none of the force or effect of Treasury Decsons and do not commt the Department to
any nterpretaton of the aw whch has not been formay approved and promugated by the Secretary of the
Treasury. ach rung embodes the admnstratve appcaton of the aw and Treasury Decsons to the entre
state of facts upon whch a partcuar case rests, s especay to be noted that the same resut w not neces-
sary be reached n another case uness a the matera facts are dentca wth those of the reported case. s t s
not aways feasbe to pubsh a compete statement of the facts underyng each rung, there can be no assurance
that any new case s dentca wth the reported case. s bearng out ths dstncton, t may be observed that the
rungs pubshed from tme to tme may appear to reverse rungs prevousy pubshed.
Offcers of the ureau of Interna Revenue sre especay cautoned aganst reachng a concuson n any case
merey on the bass of smarty to a pubshed rung, and shoud base ther |udgment on the appcaton of a
pertnent provsons of the aw and Treasury Decsons to a the facts n each case. These rungs shoud be uso
as ads n studyng the aw and ts forma constructon as made n the reguatons and Treasury Decsons pre-
vousy ssued.
In addton to pubshng a Interna Revenue Treasury Decsons, t s the pocy of the ureau of Interna
Revenue to pubsh a rungs and decsons, ncudng opnons of the Chef Counse for the ureau of Interna
Revenue, whch, because bey announce a rung or decson upon a nove queston or upon a queston n regard
to wbch there e sts no prevousy pubshed rung or decson, or for other reasons, are of such mportance as
to be of genera nterest. It s aso the pocy of the ureau ts pubsh a rungs or decsons whch revoke,
modfy, amend, or affect n any manner whatever any pubshed rung or decson. In many nstances opnons
of the Chef Counse for the ureau of Interna Revenue are not of genera nterest because they announce no
new rung or new constructon of the revenue aws but smpy appy rungs aready made pubc to certan
stuatons of fact whch are wthout speca sgnfcance. It s not the pocy of the ureau to pubbsh such opnons.
Therefore, the numbers assgned to the pubshed opnons of the Chef Counse for the ureau of Interna
Revenue are not consecutve. No unpubshed rung or decson w be cted or reed upon by any offcer or
empoyee of the ureau of Interna Revenue as a precedent n the dsposton of other cases. Uness otherwse
specfcay ndcated, aU pubshed rungs and decsons have receved the consderaton and approva of the
Chef Counse for the ureau of Interna Revenue.
UNIT D ST T S GO RNM NT PRINTING OFFIC : W S INGTON : 19 9
For sae by Superntendent of Documents, U. S. Government Prntng Offce. Washngton 25, D. C
See back of tte for prces
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The Interna Revenue uetn servce conssts of buetns ssued
every other week and semannua cumuatve buetns.
The buetns contan the rungs and decsons whch are made
pubc and a Treasury Department decsons (known as Treasury
Decsons) pertanng to Interna Revenue matters. The semannua
cumuatve buetns contan a rungs and decsons (ncudng
Treasury Decsons) pubshed durng the prevous 6 months.
_ The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
Offce, Washngton 25, D. C, for 2.50 per year; foregn, 3.75. Snge
copes of the uetn, 10 cents each.
Ceran ssues of cumuatve buetns are out of prnt and are,
therefore, not avaabe. Persons desrng avaabe cumuatve
buetns may obtan them from the Superntendent of Documents at
prces as foows:
Year
Cumuatve uetn
Frst 6 months
Second 6 months
1920
2
0. 25
3
0. 30
1928
II-1
. 35
II-2
. 50
1929
III-1
. 50
III-2
. 55
1930
I -1
. 50
I -2
.50
1932
I-1
. 30
1936
-1
. 55
-2
. 5
1939
1939-1
1939-2
.60
Part 1
. 50
Part 2
1. 00
19 0
19 0-1
. 30
19 0-2
. 60
19 1
19 1-1
. 5
19 1-2
.60
19 2
19 2-1
. 0
19 2-2
.60
19 3
1. 25
19 6
19 6-1
. 50
19 6-2
. 75
19 7
19 7-1
. 0
19 7-2
. 75
19 8
19 8-1
. 75
19 8-2
1. 00
Contans ony ncome ta rungs.
1 ouse, Senate, and conference reports on revenue bs enacted as the ct of October 3,
1913, the ct of October 22, 191 , and the Revenue cts of 1916 to 1938, ncusve, and on
amendments to such cts.
19 3 Cumuatve uetn prnted n one voume.
Persons desrngto obtan the servce n dgest form may do so at
prces as foows: Dgest No. 19 (ncome ta rungs onv, pr, 1919,
to December, 1921, ncusve), 50 cents; Dgest No. 13 (1922-2 ), 60
cents; Dgest No. 22 (1925-27), 36 cents; and Dgest (ncome ta
rungs ony, pr, 1919, to December, 1930, ncusve), 1.50.
nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton 25, D. C.
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INTRODUCTORY NOT S
The Interna Revenue Cumuatve uetn 19 8-2, n addton to
a decsons of the Treasury Department (caed Treasury Decsons)
pertanng to Interna Revenue matters, contans opnons of the
Chef Counse for the ureau of Interna Revenue, and rungs and
decsons pertanng to ncome, estate, gft, saes, e cess profts, em-
poyment, soca securty, and msceaneous ta es, and egsaton
afectng the revenue statutes, as ndcated on the tte page of ths
uetn, pubshed n the uetns (19-18, Nos. 1 to 26, ncusve) for
the perod uy 1 to December 31,19 8. It aso contans a cumuatve
st of announcements reatng to decsons of The Ta Court of the
Unted States, formery the Unted States oard of Ta ppeas,
pubshed n the Interna Revenue uetn Servce from uy 1 to
December 31, 19 8.
Income ta rungs are prnted n two parts. The rungs under
the Interna Revenue Code are prnted as Part I, the aw headngs
correspondng wth the sectons of the Code, as amended, and the
reguatons headngs correspondng wth the secton headngs of Regu-
atons 111 or 103. Rungs under the Revenue ct of 1938 and pror
revenue acts are prnted as Part II, the aw headngs correspondng
wth the secton headngs of those revenue acts and the reguatons
beadngs correspondng wth the artce headngs of Reguatons 101.
Rungs under Ttes III and I of the Soca Securty ct and
under Subchapters and C, Chapter 9, of the Interna Revenue
Code n force pror to anuary 1, 19 0, are pubshed under artce
headngs of Reguatons 91 and 90, respectvey; rungs under Sub-
chapters and C, Chapter 9, of the Code n force on or after anuary
1, 19 0, are pubshed under the secton headngs of Reguatons 106
and 107, respectvey; and rungs under the Carrers Ta ng ct of
1937 and under Subchapter , Chapter 9, of the Code, are pubshed
under the artce headngs of Reguatons 100.
R I TIONS
The foowng abbrevatons are used throughout the uetn:
, , C, etc. The names of ndvduas.
. R. M. Commttee on ppeas and Revew memorandum.
. R. R. Commttee on ppeas and Revew recommendaton.
. T. coho Ta Unt.
. T. . oard of Ta ppeas.
C. Cumuatve uetn.
Ct. D. Court decson.
C. S. T. Capta Stock Ta Dvson.
C. T. Ta es on mpoyment by Carrers.
D. C. Treasury Department crcuar.
m. T. Ta es mposed by the Soca Securty ct, the Carrers Ta ng ct
of 1937, and Subchapters , , and C of the Interna Revenue Code.
(n)
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I
. P. C. cess Profts Ta Counc rung or memorandum.
. T. state Ta Dvson.
G. C. M. Genera Counse s, ssstant Genera Counse s, or Chef Counse s
memorandum.
I. R. 1 . Interna Revenue uetn.
I. R. C. Interna Revenue Code.
I. T. Income Ta Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accord-
ng to conte t.
.Mn. Mmeographed etter.
MS. or M. T. Msceaneous Dvson.
O. or L. O. Soctor s aw opnon.
O. D. Offce decson.
Op. . G. Opnon of the ttorney Genera.
P. T.- Processng Ta Dvson.
S. T. Saes Ta Dvson.
S. Sver Ta Dvson.
S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
S. S. T. Ta es on mpoyment by others than carrers.
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. C Ta Court of the Unted States.
T. D. Treasury Decson.
and y are used to represent certan numbers, and when used wth the word
doars represent sums of money.
NNOUNC M NT R L TING TO D CISIONS OF T T COURT OF T
UNIT D ST T S, FORM RLY NOWN S T UNIT D ST T S O RD OF
T PP LS
In order that ta payers and the genera pubc may be nformed
whether the Commssoner has acquesced n a decson of The Ta
Court of the Unted States, formery known as the Unted States
oard of Ta ppeas, dsaowng a defcency n ta determned by
the Commssoner to be due, announcement w be made n the b-
weeky Interna Revenue uetn at the earest practcabe date.
Notce that the Commssoner has acquesced or nonacquesced n a
decson of the Ta Court reates ony to the ssue or ssues decded
adversey to the Government. Decsons so acquesced n shoud be
reed upon by offcers and empoyees of the ureau of Interna
Revenue as precedents n the dsposton of other cases.
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I 6ZI-0Z-8WI
Z6ZI-6I-SWI
9Z6ZI-6I-8WI
Z6Z-6I-8WI
ZZ6ZI-61-8WI
606ZI--8Wt
016ZI-ZI-8WI
806ZI-ZI-8WI
Z88ZI-9I-8WI
068ZI-9I-8MI
88ZI-SI-8MI
6 8ZI-SI-8WI
8ZI- I-8WI
98ZI-SI-fW
S 8ZI-9I- 6I
8ZI-S1-8MI
8ZI-SI-8WI
Z8ZI-5I-8t6I
I SZI-SI-8W
08ZI-SI-8W
89SZI-SI-8WI
8 8ZI-S-8WI
8S8ZI- -8WI
IS8Z- - MI
S8ZI- I-8WI
958ZI- I-8WI
SS8ZI- -8MI
8ZI- -8MI
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8 8ZI- -8MI
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:t uosT. 3p w t)3
89S
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I
Rung
Unted States Ta Court Con
13082
13101
13236
13301
13372
13 90
13518
13603
139 3
1 170
1 176.
1 307
1 53
155 5
15
15633
15836
1591
97873
10 537
108361
109162
111851
Offce decsons (I. T.):
3912
3913 --
391
3915 -
3916
3917
3918
391 -.-
3920
3921
3922
3923
392
3925
3926
3927
3928
3929
3930
3931
39.
3933
Offce decsons ( . P. C.):
33
3
Offce decsons (S. T.):
113
935
Offce decson ( . T.):
21
Rung No.
19 8-23-12955
19 8-16-12886
19 8-23-12955
19 8-1 -128 2
19 8-21-12937
19 8-2 -12967
19 8-23-12955
19 8-18-12912
19 8-18-12912
19 8-23-12955
19 8-20-12929
19 8-16-12886
19 8-21-12937
19 8-23-12955
1918-2 -12967
19 8-21-12937
19 8-25-1297
19 8-19-12919
19 8-18-12912
1918-20-12929
19 8-1 -128 2
19 8-19-12919
19 8-25-1297
19 8-1 -128 3
19 8-1 -128
1918-15-1286
19 8-16-12888
19 8-16-12889
19 8-17-12902
19 8-17-12903
19 8-17-1290
19 8-18-12913
19 8-19-12920
19 8-19-12921
19 8-19-12923
19 8-20-12930
19 8-21-12938
19 8-22-129 6
19 8-23-129.56
19 8-2 -12968
19 8-2 -12969
19 8-2 -12971
19 8-25-12977
19 8-26-1299
19 8-26-12996
19 8-16-12892
19 8-23-12960
19 8-1 -128 6
19 8-15-12866
19 8-20-12932
Page
2

3
1
1,3
2
3
2,3
6
5
1
3
6,6
5
I
3
8
3
1
1
3
6
2,
68
95
98
30
51
10
t
67
60
32
6
sa
91
28
8
38
9
29
126
87
7
130
103
106
180
192
156
Rung
Offce decsons (M. T.):
28...
29
30
31
32...
Offce decsons (MS.):
32
325
326
327
328.
329
Offce decsons (T.):
213.
21 .
215.
216.
217.
218.
219.
220
221
222
223
22
225
226
Depart meat crcuar:
833
Mtmeoeraphs:
6185 (amended)
628
6288
6293
6310
631
6323
6327
6336
Crcuars:
20 0
2060
2061
Legsaton
Rung No.
19 8-1 -128 7
19 8-15-12867
19 8-16-1289
19 8-18-12916
19 8-21-129 0
19 8-15-12880
19 8-17-12911
19 8-19-1292
19 8-21-129
19 8-23-12966
19 8-25-12990
19 8-1 -12859
19 8-1 -12860
19 8-16-12895
19 8-16-12896
19 8-18-12917
10 8-18-12918
19 8-20-12936
19 8-21-129 3
19 8-23-1296
19 8-23-12966
19 8-2 12991
19 8-25-12992
19 8-26-12997
19 8-26-12998-
19 8-20-12935
19 .8-16-12891
19 8-16-12893
19 8-17-12906
19 8-18-1291
19 8-22-129 9
19 8-23-12981
19 8-21-12958
19 8-25-12975
19 8-26-12995
19 8-18-12915
19 8-23-12959
19 8-2 -12170
19 8-1 -12861
19 8-15-12881
19 S-15-128S2
19 8-15-1288
(19 8-16-12885
19 8-16-12897
19 8-16-12898
1918-16-12899
.19 8-16-12900
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CONT NTS OF CUMUL TI ULL TINS (I. T.) 1 to 5) S. T. FO 1920 ND 1921; INT N L
NU , 1-2, n-1. II-2. IT -1, I-2, I -1, I -2, -. -2, I-1, I-2, T -1, II-2, III-1.
III-2. I -1, I -2, -, -2. I-I, I-2. II-1, 1I-2, III-1, III-2. I -, I -2. -1. -2,1937-1,
1937-2, 1938-1. 1938-2, 1939-1 (P T 1 ND P RT 2), 1939-2, 19 0-1, 19 0-2, 19 1-1. 19 1-2, 19 2-1,
19 2-2; NNU L ULL TINS FO 19 3, 19 . ND 19 5; S MI NNU L ULL TINS 19 6-1.
19 6-2. 19 7-1. 19 7-2.19 8-1. ND 19 8-2
Cumuatve uetn
Rung Nos.
Income Ta :
December, 1919 (No. 1)
anuary- une, 1920 (No. 2)
uy-December, 1920 (No. 3)
anuary- une, 1921 (No. )
uy-December, 1921 (No. 6)
Saes Ta:
1920 (S. T. 1-20)
anuary- une, 1921
uy-December, 1921
Interna Revenue uetn:
anuary- une, 1922 (No. 1-1)
uy-December, 1922 (No. 1-2)
anuary- une, 1923 (No. II-)
uy-December, 1923 (No. II--2)
anuary- une, 192 (No. III-)
uy-December, 192 (No. III-2)
anuary- une, 1925 (No. I -1)
uy-December, 1925 (No. I -2)
anuary- une, 1926 (No. -)
uy-December, 1926 (No. -2)
anuary- une, 1927 (No. I-1)
uy-December, 1927 (No. I-2)
anuary- une, 1928 (No. II-1)
uy-December, 1928 (No. II-2)
anuary- une, 1929 (No. III-1)
uy-December, 1929 (No. III-2)
anuary- une, 1930 (No. I -1)
uy-December, 1930 (No. I -2)
anuary- une, 1931 (No. -)
uy-December. 1931 (No. -2)
anuary- une, 19.12 (No. I-1)
uy-December, 1932 (No. I-2)
anuary- une, 1933 (No. II-1)
utv-Deccmber. 1933 (No. I1-2)
anuary- une 193 (No. III-1)
uy-December. 193 (No. III-2)
anuary- une, 1935 (No. I -1)
uy-December. 1935 (No. I -2)
anuary- une, 1936 (No. -1)
uy-December. 1936 (No. -2)
anuary- une, 1937 (1937-1)
uy-December, 1937 (1937-2)
anuary- une, 1938 (1938-1)
uy-December, 1938 (1938-2)
anuary- une. 1939 (1939-1 Part 1 and Port 2)
uy-December, 1939 (1939-2)
anuary- une, 19 0 (19 0-1)..
uy-December, 19 0 (19 0-2)
anuary- une, 19 1 (1911-1)
uy-December. 1911 (I -2)
anuary- une, 19 2 (19 2-1)
uy-December, 19 2 (19 2-2)
anuary-December, 19 3 (12 months)
anuary-December, 19 (12 month )
anuary-December, 19 5 (12 months)
anuarv- une, 19 6 (19 6-1)
uy-December, 19 6 (19 6-2)
anuarv- une, 19 7 C19 7-1)
uy-December, 19 7 (19 7-21
anuarv- une, 19 8 09 8-1)
uv-Dcccmber, 19 8 (19 8-2)
1-655
656-1033
1U3 -I368
1369-1710
1711-1995
1-112
113-265
266-356
1-383
38 -665
666-956
957-1276
1277-16 1
16 2-19 9
1950-2251
2252-2523
252 -2813
281 -3026
3027-3291
3292-3557
3558-378
3785- 052
053- 2 1
2 9- 87
1 I6 I
161 S7
888-512
5125-5338
5339-5531
5532-5961
5962-6262
6263-6581
6582-6871
6872-722
7225-7563
756 -788
7885-81 9
8150-8 59
S 60-8792
8793-9118
9119-9 2
9 25-965
9655-9896
9897-10126
10127-1030
10305-105 8
105 9-10761
10762 109 3
109 -11138
11139-11302
11303-11590
11591-11916
11917-12200
12261-12332
12333-12 65
12 66-12580
12581-12721
12722-128 1
128 2-12998
( TD
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T T COURT OF T UNIT D ST T S
CUMUL TI LIST OF NNOUNC M NTS R L TING TO
D CISIONS OF T T COURT OF T UNIT D
ST T S PU LIS D IN T INT RN L R NU
ULL TIN S R IC FROM ULY 1, 19 8, TO D C M-
R 31,19 8, INCLUSI
19 8-26-12993
The Commssoner acquesces n the foowng decsons:
Ta payer
Docket No.
oume Page
dda, Fernand C. .

artman, oert, estate of1

artman, r., oert, e ecutor of estate of oert art-
man 1 - --
eser, Irvne F
ovennan et u ., arry -
rady et u ., George T -
rann Stuart Co., The
rown, r., Cree
rown s Son Co., . T. S
Caforna egetabe Concentrates, Inc
Camoc Fastener Co., Inc
Constantnescu, Forca
Coverdae et a., zabeth, e ecutors of estate of
zabeth aw hurst Davey
D
Davey, zabeth aw hurst, estate of.
Dean, ames Newton
De ter et u ., I. . ._.
Dfco Laboratores, Inc
Doane, Ida F., estate of1
Doane, Marguerte T., e ecutr of estate of Ida F.
Doane1
Doherty, Grace R., transferee
Dreyfus et a., Isdore, e ecutors of estate of ugusta
D. Moyse Schmucker
883
12578
12578
97873
12003
1 176
12675
12 28
10999
12 26
125
1153
15562
123 1
123 1
13301
10 537
12168
12782
12782
7 2
13372
oard of Ta ppeas.
OUt ta decson.
1 state ta decson.
Nonacquescenoe pubshed n Cumuatve uetn 10 3-2, page 2 , wthdrawn.
cquescence reates ony to the ssue nvovng the proper method of computng e oess profts net ncome
for the frst 11 months of 19 1.
(1)
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cqt|escences Contnued
Ta payor
oume Page
Duncan, e ander
Duncan, et a., . ., trustees of zabeth Duncan
Yaggv Trust
Duncan et a.. . ., trustees of Trust of Fora Ross
Duncan W
Duncan Trust, Fora Ross
Duncan W, Fora Ross, Trust of

aton, Carence ., estate of-

aton, Mur P
aton, Mur P., e ecutr of estate of Carence .
aton
uropean Nava Stores Co., S.
F
Frst Natona Trust and Savngs ank of Santa
arbara, e ecutor and trustee of estate of Meusna
. Yarck 1
Forda Natona ank of acksonve, Fa., The, ad-
mnstrator of estate of Dck W. Pau
Fokker, nthony . G., estate of 1
Freudmann. enr
Freudmann. Ma -
Fredman, Morrs -.
Fredman, Morrs1
Fredman, Samue
Fredman, Samue1
Fredman, Soman
Fredman, Soman
Frueauff, Chares ., transferee s
Fry, mbrose, estate of 1
G
Gade, F. erman, estate of1 -.
Genera Propertes Co., Inc., transferee
Gray, Robert L

amton Natona ank of no ve, e ecutor and

trustee of estate of Nee . ennngs 1
echt Co., The -.
am vod et u ., Rof
ennngs, Nee ., estate of 1 .
ohnson, Over, estate of 1
ohnson Robert Wood
ones, W. ton, transferee
10951
1095
10952
10953
10952
12099
12100
12099
13082
10567
12892
111851
9101
9100
10858
10863
10856
10861
10857
10862
7 0
103 1
13603
7 39
9 39
6 71
2599
13 90
6 71
9596
127 9
7 1
1 state ta decson.
1 ft ta decson.
cquescence reates ony to the Issue nvovng the proper method of computng e cess profts net
Income for the frst 11 months of 19 1.
1 cquescence reates ony to the Issue whether the rght to Invade the prncpa of the trust estate for the
beneft of the survvng husband rendered the chartabe bequests ncapabe of vauaton.
1 Nonacquescence pubshed n Cumuatve uetn 19 6-2, page 6, wthdrawn.
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cquescences Contnued
Ta payer
Docket No.
oume Pace
no ve Truck Saes Servce, Inc.
L
Lee, een S.. e ecutr of estate of Worth S. Lee1.
Le , ohn
Lee, Worth S. estate of 1
Leon dde, Inc
M
Mackn Corporaton 2
Manschewtz Co., Te .
Mc nney Manufacturng Co
Mes-Coney Co., Inc
Mtche, Marsha O., admnstrator wth the w
anne ed of estate of mbrose Fry 1
Mur, Wam dward.
N
Northern Trust Co., The, e ecutor of estate of F.
erman Gade 1
O Dane, dgar ., estate of
O Dane et a., Ruth, e ecutors of estate of dgar .
O Dane
Oson, . C
Pau, Dck W., estate of_
Ross, a ., e ecutr of estate of Over ohnson __
S
Sehmucker, ugusta D. Moyse, estate of 1
Schnur, Davd
Ses, nne, estate of1
Ses et a., G. M., e ecutors of estate of nne Ses .
Shertzer, dth P.. trustee of ohn Shertzer Trust
Shertzer Trust, ohn
Smth, ames M -
Smth, Mnne I
Standard Reazaton Co
Summers, . Ms
Surface Combuston Corporaton
10977
13518
118 6
1 307
118 0
1591
79 7
8678
13236
973
11752
103 1
108351
270
55 9
820
11573
13603
12923
12923
9201
12892
9596
13372
6619
120 1
120 1
15633
15033
12101
12102
12322
12517
7 38
1 state ta decson.
Nonacuescence pubshed n Cumuatve uetn 19 0-2, pace 6, wthdrawn.
3 cquescence reates ony to the ssue nvovng the proper method of computng e cess profts net n-
comc for the frst 11 months of 19 1.
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cqt|escences Contnued
Ta payer
Docket No.
oume Page
T
Tffanv, Carter, e ecutor of estate of nthony . G.
Fokker 1
Trust of Fora Ross Duncan W

arck, Meusna ., estate of 1

W
Warner Mountans Lumber Co
Y
Yaggv, zabeth Duncan
Yaggy et a., zabeth Duncan, trustees of Fora
Ross Duncan Trust
Yaggy Trust, zabeth Duncan
Y oung, Roand eth -
111851
10952
10567
1015
10955
10953
1095
13191
state ta decson.
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The Commssoner does NOT acquesce n the foowng decsons:
Ta payer
dda, Fernand C.
kron Wedng Sprng Co., The-
mercan emberg Corporaton

everdge, Catherne S.1

rown Shoe Co., Inc -
C
Coast Carton Co
Cresson Consodated God Mnng Mng Co.,
The -
D
de ssengarthen, nna Foto, estate of
De Pergny, Margaret Thaw Carnege, estate of1
Doherty, Grace R., transferee
F
Fdety Trust Co., e ecutor of estate of Margaret
Thaw Carnege de Pergny ..
Frueauff, Chares ., transferee
G
Genera Propertes Co., Inc., transferee
Grard Trust Co., trustee for frst mortgage bond-
hoders of the Penn thetc Cub udng
Gordon, ames D
II
amton Natona ank of no ve, e ecutor and
trustee of estate of Nee . ennngs _. -.
arrs, Cornea 1
nch, . utton, ancary admnstrator c. t. a. of
estate of nna Foto de ssengarthen
ennngs, Nee ., estate of
ones, W. ton, transferee

eck, mma L., estate of

ore, Chrstan W.
Docket No.
1 170
10 7
85 1
12919
1139
11221
11529
155 5
6679
7 2
6679
7 0
7 39
9007
12956
6 71
11616
155 5
6 71
7 1
1 53
139 3
oume Page
Oft ta decson.
state ta decson.
Nonacquescence reates ony to the Issue nvovng deductbty of contrbutons to two trusts under
secton 23(a) of the Interna Revenue Code.
Nonacquescence reates ony to the Issue whether the vauaton of chartabe bequests shoud be made
by the use of standard mortaty tabes or by determnng the actua fe e pectancy of the fe tenant wth
reference to the condton of hs heath at the tme of decedent s death.
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6
Nonacquescences Contnued
Tapayer
Docket No.
Report
L
oume
Page
Leh et a., zabeth eck, e ecutors of estate of
mma L. eck 1
1 53
10
1121
P
Penn thetc Cub udng
9007
10
919
S
St. Car state Co
109162
9
392
Smth, a C._
15836
11
17
Snte, Fred
12767
10
523
Snte, Loretto M
12768
10
523
Surface Combuston Corporaton 3
7 38
9
631
T
5781
10
1 0
U
10252
10
802
state ta decson.
Nonacquescence reates ony to the Issue Invovng deductbty of contrbutons to two trusts under
secton 23(a) o the Interna Revenue Code.
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INCOM T RULINGS. P RT I
INT RN L R NU COD
C PT R 1. INCOM T
SU C PT R . G N R L PRO ISIONS
P RT II. COMPUT TION OF N T INCOM
S CTION 22(a). GROSS INCOM : G N R L
D FINITION
Secton 29.22(a)-5: Gross ncome from busness.
INT RN L R NU COD
Massachusetts ta on meas coected by vendor from purchaser.
(See. T. 3915, page 30.)
Secton 29.22(a)-7: Gross ncome of farmers. 19 8-2(5-1299
( so Secton 113(a), Secton 29.113(a) (2)-.) I. T. 3932
INT RN L R NU COD
vestock raser made a bona fde gft to hs son of catte whch
the father had rased and whch had a far market vaue of 1, 00 at
the tme of the gft. When the catte were sod about 8 months ater
for 2,100, the proceeds of the sae were receved by the son. ed,
(1) the far market vaue of the catte on the date of the gft s n-
cudbe n computng the father s gross Income for the ta abe year
n whch the gft was made; (2) the e cess of the seng prce of the
catte over ther far market vaue on the date of the gft represents
ordnary ncome to the son.
dvce s requested wth respect to the treatment for Federa ncome
ta purposes of the proceeds of the sae of feeder catte whch had
been gven by a father to hs son.
In the nstant case the father, a vestock raser, made a bona fde
gft to hs son of catte whch had a far market vaue at that tme of
1,500. The catte had been rased by the father and hed by hm
prmary for sae. Pursuant to the provsons of secton 29.23(a)-11
of Reguatons 111, the father had deducted the cost of feedng and
rasng the catte, and, thus, the bass of the catte n hs hands was
zero. When the catte were sod about 8 months ater for 2,100, the
p oceeds of the sae were receved by the son.
In Ieverng v. Pau R. G. orst (311 U. S. 112. Ct. D. 1 72, C, .
19 0-2, 206), the owner of negotabe bonds detached nterest coupons
therefrom shorty before ther due date and devered them as a gft
(7)
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29.22(a)-7
8
to hs son who procured ther payment. In support of the concuson
that the nterest was ncudbe n the gross ncome of the owner of
the bonds, the Court sad n part:
though the donor here, by the transfer of the coupons, has precuded any
possbty of hs coectng them hmsef he has nevertheess, by hs act, pro-
cured payment of the nterest, as a vauabe gft to a member of hs famy.
Such a use of hs economc gan, the rght to receve Income, to procure a sats-
facton whch can be obtaned ony by the e pendture of money or property,
woud seem to be the en|oyment of the ncome whether he satsfacton Is the
purchase of goods at the corner grocery, the payment of hs debt there, or such
nonmatera satsfactons as may resut from e payment of a campagn or
communty chest contrbuton, or a gft to hs favorte son. ven though he
never receves the money he derves money s worth from the dsposton of the
coupons whch he has used as money or money s worth n the procurng of a
satsfacton whch s procurabe ony by the e pendture of money or money s
worth. The en|oyment of the economc beneft accrung to hm by vrtue of hs
acquston of the coupons Is reazed as competey as t woud have been f
he had coected the nterest In doars and e pended them for any of the purposes
named.
The rue estabshed by the. orst case was foowed n I. T. 3910
(C. . 19 8-1, 15), whch hods n part that the far market vaue of
agrcutura products contrbuted by a farmer or other producer to an
organzaton descrbed n secton 23(o) or secton 23(q) of the In-
terna Revenue Code s ncudbe n the grows ncome of the donor.
The rue s aso appcabe to the nstant case. Inasmuch as the father
made a vad gt of catte whch he rased for the producton of n-
come, the father reazed ncome by such dsposton, and he may not
escape ta aton thereon merey by reason of the fact that he derved
a beneft by means of a gft rather than by sae or e change. Ths
prncpe s ong estabshed. (See O. D. 120, C. . 1. 8 (1919).)
ccordngy, t s hed that the far market vaue of the cutte on the
date of the gft s ncudbe n the father s gross ncome for the ta -
abe year n whch the gft was made.
The recognzed gan derved by the son from the sae of the catte
s ta abe to hm. Under secton 113(a) (2) of the Interna Revenue
Code, the bass for computng gan from the sae of property acqured
by gft after December 31, 1920, s the same as t woud be n the
hands of the donor or the ast precedng owner by whom t was not
acqured by gft. Such bass, under the crcumstances of the nstant
case, s the far market vaue of the catte on the date of the gft, snce
the amount thereof s ncudbe n the gross ncome of the father for
Federa ncome ta purposes. (Cf. enry . Poor v. Commssoner,
11 . T. . 781, affrmed, 30 Fed. (2d) 1019. and Ruth . Rans v.
Commssoner, 38 . T. . 1189, and decsons theren cted.)
Feeder catte, n the hands of a farmer or vestock raser, const-
tute stock n trade or property of a knd whch s ncudbe n nven-
tory or property hed for sae to customers n the ordnary course of
trade or busness and, therefore, do not quafy as capta assets under
secton 117(a)(1) of the Interna Revenue Code. Such catte, not
beng used or draft, breedng, or dary purposes and not beng sub-
|ect to deprecaton, do not quafy as property used n the trade or
busness wthn the meanng of secton 117(|) of the Code. (Cf.
I. T. 3666, C. . 19 , 270, and I. T. 3712, C. . 19 5, 176.) Conse-
quenty, n the nstant case, the entre gan from the sae by the son
of the feeder catte represents ordnary ncome whch s ncudbe n
hs gross ncome for the ta abe year n whch the sae was made.
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9
22(b)
S CTION 22(b). GROSS INCOM : CLUSIONS
FROM GROSS INCOM
19 8-2- -129G8
I. T. 3928
INT RN L R NU COD
mounts receved from the M Company mpoyees eneft ssoc-
aton, whch quafes as an nsurance company wthn the meanng
of secton 29.37CT-7 of Reguatons 111, on account of nonndustra
dsabty consttute amounts receved through accdent or heath
nsurance as compensaton for persona n|ures or sckness, and
such amounts are e cudabe from goss ncome under secton
22(b) (5) of the Interna Revenue Code.
dvce s requested whether amounts receved by the members of
the M Company mpoyees eneft ssocaton on account of non-
ndustra dsabty are e cudbe from gross ncome under secton
22(b) (5) of the Interna Revenue Code.
The assocaton n queston s a vountary empoyees assocaton
organzed for the purpose of provdng ts members wth ncome dur-
ng perods of physca nabty to work by reason of nonndustra
accdents or ness. Its funds are. derved from dues pad by the
members, an equa amount pad bv the empoyer company, and earn-
ngs on such funds. Membershp n the assocaton s acqured by the
fng and acceptance of an appcaton for membershp n whch
nformaton concernng the heath of the appcant must be gven. t
the same tme there s e ecuted an authorzaton permttng the com-
pany to deduct from the perodc pay of the partcpatng empoyee
the prescrbed admsson fee and dues. Upon acceptance of the app-
caton, the member s furnshed a membershp card ndcatng that he
s entted to partcpate n the benefts of the assocaton. The byaws
of the assocaton recte that: enefts sha be pad to a member who
has furnshed satsfactory proof of hs dsabty accordng to a
prescrbed schedue and that a member sha have no nterest n the
property or funds of the assocaton e cept the rght to receve
benefts and a share of the assets upon dssouton.
Secton 22(b) (5) of the Interna Revenue Code provdes n part as
foows:
(b) cusons Fhom Gross Income. The foowng tems sha not be n-
cuded n gross ncome and sha be e empt from ta aton under ths chapter
Chapter 1 of the Code :

(,r ) Compensaton fob n|ures or sckness. cept n the case of
amounts attrbutabe to (and not n e cess of) deductons aowed under
secton 23( ) any pror ta abe year, amounts receved, through accdent
or heath nsurance as compensaton for persona n|ures or sck-
ness
Secton 29.3797-7 of Reguatons 111 provdes n part as foows:
Sec. 29.3797-7. Insurance Company. vountary unncorporated
assocaton of empoyees formed for the purpose of reevng sck and aged mem-
bers and the dependents of deceased members s an nsurance company, whether
the fund for such purpose s created whoy by membershp dues or party by con-
trbutons from the empoyer.
The rghts of an empoyee-member n the nstant case are nde-
feasbe rghts to receve benefts and are dstngushabe from those
820823 9 2
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29.22(b)(2)-2
10
of a benefcary under the pan consdered n I. T. 3738 (C. . 19 5, 90)
n that no empoyee under that pan has any ndvdua rght, tte,
nterest, or cam aganst hs empoyer, hs empoyer s contrbuton, or
the fund from whch payments are to be made. so, the pan n
the nstant case s dstngushabe from the sckness dsabty benefts
pan consdered n G. C. M. 23511 (C. . 19 3, 86, 88). Under that
pan, there s no fund, the payments beng made drecty by the em-
poyer to the empoyees. In short, there s no nsurance. In the
nstant case, benefts are pad from a fund specay created for the
purpose, and the assocaton s an nsurance company for Federa
ncome ta purposes under secton 29.3797-7 of Reguatons 111, supra.
In vew of the foregong, t s hed that amounts receved by the
members of the M Company mpoyees eneft ssocaton on account
of nonndustra dsabty consttute amounts receved through acc-
dent or heath nsurance as compensaton for persona n|ures or sck-
ness, and such amounts are e cudbe from gross ncome under sec-
ton 22(b)(5) of the Code.
Secton 29.22(b) (2)-2: nnutes. 19 8-17-12902
I. T. 3917
INT RN L R NU COD
The penson pad under secton 22. (1) of the Nevada Retrement
ct, approved March 27, 19 7, from contrbutons of the empoyng
agency, to a former empoyee of the State of Nevada, or a potca
subdvson thereof, retred on account of n|ury sustaned n the
performance of hs offca dutes, s n the nature of and stppe-
menta to workmen s compensaton and s e cudbe from gross
ncome under secton 22(b) (5) of the Interna Revenue Code. The
dsabty retrement annuty pad under secton 22. (1) of the
Nevada statute, whch annuty s based on the contrbutons of the
empoyee to the retrement fund, s ta abe as annuty ncome under
secton 22(b) (2) ( ) of the Code.
dvce s requested reatve to the ta abty, for Federa ncome
ta purposes, of payments made under secton 22. (1) of the Nevada
Retrement ct, approved March 27, 19 7, to former empoyees of
the State of Nevada, or a potca subdvson thereof, who were retred
on account of n|ury sustaned whe n actua performance of ther
offca dutes.
The Nevada Retrement ct estabshes a system provdng for bene-
fts at retrement, dsabty, or death for empoyees of pubc em-
poyers. The system s desgnated as the pubc empoyees retre-
ment system. Secton 22. (1) of the ct provdes n part as foows:
Sec. 22. (1) Whenever an empoyee who s a member of the system, who has b en
an empoyee who s a member of the system, who has been an empoyee for ve
years or more of an empoyer whch s partcpatng n the system, and who s
under the vountary retrement age, s found, after beng e amned by one or
more physcans seected by the board, to be mentay or physcay Incapactated
or an e tended and uncertan duraton, as determned by medca e amnaton,
by n|ury sustaned whe n actua performance of duty and not ntentonay
sef-nfcted, he sha receve a dsabty retrement annuty based on the contr-
butons credted to hs account and a penson provded by the contrbutons of
hs empoyng agences equa to the penson to whch he woud have been entted
f he had worked contnuay unt hs earest servce retrement age
The amount of the penson sha be reduced, however, by the amount of the pay-
ments to whch he s entted from the ndustra accdent commsson.
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11
29.22 (b) 2)-2
Secton 22(b) of the Interna Revenue Code, nsofar as appcabe,
provdes as foows:
(b) cusons from Gross Income. The foowng tems sha not be n-
cuded n gross ncome and sha be e empt from ta aton under ths chapter
Chapter 1 of the Code :
(
(2) nnu|t|ks, etc.
( ) In genera. mounts receved as an annuty under an
annuty or endowment contract sha be ncuded n gross ncome; e cept
that there sha be e cuded from gross ncome the e cess of the amount
receved n the ta abe year over an amount equa to : per centum of the
aggregate premums or consderaton pad for such annuty (whether or
not pad durng such year), unt the aggregate amount e cuded from
gross ncome under ths chapter or pror ncome ta aws n respect of
such annuty equas the aggregate premums or consderaton pad for
such anfuty.

(5) Compensaton for n|ures or sckness. amounts re-
ceved under workmen s compensaton acts, as compensaton for
persona n|ures or sckness
Secton 22. (1) of the Nevada Retrement ct specfcay provdes
that the penson porton of the dsabty retrement annuty and
penson sha be reduced by the payments the empoyee s entted to
receve from the ndustra accdent commsson (the body empowered
wth admnstraton of the State workmen s compensaton aw).
Therefore, the porton of the payment desgnated as a penson s n
the nature of and suppementa to workmen s compensaton.
To the e tent that the Nevada Retrement ct provdes a system
of compensaton n the nature of workmen s compensaton, t s smar
to the statute whch was consdered n W, bster R. Frye et u . v. Unted
States and erman L. Lay et u . v. Unted States (72 Fed. Supp. 05)
n whch the Dstrct Court of the Unted States for the Dstrct of
Coumba stated that the Dstrct of Coumba Code provsons for
compensaton of pocemen and fremen n the Dstrct of Coumba,
dsabed through n|ury receved or dsease contracted n ne of duty,
were n the nature of a workmen s compensaton act, and hed that
sums pad thereunder from the Dstrct of Coumba poce and fre-
men s reef funds on account of dsabty ncurred n ne of duty
were e empt from Federa ncome ta . Inasmuch as the penson pad
n the nstant case s a ke beneft authorzed by smar egsaton,
t s n the nature of workmen s compensaton, and the fact that t s
suppementa to, rather than n eu of, smar benefts under the
Nevada workmen s compensaton aw s mmatera. It foows that
the porton of the beneft payment authorzed by secton 22. (1) of
the Nevada Retrement ct whch s desgnated as a penson and s
pad from contrbutons of the empoyer comes wthn secton 22(b) (5)
of the Interna Revenue Code as an amount receved under a work-
men s compensaton act and s nonta abe. (See 1. T. 3877, C. .
19 7-2,15.)
The provsons of secton 22. (1) of the Nevada Retrement ct
reatng to the dsabty retrement annuty based on contrbutons
of the empoyee are smar to those of the Federa cv servce re-
trement system. They are aso smar to varous State and muncpa
retrement systems provdng for retrement aowances for empoyees
who retre on account of age, number of years of servce, non-servce-
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29.22(b)( )-
12
connected dsabty, etc. Such retrement aowances are sub|ect to
Federa ncome ta as annutes under the provsons of secton
22(b) (2) ( ) of the Interna evenue Code. (See I. T. 3 28, C. .
19 0-2, 60, and I. T. 3653, C. . 19 , 75.) It s accordngy hed
that the dsabty retrement annuty n queston s ta abe to the
recpent as annuty ncome under secton 22(b) (2) ( ) of the Code.
Secton 29.22(b) ( )- : Interest upon Unted 19 8-25-12975
States obgatons. Mm. 6327
Ta abe and e empt status under Federa ncome ta aws of
Interest on Unted States savngs bonds ssued (1) pror to March
1,19 1, and (2) on and after March 1,19 1.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, November 9, 191,8.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
INCR M NT IN LU S INT R ST
1. The ssuance of Unted States savngs bonds s authorzed by
the Second Lberty ond ct, as amended. For the purpose of deter-
mnng ta es and ta e empton, the aw provdes that the ncrement
n vaue represented by the dfference between the prce pad for
Unted States savngs bonds and the redempton vaue receved there-
for (whether at or before maturty) sha be consdered as nterest.
UNIT D ST T S S INGS ONDS ISSU D PRIOR TO M RC 1, 18 1
2. Under e stng aw, nterest on Unted States savngs bonds
ssued pror to March 1, 19 1, s e empt from ncome or profts ta es
now or hereafter mposed by the Unted States e cept surta es, e -
cess-profts and war-profts ta es, and s e empt from such e cepted
ta es to the e tent of nterest on a prncpa amount of bonds not n
e cess of 5,000 (ncudng other bonds owned by the ta payer whch
were ssued under the authorty of the Second Lberty ond ct,
as amended). There are no e cess-profts or war-profts ta es now
mposed by the Unted States to whch such nterest s sub|ect.
S L CTION OF ONDS
3. Ta payers may seect each year the bonds ssued pror to March
1, 19 1, comprsng the prncpa amount of 5,000, the nterest from
whch they desre to treat as ta -e empt ncome for the year under
consderaton. The bonds seected may therefore consst of Unted
States savngs bonds and Treasury bonds ssued pror to March 1,
19 1, a of whch bonds were ssued under the authorty of the Second
Lberty ond ct, as amended.
. In determnng whether the sad prncpa amount of such bonds
ssued pror to March 1, 19 1, owned by a ta payer s wthn or n
e cess of 5,000, the ssue or purchase prce ony s consdered as
prncpa of Unted States savngs bonds, not the maturty vaue.
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13
29 22(b)( )-
UNIT D ST T S S INGS ONDS IS L D ON ND FT M RC 1, 19 1
5. Under the provsons of the Pubc Debt ct of 19 1, nterest on
Unted States savngs bonds ssued on and after March 1, 10 1, s
not e empt from ncome or profts ta es now or hereafter mposed by
the Unted States. The e empton descrbed n paragraph -2 of ths
mmeograph does not appy to the nterest (ncrement n vaue) on
Unted States savngs bonds ssued on and after March 1, 10 1.
M T OD OF R PORTING INT R ST
6. (a) Ta payers who reguary empoy the cash recepts and ds-
bursements method of accountng shoud return the ta abe nterest
(ncrement n vaue) on Unted States savngs bonds as ncome for
Federa ncome ta purposes for the ta abe year n whch payment
of the redempton vaue of the bonds s receved (whether before or
at maturty) ; provded, however, that n the case of the death of a
ta payer durng a ta abe year begnnng pror to anuary 1, 19 3,
the nterest (ncrement n vaue) earned up to the date of hs death
shoud be returned as ncome for the ta abe perod n whch fus
the date of hs death. In the event of a ta payer s death durng a
ta abe year begnnng on or after anuary 1, 19 3, the nterest (n-
crement n vaue) shoud be returned as ncome for the ta abe year
n whch the bonds are cashed by the estate of the decedent or by the
person entted to such nterest by bequest or nhertance or by reason
of the death of the decedent.
(b) For a ta abe year begnnng after December 31, 19 0, a ta -
payer who makes hs ncome ta returns on the cash recepts and ds-
bursements bass may eect n hs return to treat the nterest (n-
crement n vaue) on non-nterest-bearng obgatons ssued at a
dscount as ncome receved n such ta abe year. ta payer makng
such an eecton s requred to report n hs return for the year of the
eecton the nterest (ncrement n vaue actuay fang wthn the
year) and the tota of the ncreases n redempton vaue occurrng
between the date of hs acquston of the bonds and the begnnng of
such year. If any such eecton s made wth respect to any such ob-
gaton, t sha appy aso to a such obgatons owned by the ta payer
at the begnnng of the frst ta abe year to whch t appes and to
a such obgatons thereafter acqured by hm and sha be bndng
for a subsequent ta abe years, uness upon appcaton by the ta -
payer the Commssoner permts hm, sub|ect to such condtons as the
Commssoner deems necessary, to change to a dfferent method.
ampe: ohn Doe makes hs ncome ta returns on the caendar
year bass and computes hs net ncome on the cash recepts and ds-
bursements bass. e purchased the foowng bonds, non-nterest-
bearng obgatons, ssued at a dscount:
I. Unted States savngs bonds. Seres D, havng a maturty vaue
of 10,000, bearng ssue date of une 1. 19 0, for 7,500.
II. Unted States savngs bonds, Seres , havng a maturty vaue
of 5,000, bearng ssue date of une 1,19 G, for 3,750.
III. Unted States savngs bonds, Seres F, havng a maturty vaue
of 10,000, bearng ssue date of December 1, 19 6, for 7, 00.
In hs return for 19 7, ohn Doe eects to treat the ncreases n the
redempton prces as ncome. The amount of nterest (ncrement n
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29.22(b) (13)-1
1
vaue) he woud report for 19 7 (and for 19 8 and 19 9 f there s no
change n hs hodngs) s as foows:
19
7
19 8
19 9
onds owned by ta payer a non-n-
terest-bearng obgatons ssued at a
dscount
Sub|e
It to
Sub|ect to-
Sub|ect to
Norma
ta
Surta
Norma
ta
Surta
Norma
ta
Surta
10,000 Unted States savngs bonds (Is-
sue date une 1,19 0), for 7,500 1
None
50.00
500.00
50.00
None
50.00
13.1.33
50.00
None
100.00
133.3:5
100.O1
5,000 Unted States savngs bonds, Seres
(ssue date une 1, 19 6), for 3,750
10,000 Unted States savngs bonds, Se-
res F (ssue date December 1,19 6), for
7, 00
20.00
20.00
70.00
70.00
110.00
110.01
70.00
570.00
120.00
253.33
210.00
3 3.33
Interest (Increment n vaue) on prncpa amount of 5,000 Is totay e empt for reason stated to para-
graph 2; therefore, Interest (Increase n vaue as shown by redempton tabe appearng on face of bond)
sub|ect to surta ony s wth respect to prncpa amount (purchase prce) n e cess of 5,000. Purchase
prce of 7,5011 ess 5,000 oquns 2,500 n purchase prce of bonds havng a maturty vaue of 3,333.33. It
w be noted that on the bass of the redempton tabe appearng n the bond there woud be an ncrement
n vaue of M0 as of December 31, 19 7.
s The e empton descrbod n paragraph 2 of ths mmeograph does not appy to the nterest (ncrement n
vaue) on Unted States savngs bonds ssued on and after March 1, 19 1.
7. Ta payers who reguary empoy the accrua method of ac-
countng shoud return the nterest (ncrement n vaue) on Unted
States savngs bonds as ncome (ta abe or e empt) for each ta abe
year when and to the e tent that t s earned durng the year accordng
to the terms of the bonds and n the amount ndcated n the tabe of
redempton vaues shown thereon.
8. Ths mmeograph supersedes Mmeograph 5299 (C. . 19 2-1,
37). Inqures regardng ths mmeograph shoud refer to the num-
ber thereof and the symbos IT: IM.
Geo. . Scoeneman,
C ommssoner.
Secton 29.22 (b) (13)-1: Compensaton of members 19 8-16-12887
of mtary and nava forces. T. D. 56 5
TITL 20 INT RN L R NU . C PT R I, SU C PT R . P RT 10 ND
P RT 20. SU C PT R D, P RT 05
Reguatons 103 amended to conform to Pubc Laws 356, 307, and
38 ( ghteth Congress) ; Reguatons 111 amended to conform
to Pubc Laws 310, 350, 367, and 38 ( ghteth Congress), and
Reguatons 116 amended to conform to Pubc Law 38 ( ghteth
Congress).
Treasury Department,
Offce of Commssoner of I nternae Reventte,
W ashng ton 2o, D. C.
To Coectors of Interna Revenue and Others Concerned:
On May 7, 19 8, notce of proposed rue makng regardng Pubc
Laws 310, 356, 367, and 38 ( ghteth Congress) was pubshed n
the Federa Regster (13 F. R. 2 ). fter consderaton of a smh
reevant matter as was presented by nterested persons regardng the
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15
29 22(b)(13)-
proposa, the foowng amendments are hereby adopted. Such
amendments are necessary n order to conform Reguatons 103 26
CFR, Part 19 , reatng to the ncome ta under the Interna Revenue
Code for ta abe years begnnng before anuary 1, 19 2, to Pubc
Law 356 ( ghteth Congress), approved ugust , 19 7, to Pubc
Law 367 ( ghteth Congress), approved ugust 5, 19 7, and to
Pubc Law 38 ( ghteth Congress), approved ugust 8, 19 7; to
conform Reguatons 111 26 CFR, Part 29 , reatng to the ncome ta
under the Interna Revenue Code for ta abe years begnnng after
December 31,19 1, to Pubc Law 310 ( ghteth Congress), approved
ugust 1, 19 7, to Pubc Law 356 ( ghteth Congress), to Pubc.
Law 367 ( ghteth Congress), and to Pubc Law 38 ( ghteth
Congress); and to conform Reguatons 116 26 CFR, Part 05 ,
reatng to coecton of ncome ta at source on wages wth respect to
wages pad on or after anuary 1, 19 5, to Pubc Law 38 ( ghteth
Congress), such reguatons are amended as foows:
R GUL TIONS 103 26 CFR, P RT 19
Paragraph 1. There s nserted mmedatey precedng secton
19.22(b) (13)-1 26 CFR 19.22(b) (13)-1 the foowng:
S C. 7. DDITION L LLOW NC FOR MILIT RY ND N L
P RSONN L. (PU LIC L W 38 , IG TI T CONGR SS,
PPRO D UGUST 8, 19 .)
Secton 22(b) (13) of the Intemu Revenue Code s hereby amended to
read as foows:
(13) ddtona aowance for mtary and nava personne.
( ) In the case of compensaton receved pror to anuary 1,
19 9, durng any ta abe year, for actve servce as a comms-
soned offcer (or a commssoned warrant otfcer) n the mtary
or nava forces of the Unted States durng the present war, or,
n the ease of a ctzen or resdent of the Unted States, as a
member of the mtary or nava forces of any of the other Unted
Natons durng such war, so much of such compensaton as does
not e ceed 1,500.
( ) Compensaton receved pror to anuary 1, 19 9, durng
any ta abe year, for actve servce as a member beow the grade
of commssoned offcer (or commssoned warrant offcer) n
the mtary or nava forces of the Unted States durng the
present war.
Par. 2. Secton 19.22(b) (13)-1, as amended by Treasurv Decson
5508 C. . 19 6-1, 27 , approved pr 15, 19 6 26 CFR
19.22(b) (13)-1 , s further amended by revsng the second sentence
thereof to read as foows:
The e cuson from gross ncome under secton 22(b) (13) and ths secton s
appcabe ony to compensaton receved pror to anuary 1, 19 9.
Par. 3. There s nserted mmedatey precedng secton 19.22(d)-
26 CFR 19.22(d)- the foowng:
S C. 8. IN OLUNT RY LI UID TION ND R PL C M NT OF
IN NTORY. (PU LIC L W 38 , IG TI T CONGR SS,
PPRO D UGUST 8,19 7.)
Secton 22(d) (6) ( ) of the Interna Revenue Code s hereby amended
by strkng out pror to the termnaton of the present war as pro-
camed by the Presdent and Insertng n eu thereof pror to anuary
1, 19 8 , and by strkng out not more than 3 year safter the term-
naton of the present war as procamed by the Presdent and nsertng
n eu thereof pror to anuary 1,1951 .
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29.22(b)(13)-1
16
Par. . Secton 19.22(d)-7, as amended by Treasury Decson 536
C. . 19 , 86 , approved pr 29, 19 26 CFR 19.22(d)-7 , s
further amended by revsng the second paragraph thereof to read as
foows:
The statutory provsons affordng recognton to the nvountary character of
nventory decreases whch become apparent n war years and authorzng for
ta purposes a repacement of the tems of merchandse so qudated are mted
n ther appcaton to qudatons occurrng n ta abe years begnnng after
December 31, 19 0, and pror to anuary 1, 19 8, and to Inventory repacements
effected n ta abe years endng pror to anuary 1,1951.
Pah. 5. Secton 19.322-7, as amended by Treasury Decson 5503
C. . 19 6-1, 156 , approved March 20, 19 6 26 CFR 19.322-7 ,
s further amended by revsng the ast sentence of (a) to read as
foows:
The provsons of ths subsecton are sub|ect to the e ceptons provded n the
succeedng subsectons of ths secton and In Pubc Law 356 ( ghteth Con-
gress), approved ugust , 19 7, e tendng to December 31, 19 8, the tme for
fng a cam for credt or refund based upon an overpayment of the ta as a
resut of the faure to take a war oss deducton n respect of property consdered
destroyed or sezed under secton 127(a) of the Code for a ta abe year begn-
nng n 19 1 or 19 2.
Par. 6. There s nserted mmedatey precedng secton 19. 21-1,
added by Treasury Decson 5297 C. . 19 3, 2 3 , approved Sep-
tember 20,19 3 26 CFR 19. 21-1 , the foowng:
PU LIC L W 367 ( IG TI T CONGR SS)
n ct Reatng to the ncome-ta abty of members of the armed
forces dyng n the servce.
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 21 of the Interna
Revenue Code (reatng to abatement of ta for members of armed forces
upon death) Is amended to read as foows:
S C. 21. T M NT OF T FOR M M RS OF RM D
FORC S UPON D T .
In the case of any ndvdua who des on or after December 7, 19 1,
whe n actve servce as a member of the mtary or nava forces of
the Unted States or of any of the other Unted Natons and pror to
anuary 1, 19 8
(a) the ta mposed by ths chapter sha not appy wth re-
pect to the ta abe year n whch fas the date of hs death, or
wth respect to any pror ta abe year (endng on or after Decem-
ber 7, 19 1) durng any part of whch he was a member of such
forces; and
(b) the ta under ths chapter and under the correspondng
tte of each pror revenue aw for ta abe years precedng those
specfed n cause (a) whch Is unpad at the date of hs death
(ncudng Interest, addtons to the ta , and addtona amounts)
sha not be assessed, and f assessed the assessment sha be abated,
and f coected sha be credted or refunded as an overpayment.
Sec. 2. If at any tme pror to anuary 1, 19 8, the aowance of a
credt or refund of an overpayment of the ta for any ta abe year
specfed n secton 21(a) of the Interna Revenue Code (as amended by
ths ct) s prevented (e cept for the provsons of secton 3S01) by the
operaton of any aw or rue of aw, a credt or refund of the overpayment
of such ta to the e tent that the overpayment s attrbutabe to the
change of aw made by ths ct may, nevertheess, be aowed or made f
a cam therefor s fed before anuary 1, 19 9.
pproved ugust 5, 19 7.
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17
29.22(b)(13)-
S C. 9. T M NT OF T FOR M M RS OF RM D FORC S
UPON D T . (PU LIC L W 38 , IG TI T CONGR SS,
PPRO D UGUST 8, 19 7.)
Secton 21 of the Interna Revenue Code s hereby amended by
strkng out the termnaton of the present war as procamed by the
Presdent and nsertng n eu thereof anuary 1, 19 8.
Par. 7. Secton 19. 21-1, as added by Treasury Decson 5297
26 CFR 19. 21-1 , s amended as foows:
( ) y revsng the frst sentence thereof to read as foows:
If an ndvdua des on or after December 7, 19 1, and before anuary 1, 19 8,
whe n actve servce as a member of the mtary or nava forces of the Unted
States or of any of the other Unted Natons, then
(a) the ta abty n the case of such ndvdua under chapter 1 for
the ta abe year n whch occurs the date of death s canceed am f the
ta (ncudng nterest, addtons to the ta , and addtona amounts) Is
assessed, the assessment sha be abated and f the amount of suc ta Is
coected (regardess of the date of coecton) the amount so coected sha
be credted or refunded as an overpayment;
(6) the ta abty n the case of such Indvdua under chapter 1 for
any ta abe year (endng on or after December 7, 19 1) pror to the year
n whch occurs the date of death durng any part of whch he was a
member of such forces s canceed and f the ta (ncudng Interest, add-
tons to the ta , and addtona amounts) s assessed, the assessment sha
be abated and If the amount of such ta s coected, the amount so coected
sha be credted or refunded as an overpayment, and f at any tme pror
to anuary 1, 19 8, the aowance of a credt or refund of an overpayment
of such amount Is barred (e cept for the provsons of secton 3801) by the
operaton of any aw or rue of aw, a credt or refund of the overpayment
of such amount may be aowed or made provded cam therefor s fed
before anuary 1, 19 9; and
(c) that amount of ta for ta abe years precedng those specfed In
(a) and (6) above under chapter 1, or correspondng provsons of pror
revenue aws, whch remans unpad as at the date of death sha not be
assessed, and If any such unpad ta (Incudng nterest, addtons to the
ta , and addtona amounts) has been assessed, such assessment sha be
abated and If the amount of any such unpad ta s coected subsequent to
the date of death, the amount so coected sha be credted or refunded as
an overpayment.
( ) y revsng the fna cause of the second sentence thereof to
read as foows:
bnt wth respect to ta abe years durng whch such ndvdua was at no tme
a member of the mtary or nava forces of the Unted States or any of the
other Unted Natons and wth respect to ta abe years endng before December 7,
19 1, the amount so abated, credted, or refunded sha not e ceed the amounts
unpad at the date of death. s
R GUL TIONS 111 26 CFR, P RT 29
Par. 8. There s nserted mmedatey precedng secton 29.22(b)
(13)-1 26 CFR 29.22(b) (13)-1 the foowng:
S C. 7. DDITION L LLOW NC FOR MILIT RY ND N L
P RSONN L. (PU LIC L W 38 , IG TI T CONGR SS,
PPRO D UGUST 8, 19 7.)
Secton 22(b) (13) of the Interna Revenue Code s hereby amended to
read as foows:
(13) ddtona aowance for mtary and nava personne.
( ) In the case of compensaton receved pror to anu-
ary 1, 19 9, durng any ta abe year, for actve servce as a
commssoned offcer (or a commssoned warrant offcer) In the
mtary or nava forces of the Unted States (urng the present
war, or n the case of a ctzen or resdent of the Unted States,
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29.22 (b)(13)-
18
as a member of the mtary or nava forces of any of the other
Unted Natons durng such war, so much of such compensaton
as does not e ceed 1,500.
( ) Compensaton receved pror to anuary 1,19 9, durng
any ta abe year, for actve servce as a member beow the grade
of commssoned offcer (or commssoned warrant offcer) n the
mtary or nava forces of the Unted States durng the present
war.
Par. 9. Secton 29.22(b) (13)-1, as amended by Treasury Decson
5508 26 CFR 29.22(b) (13)-1 , s further amended by revsng the
frst sentence of the second paragraph thereof to read as foows:
The e cusons under secton 22(b) (13) and ths secton are appcabe ony to
compensaton receved pror to anuary 1, 19 9.
Par. 10. There s nserted mmedatey precedng secton 29.22(d)-
26 CFR 29.22(d)- the foowng:
S C. 8. IN OLUNT RY LI UID TION ND R PL C M NT OF
IN NTORY. (PU LIC L W 3S , IG TI T CONGR SS, P-
PRO D UGUST 8, 19 7.)
Secton 22(d) (6) ( ) of the Interna Revenue Code s hereby amended
by strkng out pror to the termnaton of the present war as procamed
by the Presdent and nsertng n eu thereof pror to anuary 1,19 8 ,
and by strkng out not more than 3 years after the termnaton of the
present war as procamed by the Presdent and nsertng n eu thereof
pror to anuary 1, 1951 .
Par. 11. Secton 29.22(d)-7, as amended by Treasury Decson 536
20 CFR 29.22(d)-7 , s further amended by revsng the second para-
graph thereof to read as foows:
The statutory provsons affordng recognton to the nvountary character of
nventory decreases whch become apparent n war years and authorzng for ta
purposes a repacement of the tems of merchandse so qudated are mted n
ther appcaton to qudatons occurrng n ta abe years begnnng pror to
anuary 1, 19 8, and to nventory repacements effected n ta abe years endng
pror to anuary 1, 1951.
Par. 12. Secton 29.23(m)-3, as amended by Treasury Decson 5 13
C. . 19 , 12 , approved October 31, 19 2(5 CFR 29.23(m)-3 ,
s further amended as foows:
( ) y substtutng for the headng and the frst sentence of the frst
paragraph the foowng:
Sec. 29.23(m)-3. Computaton of Depeton or Mnes (Other Than Meta,
Coa, au te, Fuorspar, Fake Graphte, ermcute, ery, Fedspar. Mca,
Tac (Incudng Pykophtte), L.pdote, Spodumene, amte. a., S. goer,
and Chna Cay, Phosphate Rock. Rock sphat Mnes, or Tbona, kntomtb,
Gsonte, Thenardte, Potash, or Suphur Mnes or Deposts) on ass of
Dscovery aue. The bass on whch depeton s to be computed n the case of
mnes, e cept those specfed n the ne t succeedng sentence, dscovered by the
ta payer after February 28, 1913, s the far market vaue of the property at the
date of dscovery or wthn 30 days thereafter, f such mnes were not acqured
as the resut of purchase of a proven tract or ease, and f the far market vaue
of the property s materay dsproportonate to cost. Such bass may not be
used n the case of the foowng: Meta, coa, fuorspar, ba and sagger cay, rock
asphat, or suphur mnes wth respect to ta abe years begnnng after December
31, 19 1 : fake graphte mnes wth respect to ta abe years begnnng after
December 31, 10 2; vermcute, bery, fedspar, mca, tac (not ncudng pyro-
phyte), epdote, spodumene or barte mnes, or potash mnes or deposts n-
cudng potash sats n souton wth respect to ta abe years begnnng after
December 31, 19 3; or bau te, pyrophyte, chna cay, phosphate rock, trona,
bentonte, gsonto, thenardte (from brnes or m tures of brne) mnes or de-
posts for ta abe years begnnng after December 81. 19 6.
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19
29.22(b)(13)-
( ) y strkng out the fourth paragraph thereof.
Par. 13. Secton 29.23(m)-5, as amended by Treasury Decson 5 13
26 CFR 29.23(m)-5 , s further amended as foows:
( ) y revsng the headng and the frst sentence of the frst para-
graph to read as foows:
Sec. 29.23(m)-5. Computaton of Depeton ased on Percentage of Income
n Case of Coa Mnes, Meta Mnes, au te Mnks. Fuorspar Mnes, Fake
Graphte Mnes. ekmcute Mnks. ery Mnks. Fedspar Mnes, Mca
Mnes, Tac (Incudng Pyrophyte) Mnes. Lepdote Mnes, Spodumene
Mnes, arte Mnes, a, Sagger, and Chna Cay Mnes, Phosphate Rock
Mnes, Rock sphat Mnes, Trona, entonte, Gsonte, Thenardte, and
Potash and Suphur Mnes or Deposts. Under secton 11 (b) ( ) ( ) a ta -
payer may deduct for depeton an amount equa to 5 percent of the gross Income
from the property durng any ta abe year n the case of coa mnes: an amount
equa to 15 percent of the gross ncome from the property durng any ta abe
year n the case of meta, fuorspar, ba and sagger cay, or rock asphat mnes,
and durng any ta abe year begnnng after December 31, 19 2, n the case of
fake graphte mnes, and durng any ta abe year begnnng after December 31,
19 3. n the case of vermcute, bery, fedspar, mca, tac (not ncudng pyro-
phyte), epdote. spodumene, or barte mnes, or potash mnes or deposts
ncudng potash sats n souton, and durng any ta abe year begnnng after
December 31, 19 6, n the case of bau te, pyrophyte, chna cay, or phosphate
rock mnes, or trona, bentonte, gsonte. thenardte (from brnes or m tures
of brne) mnes or deposts; and an amount equa to 23 percent of the gross
ncome from the property durng any ta abe year n the case of suphur mnes
or deposts; but such deducton sha not n any case e ceed 50 percent of the
net ncome of the ta payer (computed wthout aowance for depeton) from
the property.
( ) y strkng out the ast paragraph thereof.
Pak. 1 . Secton 29.23(m)-10(d), as amended by Treasury Decson
5 13 26 CFR 29.23 (m)-10(d) , s further amended as foows:
( ) y revsng the second sentence thereof to read as foows:
depeton deducton n respect of any bonus or advanced royaty from the
property n the amount of 15 percent of such bonus or royaty may be taken
by the owner of an economc nterest n fuorspar, ha and sagger cay, or rock
asphat mnes wth respect to any ta abe year, may be taken by the owner of
an economc nterest n a fake graphte mne wth respect to ta abe years be-
gnnng after December 31, 19 2, may be taken by the owner of an economc
nterest n vermcute, bery, fedspar, mca, tac (not ncudng pyrophyte),
epdote, spodumene, and barte mnes, and potash mnes or deposts ncudng
potash sats to souton wth respect to ta abe years begnnng after December
31, 19 3, and may be taken by the owner of an economc nterest n bau te,
pyrophyte, chna cay, or phosphate rock mnes, or trona, bentonte, gsonte,..
or thenardte (from brnes or m tures of brne) mnes or deposts wth respect
to ta abe years begnnng after December 31, 19 0; but such depeton deducton
sha not n any case e ceed fO percent of the net ncome of the ta payer (com-
puted wthout aowance for depeton) from the property.
( ) y strkng out the ast two sentences thereof.
Par. 15. Secton 29.23(m)-13(a), as amended by Treasury Decson
5 13 26 CFR 29.23(m)-13(a) , s further amended by changng that
porton of the frst sentence mmedatey precedng (1) to read as
foows:
(a) There sha be attached to the return of every ta payer who cams de-
peton of o and gas wes under secton 11 (b) (3) and secton 29.23(m)- , or
depeton of coa mnes, meta mnes, bau te mnes, fuorspar mnes, fake graphte
mnes, vermcute mnes, bery mnes, fedspar mnes, mca mnes, tac (ncudng
pyrophyte) mnes, epdote mnes, spodumene mnes, barte mnes, ba, sagger,
and chna cay mnes, phosphate rock mnes, rock asphat mnes, and trona,
bentonte, gsonte, thenardte, and suphur and potash mnes or deposts n-
cudng potash sats n souton under secton 11 (b)( )( ) and secton
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29.22(b) (13)-1)
20
29.23 (m)-5, a statement contanng the foowng nformaton wth respect to
every property for whch percentage depeton s aowabe:
Par. 16. Secton 29.23 (m)-1 , as amended by Treasury Decson
5 13 26 CFR 29.23(m)-1 , s further amended as foows:
( ) y revsng the headng and the frst two sentences thereof to
read as foows:
Sec. 29.23(m)-1 . Dscovert or Mnes Other Than Coa, Meta, au te,
Fuorspar, Fake Graphte, ermcute, ery, Fedspar, Mca, Tac (Incud-
ng Ptrophyte),Lep doute, Spodumene, arte, a, Sagger, and Chna
Cay, Rock sphat, Phosphate Rock, Trona, entonte, Gsontte, Thenard-
te, Potash, and Suphur Mnes or Deposts. (a) To entte a ta payer to a
vauaton of hs propsrty, for the purpose of depeton aowances, by reason of
the dscovery of a mne (other than the mnes descrbed n ths subsecton) or
mneras (other than the mneras descrbed n ths subsecton), t must appear
that the mne or mneras were not acqured as the resut of the purchase of a
proven tract or ease; aso the dscovery must be made by the ta payer after
February 28,1913, and must resut n the far market vaue of the property becom-
ng dsproportonate to cost. For the purpose of ths secton, coa, meta, fuor-
spar, ba and sagger cay, rock asphat, and suphur mnes sha not be entted to
vauaton upon the bass of dscovery wth respect to any ta abe year, fake
graphte mnes sha not be entted to such vauaton for ta abe years begnnng
after December 31, 19 2, vermcute, bery, fedspar, mca, tac (not ncudng
pyrophyte), epdote, spodumene, and barte mnes, and potash mnes or de-
posts ncudng potash sats n souton sha not be entted to such vauaton
for ta abe years begnnng after December 31, 19 3, and bau te, pyrophyte,
chna cay, phosphate rock mnes, and trona, bentonte, gsonte, and thenardte
(from brnes or m tures of brne) mnes or deposts sha not be entted to such
vauaton for ta abe years begnnng after December 31,19 6; kewse the ds-
covery n any ta abe year of o or gas, coa, suphur, meta, metac ores,
fuorspar, ba and sagger cay, or rock asphat sha not entte the property to
vauaton based on dscovery wth respect to any ta abe year, of fake graphte
sha not entte the property to such vauaton wth respect to any ta abe year
begnnng after December 31,19 2, of vermcute, bery, fedspar, mca, tac (not
ncudng pyrophyte), epdote, spodumene, barte, and potash sha not entte
the property to such vauaton wth respect to any ta abe year begnnng after
December 31,19 3, and of bau te, pyrophyte, chna cay, phosphate rock, trona,
bentonte, gsonte, thenardte (from brnes or m tures of brne) sna not en-
tte the property to such vauaton wth respect to any ta abe year begnnng
after December 31,19 6.
( ) y strkng out the thrd and fourth sentences thereof.
Par. 17. There s nserted mmedatey precedng secton 29.23 (q)-
26 CFR 29.23(q)- the foowng:
S C. 16. C RIT L CONTRI UTIONS Y CORPOR TIONS.
(PU LIC L W 38 , IG TI T CONGR SS, PPRO D U-
GUST 8, 19 7.)
Secton 23(q) (2) of the Interna Revenue Code (reatng to chartabe
and other contrbutons by corporatons) s hereby amended by strkng
out the date of the cessaton of hosttes n the present war, as pro-
camed by the Presdent and nsertng n eu thereof December 31,
19 8 .
Par. 18. Secton 29.23(q)-, as amended by Treasury Decson
5371 C. . 19 , 80 , approved May 11,19 26 CFR 29.23(q)-, s
further amended by revsng the thrd sentence thereof to read as
foows:
Where payment s made n a ta abe year begnnng before anuary 1, 19 9, the
chartabe deducton prescrbed s aowabe to corporatons even though the gfts
or contrbutons are used outsde of the Unted States or Its possessons.
Par. 19. There s nserted mmedatey precedng secton 29.11 -1
26 CFR 29.11 -1 the foowng:
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21
29.22(b)(13)-1
S C. 15. P RC NT G D PL TION. (PU LIC L W 38 , IG T-
I T CONGR SS, PPRO D UGUST 8, 19 7.)
(a) Secton 12 (e) of the Revenue ct of 19 3 (reatng to termna-
ton of percentage depeton for certan mneras) s repeaed as of the
date of ts enactment.
(b) So much of secton 11 (b)( ) of the Interna Revenue Code
(reatng to percentage depeton for certan mneras) as precedes the
second sentence thereof, s amended to read as foows:
( ) Percentage depeton for coa, bau te, fuorspar, fake
graphte, vermcute, bery, fedspar, mca, tac (ncudng pyro-
phyte), epdote, spodumene, barte, ba, sagger, and chna cay,
rock asphat, phosphate rock, trona, bentonte, gsonte, thenardte,
and meta mnes, potash, and sufur.
( ) In Genera. The aowance for depeton under secton
23(m) sha be, n the case of coa mnes, 5 per centum, n the
ease of meta mnes, bau te, fuorspar, fake graphte, vermc-
ute, bery, fedspar, mca, tac (ncudng pyrophyte),
epdote, spodumene, barte, ba, sagger, and chna cay,
phosphate rock, rock asphat mnes, trona, bentonte, gsonte,
thenardte (from brnes or m tures of brne), and potash mnes
or deposts, 15 per centum, and n the case of sufur mnes or
deposts, 23 per centum, of the gross ncome from the property
durng the ta abe year, e cudng from such gross ncome an
amount equa to any rents or royates pad or ncurred by the
ta payer n respect of the property.
(c) The frst sentence of secton 11 (b) (2) of the Interna Revenue
Code (reatng to dscovery vaue) s amended to read as foows: In
the case of mnes (other than meta, bau te, coa, fuorspar, fake
graphte, vermcute, bery, fedspar, mca, tac (ncudng pyrophyte),
epdote, spodumene, barte, potash, ba, sagger, and chna cay,
phosphate rock, rock asphat, trona, bentonte. gsonte, thenardte,
or sufur mnes) dscovered by the ta payer after February 2S, 1913,
the bass for depeton sha be the far market vaue of the property at
the date of dscovery or wthn thrty days thereafter, f such mnes
were not acqured as the resut of purchase of a proven tract or ease,
and f the far market vaue of the property s materay dsproporton-
ate to the cost.
(d) The amendments made by subsectons (b) and (c) of ths secton
sha be appcabe wth respect to ta abe years begnnng after Decem-
ber 31, 19 (1.
Par. 20. Secton 29.11 -1, as amended bv Treasury Decson 5 13
26 CFR 29.11 -1 , s further amended to read as foows:
Sec. 29.11 -1. ass fob owance of Deprecaton and Depeton. The
bass upon whch e hauston, wear and tear, obsoescence, and depeton w be
aowed n respect of any property s the same as Is provded n secton 113(a),
ad|usted as provded n secton 113(b), for the purpose of determnng the gan
from the sae or other dsposton of such property, e cept that as provded n
secton 29.23(m)-21 n the case of the cuttng of tmber whch s consdered
to be a sae or e change of such tmber under secton 117(k) (1), the bass sha
be the far market vaue of such tmber as of the frst day of the ta abe year
In whch t s cut, and e cept as provded n secton 29.23(m)-3, reatng to
depeton based on dscovery vaue, n secton 29.23(m)- , reatng to percentage
depeton n the case of o and gas wes, and n secton 29.23(m)-5, reatng to
percentage depeton n the case of coa mnes, meta mnes, fuorspar mnes,
ba and sagger cay mnes, or rock asphat mnes, and suphur mnes or deposts
wth respect to ta abe years begnnng after December 31, 19 1, n the case of
fake graphte mnes wth respect to ta abe years begnnng after December 31,
19 2, n the case of vermcute, bery, fedspar, mca, tac (not ncudng pyro-
phyte), epdote, spodumene, and barte mnes, and potash mnes or deposts
(ncudng potash sats n souton) wth respect to ta abe years begnnng
after December 31, 19 3, and n the case of bau te, pyrophyte, chna cay
and phosphate rock mnes, and trona, bentonte, gsonte. and thenardte (from
brnes and m tures of brne) mnes or deposts for ta abe years begnnng after
December 31, 19 6.
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29.22(b)(13)-|
22
Par. 21. There s nserted mmedatey precedng secton 29.251-1
26 CFR 29.251-1 the foowng:
PU LIC L W 810 ( IG TI T CONGR SS)
n ct To amend secton 251 of the Interna Revenue Code
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That secton 251 of
the Interna Revenue Code (reatng to ncome from sources wthn
possessons of the Unted States) s hereby amended by addng at the end
thereof a new subsecton to read as foows:
() Prsoners of War and Internees. In the case of a ctzen of
the Unted States taken as a prsoner of war whe servng wthn a pos-
sesson of the Unted States as a member of the mtary or nava forces
of the Unted States, and In the case of a ctzen nterned by the enemy
whe servng as an empoyee wthn a possesson of the Unted States
(1) f such ctzen was confned n any pace not wthn a pos-
sesson of the Unted States, such pace of confnement sha, for the
purposes of ths secton, be consdered as wthn a possesson of the
Unted States; and
(2) any compensaton receved wthn the Unted States by such
ctzen attrbutabe to the perod of tme durng whch such ctzen
was a prsoner of war or nterned by the enemy sha, for the pur-
poses of subsecton (b), be consdered as compensaton receved out-
sde the Unted States.
Sec. 2. The amendment made by ths ct sha be appcabe to ta abe
years begnnng after December 31, 19 1.
pproved ugust 1, 19 7.
Par. 22. Secton 29.251-1 26 CFR 29.251-1 s amended by nsert-
ng mmedatey precedng the e ampe the foowng:
ctzen of the Unted States who was taken prsoner of war whe servns
wthn a possesson of the Unted States as a member of the mtary or nava
forces of the Unted States, or who was nterned by the enemy whe servng as
an empoyee (whether the empoyment s governmenta or prvate) wthn a pos-
sesson of the Unted States s not to be deprved of the benefts of secton 251,
f otherwse quafed for such benefts, even though hs subsequent pace or paces
of confnement by the enemy were not wthn a possesson of the Unted States.
Par. 23. There s nserted mmedatey precedng secton 29.322-1
26 CFR 29.322-1 the foowng:
PU LIC L W 356 ( IG TI T CONGR SS)
n ct To provde an e tenson of tme for camng credt or refund
wth respect to war osses.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That f a cam for
credt or refund under the Interna-revenue aws reates to an overpay-
ment on account of the deductbty by the ta payer of a oss n respect
of property consdered destroyed or sezed under secton 127(a) of the
Interna Revenue Code, reatng to war osses, for a ta abe year begn-
nng n 19 1 or 19 2, the three-year perod of mtaton prescrbed n
secton 322(b) (1) of the Interna Revenue Code sha n no event e pre
pror to December 31, 19 8. In the case of such a cam fed on or
before December 31,19 8, the amount of the credt or refund may e ceed
the porton of the ta pad wthn the perod provded n secton
322(b) (2) or (3) of the Interna Revenue Code, whchever s appcabe,
to the e tent of the amount of the overpayment attrbutabe to the
deductbty of the oss descrbed n ths secton.
pproved ugust , 19 7.
Par. 2 . Secton 29.322-7, as amended by Treasury Decson 55 6
C. . 19 6-2, 32 , approved December 9, 19 6 26 CFR 29.322-7 ,
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23
29.22(b)(13)-
s further amended by revsng the ust sentence of (a) of such secton
to read as foows:
The provsons of ths subsecton are sub|ect to the e ceptons provded n sub-
sectons (6), (c), d), and (e) of ths secton and n Pubc Law 356 ( ghteth
Congress), approved ugust , 19 7, e tendng to December 31, 19 8, the tme
for fng a cam for credt or refund based upon an overpayment of the ta
as a resut of the faure to take a war oss deducton n respect of property
consdered destroyed or sezed under secton 127(a) of the Code for a ta abe
year begnnng n 19 1 or 19 2.
Pab. 25. There s nserted mmedatey precedng secton 29. 21-1,
added by Treasury Decson 5305 C. . 19 3, 260 ; approved Novem-
ber 12, 19 3 26 CFR 29. 21-1 , the foowng:
PU LIC L W 307 ( IG TI T CONGR SS)
n ct Reatng to the ncome-ta abty of members of the armed
forces dyng In the servce.
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That secton 21 of the Interna
Revenue Code (reatng to abatement of ta for members of armed forces
upon death) s amended to read as foows:
S C. 21. T M NT OF T FOR M M RS OF RM D
FORC S UPON D T .
In the case of any ndvdua who des on or after December 7, 19 1,
whe n actve servce as a member of the mtary or nava forces of
the Uuted States or of any of the other Unted Natons and pror to
anuary 1,19 8
(a) the ta mposed by ths chapter sha not appy wth respect
to .the ta abe year n whch fas the date of hs death, or wth
respect to any pror ta abe year (endng on or after December 7,
19 1 | durng any part of whch he was a member of such forces;
and
(b) the ta under ths chapter and under the correspondng tte
of each pror revenue aw for ta abe years precedng those specfed
n cause (a) whch s unpad at the date of hs death (Incudng
nterest, addtons to the ta , and addtona amounts) sha not
be assessed, and f assessed the assessment sha be abated, and f
coected sha be credted or refunded as an overpayment.
Sec. 2. If at any tme pror to anuary 1, 19 8, the aowance of a
credt or refund of an overpayment of the ta for any ta abe year
specfed n secton 21(a) of the Interna Revenue Code (as amended
by ths ct) s prevented (e cept for the provsons of secton 3801)
by the operaton of any aw or rue of aw, a credt or refund of the
overpayment of such ta to the e tent that the overpayment s attrbut-
abe to the change n aw made by ths ct may, nevertheess, be
aowed or made f a cam therefor s fed before anuary 1, 19 9.
pproved ugust 5, 19 7.
S C. 9. T M NT OF T FOR M M RS OF T RM D
FORC S UPON D T . (PU LIC L W 38 , IG TI T CON-
GR SS, PPRO D UGUST 8, 19 7.)
Secton 21 of the Interna Revenue Code s hereby amended by strk-
ng out the termnaton of the present war as procamed by the Pres-
dent and nsertng n eu thereof anuary 1, 19 8 .
Par. 26. Secton 29. 21-1, as added by Treasury Decson 5305
26 CFR 29. 21-1 , s amended as foows:
( ) y revsng the frst sentence thereof to read as foows:
If an ndvdua des on or after December 7, 19 1, and before anuary 1, 19 8,
whe n actve servce as a member of the mtary or nava forces of the
Unted States or of any of the other Unted Natons, then
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29.22(b)(13)-
2
(a) the ta abty n the case of such ndvdua under chapter 1 for the
ta abe year n whch occurs the date of death s canceed and f the ta
(ncudng nterest, addtons to the ta , and addtona amounts) s
assessed, the assessment sha be abated and f the amount of such ta s
coected (regardess of the date of coecton) the amount so coected sha
be credted or refunded as an overpayment;
(6) the ta abty n the case of such ndvdua under chapter 1 for
any ta abe year (endng on or after December 7, 19 1) pror to the year n
whch occurs the date of death durng any part of whch he was a member
of such forces s canceed and f the ta (ncudng nterest, addtons to
the ta , and addtona amounts) s assessed, the assessment sha be abated
and f the amount of such ta Is coected, the amount so coected sha be
credted or refunded as an overpayment and f at any tme pror to anuary
1, 19 8, the aowance of a credt or refund of an overpayment of such
amount s barred (e cept for the provsons of secton 3801) by the operaton
of any aw or rue of aw, a credt or refund of the overpayment of such
amount may be aowed or made provded cam therefor s fed before
anuary 1,19 9; and
(c) that amount of ta for ta abe years precedng those specfed n
(a) and (6) above under chapter 1. or correspondng provsons of pror
revenue aws, whch remans unpad as at the date of death sha not be
assessed, and f any such unpad ta (ncudng nterest, addtons to the
ta , and addtona amounts) has been assessed, such assessment sha be
abated and f the amount of any such unpad ta s coected subsequent to the
date of death, the amount so coected sha be credted or refunded as an
overpayment.
( ) y revsng the fna cause of the second sentence thereof to
read as foows:
but wth respect to ta abe years durng whch such ndvdua was at no tme
a member of the mtary or nava forces of the Unted States or any of the other
Unted Natons and wth respect to ta abe years endng before December 7,19 1,
the amount so abated, credted, or refunded sha not e ceed the amount unpad
at the date of death.
R GUL TIONS 110 26 CFR, P RT 05
Par. 27. There s nserted mmedatey precedng secton 05.101
26 CFR 05.101 the foowng:
S C. 10. COLL CTION OP INCOM T T SOURC ON W G S.
(PU LIC L W 38 , IG TI T CONGR SS, PPRO D U-
GUST 8, 19 7.)
(a) Secton 1621(a) of the Interna Revenue Code Is hereby amended
by strkng out paragraph (1), by strkng out the sentence foowng
paragraph (9), and by amendng paragraph (8) to read as foows:
(8) ( ) for servces for an empoyer (other than the Unted
States or any agency thereof) performed by a ctaen of the Unted
States, f t s reasonabe to beeve that durng the entre caendar
year the empoyee w be a bona fde resdent of a foregn country or
countres, or
( ) for servces for an empoyer performed wthn a possesson
of the Unted States by a ctzen of the Unted States, If t Is reason-
abe to beeve that at east 80 per centum of the remuneraton to
be pad to the empoyee by such empoyer durng the caendar year
W be for such servces, or .
(b) The amendments made by ths secton sha be appcabe wth
respect to wages pad on or after anuary 1,19 8, e cept that the amend-
ment strkng-out paragraph (1) of secton 1921(a) of the Interna
Revenue Code sha be appcabe wth respect to wages pad on or after
anuary 1,19 9.
Par. 28. Secton 05.102, as amended by Treasury Decson 5522
C. . 19 6-2. 61 . approved une 1 , 19 6 26 CFR 05.102 , s
amended as foows: -
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25
29.22(b)(13)-1
( ) The headng and frst sentence of paragraph (b) thereof are
revsed to read as foows:
(6) Compensaton of mtary and nava forces pad before anuary 1, 19 9.
Remuneraton pad before anuary 1, 19 9, for servces performed as a member
of the. mtary or nava forces of the Unted States s e cepted from the defn-
ton of the term wages, but remuneraton pad on or after anuary 1, 19 9,
for such servces consttutes wages sub|ect to wthhodng.
( ) y revsng the headng and frst sentence of paragraph (h)
thereof to read as foows:
(h) Remuneraton for servces per formed outsde the Unted States. (1)
Remuneraton pad before anuary 1, 19 /8. The remuneraton pad before
anuary 1,19 8, by an empoyer for servces performed outsde the Unted States
does not consttute wages and hence s not subect to wthhodng f the ma|or
part of the servces performed by the empoyee for such empoyer durng the
caendar year s to be performed outsde the Unted States.
(C) y nsertng at the end of paragraph ( ) thereof the foowng:
(2) Remuneraton pad on or after anuary 1, 19 8. -Remuneraton pad on
or after anuary 1, 19 8, by an empoyer (other than the Unted States or any
agency thereof) for servces performed outsde the Unted States by a ctzen of
the Unted States, s not sub|ect to wthhodng f It s reasonabe to beeve that
durng the entre caendar year the empoyee w be a bona fde resdent of a
foregn country or countres.
The reasonabe beef wth respect to an empoyee s bona fde resdence n a
foregn country mentoned In secton 1621(a) (8) may be based on any evdence
(ncudng the statement wth respect to resdence herenafter prescrbed)
reasonaby suffcent to nduce such beef even though such evdence mght be
nsuffcent upon coser e amnaton by the Commssoner or the courts, fnay
to estabsh such bona fde resdence n a foregn country so as to |ustfy the
e empton from ta provded for n secton 116(a).
The empoyer may presume that an empoyee w be a bona fde resdent of a
foregn country durng the entre caendar year In any case where such em-
poyee, who s a ctzen of the Unted States, cams to be a bona fde resdent of a
foregn country and fes wth such empoyer, for transmsson to the coector
wth the empoyer s return on Form W- requred for the frst quarter of the
caendar year nvoved (or thrd quarter of 19 8) by secton 05.C01, a statement
wth respect to hs resdence as herenafter provded, uness such empoyer other-
wse has reasonabe beef that the empoyee w not be a bona fde resdent of
such foregn country. The statement wth respect to the empoyee s resdence
sha be verfed before an offcer duy authorzed to admnster oaths, or sgned
n the presence of two subscrbng wtnesses and the empoyee sha set forth
theren the foowng:
(1) that he was vng on anuary 1st of the current caendar year In a
foregn country (name the country) and e pects to ve n such foregn
country or n some other foregn country (name the country) durng the
entre caendar year;
() that the purpose or busness requrng hs presence n the foregn
country or countres s such that an e tended stay or a stay of ndefnte
duraton w be necessary for ts accompshment;
() that he understands that any e empton from wthhodng of ta
permtted by reason of the fng of such statement Is not a determnaton
by the Commssoner of Interna Revenue that e s e empt from ta
under secton 116(a), Interna Revenue Code;
(v) a the facts wth respect to such foregn servce, ncudng:
( ) hs name and ast address (n the Unted States) and the
coecton dstrct n whch hs ast Income ta return was fed;
( ) nature of the servces to be rendered durng the caendar year
and rate of compensaton;
(C) terms of the agreement wth the empoyer wth respect to such
foregn servces, partcuary whether or not such servces are to be
rendered for any specfed perod of tme;
(D) hs marta status; f marred, whether hs mmedate famy
w ve wth hm n the foregn country durng the perod of hs foregn
servce.
820823 9 3
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29.22(d)-
26
In the case of an empoyee who has been deemed under secton 1621(a) (8) ( )
to be a bona fde resdent of a foregn country or countres for two consecutve
caendar years mmedatey precedng the current caendar year and who s
resdng In such foregn country or countres on the 1st day of anuary of the
current caendar year, the empoyer may, n the absence at that tme of cear and
defnte knowedge to the contrary, presume that such empoyee w contnue to be
a bona fde resdent of such foregn country or countres for the current caendar
year.
Remuneraton pad on or after anuary 1, 19 8, for servces for an empoyer
performed wthn a possesson of the Unted States by a ctzen of the Unted
States s not sub|ect to wthhodng, f t s reasonabe to beeve that at east
80 percent of the remuneraton to be pad by such empoyer to the empoyee
durng the caendar year w be for such servces.
The term Unted States ncudes the severa States, the Terrtores of aska
and awa, and the Dstrct of Coumba.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 62 and 3791 of the Interna Revenue Code (53 Stat. 32, 67;
26 U. S. C, 19 0 ed., 62, 3791) and Pubc Laws 310, 356, 367, and 3 ,
ghteth Congress.).
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved uy 20, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 23, 19 8, 8: 50 a. m.)
S CTION 22(d). GROSS INCOM : IN NTORI S-
L CTI M T OD
Secton 29.22(d)-1: Inventores under eec- 19 8-23-12956
tve method. I. T. 3927
( so Secton 19.22 (d)-, Reguatons 103.)
INT RN L R NU COD
Prce ndces and data for uy, 19 8, pubshed by the ureau
of Labor Statstcs under date of September 3, 19 8, for use by
department stores empoyng the reta nventory and eectve
nventory methods.
The foowng prce ndces and data for uy, 19 8, pubshed by
the ureau of Labor Statstcs for use by department stores empoyng
the reta and eectve nventory methods, are accepted by the ureau
of Interna Revenue pursuant to Treasury Decson 5605 (C. . 19 8-1,
16), approved March , 19 8, and Mmeograph C 2 (C. . 19 8-1,
21), dated March 9, 19 8, for approprate appcaton to nventores
for ta abe years of 12 months ended on une 30, 19 8, and uy 31,
19 8. Such ndces and data as shown heren represent an e tenson
of department groups and prces shown by Tabe I, Tabe II ( uy
to uy), and Tabe III of I. T. 390 (C. . 19 8-1,18).
It s noted that the tabe and ppend , set forth beow, ntro-
duce a new Group , ades accessores, nto the nde , comprsng
four Controers Congress departments prevousy n the od Group
for whch no nde was computed. egnnng wth the cosng
nventory for ta abe years ended on une 30,19 8, and uy 31, 19 8,
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27
29.22(d)-
department stores empoyng the ureau of Labor Statstcs depart-
ment store nventory prce ndces under the eectve nventory method
shodd use the nde for the new Group for departments fang
wthn the four Controers Congress departments named thereunder
n ppend nstead of usng the nde for the store tota or the
tota shown for appare, pece goods, and notons combned (formery
Groups I, II, III, I , , and I ). (See Mmeograph 62 , supra,
paragraph 8.) Wth respect to nventores computed as of une 30,
19 8, and as of subsequent dates, ppend suppants Tabe III n
I. T. 390 , supra.
ureau of Labor Statstcs, department store nventory prce nde es,
by department groups
anuary, 19 1-100
uy 19 7,
Group
uy,
19 7
anuary,
19 8
uy,
19 8
to uy,
19 8, per-
cent In-
crease
196.6
218.6
222.3
13.1
11. Shoes
17 .8
190.3
196.
12.
III. Lades underwear
169.2
17a 2
181.6
7.3
I . Lades outerwear and grs wear
17 .9
181.3
183.7
5.0
. Men s and boys wear
188.3
190.0
19 .2
3.1
I. Furnture and beddng
183.2
18 .9
192. 9
5.3
II. ome furnshngs
150.3
1112.5
165.9
10.
III. Ma|or appances and eectrca goods
f.f. 9
170.1
169.8
1.7
I . Notons and toet artces
129.3
1 0.5
1 1. 1
9.1
169.1
1MI 5
17 .0
2.9
Tota, Groups t, II. I, I , , I . and
172.6
18 .5
s:.n
85
Tota, Groups I, TO, and III
163.3
171.0
17 .8
7.0
169.1
180.5
183.6
8.6
Store tota, uy, 19 7.
PP NDI
ureau of Labor Statstcs, department store nventory prce nde es, groupng
of Controers Congress Departments
DLS group
Controers Congress Department
Number and name
Num-
ber
Name
I. Pece goods, domestcs, and draperes
11
12
Sks, vevets, and synthetcs.
Wooen dress goods.
Wash goods and nngs.
Lnens.
II. Shoes
13
1
15
18
7
7
67
36
37
38
39
2
3
3
51
52
63
6
66
57
59
61
62
65
Domestcs Musns, sheetngs, etc.
ankets, comfortabes, and spreads.
Draperes, curtans, and uphostery.
Women s and chdren s shoes.
Men s and boys shoes.
Corsets and brasseres.
Women s and chdren s hosery.
nt underwear.
III. Lades underwear
Sk and musn underwear and sps.
Neggees and robes.
Infants wear.
M Unery.
Women s and msses coats and suts.
unor mss coats, suts, and dresses.
Women s and msses dresses.
ouses, skrts, and sportswear.
Grs wear.
prons, house dresses, and unforms.
Furs.
OU-C
66-F
Men s cothng.
Men s furnshngs.
Men s hats.
oys cothng.
oys furnshngs.
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S 29.23(a)-
28
append a contnued
ureau of Labor Statstcs, department store nventory prce nde es, groupng
of Controers Congress Departments Contnued
LS group
Controers Congress Department
Number and name
Num-
ber
Name
I. Furnture and beddng..
II. ome furnshngs
III. Ma|or appances nd eectrca goods.
I . Notons..
. Lades accessores.
I. No nde computed..
71-M
71-T
71-0
72
7:1
7
7S
71
SI
75
77
M
21
23
2
2 - 9
25- 0
25-F
26
Tt
31
33
35
.
28
91
92-S
92-C
OS
Mattresses, sprngs, and studo beds.
Uphostered furnture.
Other furnture.
Orenta rugs.
Domestc foor coverngs.
Chna and gassware.
ousewares.
01ft shop.
Pctures, frames, and mrrors.
Lamps and shades.
Ma|or appances.
Rados, pnonopraphs, and records.
Laces, trmmngs, and rbbons.
Notons.
Toet artces and drug sundres.
Sverware and cocks.
Costume ewery.
Fne |ewery and watches.
Umbreas.
rt needework.
Neckwear and scarfs.
andkerchefs.
Women s and chdren s goves.
andbags and sma eather goods.
ooks and statonery.
Toys and games.
Snortng goods.
Cameras and photographc equpment.
Luggage.
S CTION 22 (n).-GROSS INCOM : D FINITION OF
D UST D GROSS INCOM
Secton 29.22(n)-: d|usted gross ncome.
INT RN L R NU COD
Massachusetts ta on meas pad by ndvdua n connecton wth
trade or busness. (See I. T. 3915, page 30.)
S CTION 23(a). D DUCTIONS FROM GROSS
INCOM : P NS S
Secton 29.23(a)-: usness e penses. 19 8-21-12918
I. T. 3925
INT RN L R NU COD
Payments to the New York Stock change gratuty fund, man-
taned for the beneft of fames of deceased members of the e -
change, by a member who s actuay engaged n busness on the
e change consttute aowabe deductons for Federa Income ta
purposes as ordnary and necessary busness e penses under secton
23(a) (1) ( ) of the Interna Revenue Code.
dvce s requested whether payments to the New York Stock
change gratuty fund consttute ordnary and necessary busness
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29
29.23(a)-
e penses whch are aowabe deductons for Federa ncome ta
purposes.
Secton 1 pf artce I of the consttuton of the New York Stock
change provdes that every person who sha become a member
of the e change sha pay to the trustees of the gratuty fund the sum
of 15 before he sha be admtted to the prvege of membershp.
Secton 2 of artce I of the consttuton provdes n part that each
member of the e change, by sgnng the consttuton, pedges hmsef
to make, upon the death of a member of the e change, a vountary
gft to the famy of such deceased member n the sum of 15, whch
sha be pad at quartery perods on the dates on whch dues to the
e change are to be pad. Secton 5 of artce I of the consttuton
provdes n part that the abty of each member, at aw or equty,
sha be mted to the payment of 15 ony on the death of any other
member.
ven though the payments made by a member after admsson are
caed vountary gfts, such nomencature s hardy consstent wth
ther true nature. It woud seem that a member of the New York
Stock change s bound to make such gfts to mantan hs stand-
ng n the e change. The payment requred by secton 1 of artce
I of the consttuton, the orgna payment, s ceary mandatory.
Under a reasonabe nterpretaton of secton 2 of artce I of the
consttuton, the subsequent payments appear to be mandatory rather
than vountary. The pedge to make them s a condton precedent
to membershp, snce each member, pursuant to secton 6 of artce
I , s requred to sgn the consttuton.
ccordngy, t s hed that payments to the New York .Stock
change gratuty fund, mantaned for the beneft of fames of
deceased members of the e change, by a member who s actuay en-
gaged n busness on the e change consttute aowabe deductons for
Federa ncome ta purposes as ordnary and necessary busness
e penses under secton 23 (a)(1)( ) of the Interna Revenue Code.
Secton 29.23 (a)-1: usness e penses. 19 8-2 -129G9
( so Secton 29.23(a)-5.) I. T. 3929
INT RN L R NU COD
porton of the e pense ncurred by a professona wrter n pro-
tectng hs resdence from fre, a part of the resdence beng used as
hs offce, s deductbe as an ordnary and necessary busness e -
pense. The amount so deductbe may not e ceed the proporton of
the e pense whch the vaue of the rooms used as an offce and ther
contents bears to the vaue of the resdence and ts entre contents.
dvce s requested whether the e pense ncurred by a professona
wrter n protectng hs resdence from fre, a part of the resdence
beng used as hs offce, s deductbe as a busness e pense under
secton 23(a) (1) ( ) of the Interna evenue Code.
In the nstant case, the ta payer keeps n that part of hs resdence
used as an offce a arge quantty of books, manuscrpts, and documents
whch are ndspensabe n the conduct of hs professon. Durng the
fa of 19 7, at a tme when forest fres were ragng n the mmedate
vcnty of the ta payer s home, he empoyed a arge crew of men and
otherwse went to consderabe e pense n the protecton of hs prop-
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29.23(c)-
30
erty. s efforts proved successfu, and he escaped any fre oss
whatever.
Secton 23(a)(1)( ) of the Interna evenue Code provdes n
part that n computng net ncome there sha be aowed as deductons
n the ordnary and necessary e penses pad or ncurred durng the
t abe year n carryng on any trade or busness. Secton 29.23(a)-5
of Reguatons 111 recognzes that the pursut of -a professon fas
wthn the scope of a trade or busness. Secton 29.2 1 of Regua-
tons 111 recognzes that an aocaton of the e pense of mantenance
of resdenta property may be made where a porton of such property
s devoted to busness purposes.
It s hed that a porton of the e pense ncurred by a professona
wrter n protectng hs resdence from fre, a part of the resdence
beng used as hs offce, s deductbe as an ordnary and necessary
busness e pense.under secton 23(a) (1) ( ) of the Interna Revenue
Code. The amount whch s so deductbe may not e ceed the pro-
porton of the e pense whch the vaue of the rooms used as an offce
and ther contents bears to the vaue of the resdence and ts entre
contents.
Secton 29.23(a)-: usness e penses.
INT RN L R NU COD
Massachusetts ta on meas pad by purchaser other than an n-
dvdua. (See I. T. 3915, beow.)
Secton 29.23(a)-5: Professona e penses.
INT RN L R NU COD
pense ncurred by a professona wrter n protectng from fre a
resdence partay used as an offce. (See I. T. 3929, page 29.)
S CTION 23(c). D DUCTIONS FROM GROSS
INCOM : T S G N R LLY
Secton 29.23(c)-: Ta es. 19 8-16-12888
( so Secton 22(a), Secton 29.22(a)-5; Secton I. T. 3915
22(n). Secton 29.22(n)-; Secton 23(a),
Secton 29.23(a)-; Secton 2 , Secton 29.2 -2.)
INT RN L R NU COD
Treatment for Federa Income ta purposes of the e cse ta
upon charges for meas served to the pubc, whch ta s mposed
by secton 17, chapter 729, cts of Massachusetts, 19 1, as amended.
dvce s requested as to the treatment for Federa ncome ta pur-
poses of the e cse ta upon charges for meas mposed by secton 17,
chapter 729, cts of Massachusetts, 19 1, as amended (sectons 1-10,
chapter 6 , nnotated Laws of Massachusetts and 19 7 Cumuatve
Suppement).
The pertnent provsons of the above-cted Massachusetts statute
provde as foows:
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31
29.23(c)-
Secton 1. Defntons. The foowng words and phrases as used n ths
chapter sha have the foowng meanngs uness the conte t otherwse requres:

Ta abe charge , any amount charged for meas wherever furnshed wthn
the Commonweath, ncudng cover and other charges, for whch the purchaser
s charged as a tota one doar or more, e cept meas furnshed by any person
or corporaton whe transportng passengers for hre by ar to or from any
pace wthn the Commonweath.
Ta payer , any person makng a ta abe charge.
Sec. 2. Levy and mount of Ta . There s hereby eved and there sha be
coected and pad a ta equvaent to fve per cent of the amount charged for
a meas, ncudng cover and other charges, f any, for whch the purchaser s
charged as a tota one doar or more, wherever furnshed wthn the Common-
weath. The commssoner commssoner of corporatons and ta aton sha
prescrbe the method of determnng the porton of an entre charge whch s
appcabe to meas n the event that such entre charge s n part for meas
and n part for odgng or any other tem or servce. The e cse sha be pad
by the ta payer to the commssoner at the tme and n the manner herenafter
provded.
Sec. 3. Ta payeb to Regster ; Identfcaton Certfcates ; Penaty. very
ta payer sha regster wth the commssoner and pay to hm the sum of one
doar, upon recept of whch the commssoner sha Issue a numbered dentfca-
ton certfcate attestng that such regstraton has been made. The
certfcate so ssued sha reman n effect so ong as the ta payer s engaged n
servng meas for ta abe charges and has comped wth the provsons of ths
chapter. No ta payer sha engage n servng meas for any charge wthout such
regstraton certfcate.
Secton provdes that every ta payer sha keep such records of ta -
abe charges and n such form as the commssoner may requre. Sec-
ton 5 provdes that every ta payer sha fe wth the commssoner a
return of hs ta abe charges for each caendar month.
Secton 23(c)(1) of the Interna Revenue Code provdes that n
computng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. Secton 23(c) (3) of the Code provdes for the deducton of
amounts representng saes ta es pad by a purchaser of servces or
tangbe persona property, otherwse than n connecton wth a pur-
chaser s trade or busness. The term saes ta , as used n secton
29.23(c)-1(6) of Reguatons 111, reatng to State and oca saes
ta es, ncudes a ta mposed by State or oca authortes upon persons
engaged n furnshng servces at reta (such as meas) whch s
measured by the gross recepts for furnshng such servces.
It s hed that the ta on meas eved by secton 17, chapter 729, cts
of Massachusetts, 19 1, as amended, s an e cse ta mposed upon the
vendor, and t s deductbe by the vendor as a ta under secton
23 (c) (1) of the Interna Revenue Code. If the vendor s an ndvdua,
the deducton must be taken n arrvng at ad|usted gross ncome.
(See secton 22(n) (1) of the Code.) In the case of a other vendors,
the deducton s aowabe n determnng net ncome. The ta co-
ected by a vendor from a purchaser must be ncuded n the vendor s
gross ncome for Federa ncome ta purposes.
It s further hed that the ta on meas s a reta saes ta wthn
the meanng of secton 23(c) (3) of the Code. To the e tent that the
ta s pad by the purchaser (otherwse than n connecton wth hs
trade or busness), t s deductbe by the purchaser as a reta saes
ta under secton 23(c) (3) of the Code, e cept n the case of an nd-
vdua who eects to take the optona standard deducton. Where
the purchaser s an ndvdua and the ta s pad n connecton wth
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I 29.23(e)-
32
hs trade or busness, t s deductbe as a busness e pense and the
deducton must be taken n arrvng at hs ad|usted gross ncome (see
secton 22(n) (1) and (2) of the Code), e cept where the amount of
the ta s propery chargeabe to capta account. In the case of other
purchasers, such as corporatons whch purchase meas for ther em-
poyees, the deducton s aowabe as a busness e pense under sec-
ton 23(a) (1) ( ) of the Code n determnng net ncome, uness the
amount thereof s propery chargeabe to capta account.
S CTION 23(e). D DUCTIONS F OM GROSS INCOM :
LOSS S Y INDI IDU LS
n actua physca oss wth respect to trees used In the ta -
payer s trade or busness, whch trees are partay destroyed by
freeze, hurrcane, or other casuaty, Is deductbe for Federa Income
ta purposes under secton 23 (e) (1) or (f) of the Interna Revenue
Code where the oss does not consst of ncdenta or mnor damage
or mere retardaton of growth and where satsfactory proof of oss
Is furnshed.
O. D. 37 (O. . 2, 127 (1920)) modfed.
dvce s requested whether the amount of damage to trees partay
destroyed by freeze, hurrcane, or other casuaty, whch trees con-
sttute busness property, s deductbe for Federa ncome ta pur-
poses under secton 23 (e) (1) or (f) of the Interna Revenue Code.
Secton 23 (e) and (f) of the Interna Revenue Code provdes that
n computng net ncome there sha be aowed as deductons:
(e) Losses by Indvduas. In the case of an ndvdua, osses sustaned
durng the ta abe year and not compensated for by Insurance or otherwse
(1) If ncurred n trade or busness; or

(3) of property not connected wth the trade or busness, If the oss arses
from fres, storms, shpwreck, or other casuaty, or from theft.
(f) Losses by Corporatons. In the case of a corporaton, osses sustaned
durng the ta abe year and not compensated for by nsurance or otherwse.
O. D. 37 (C. . 2, 127 (1920)), promugated under the Revenue
ct of 1918, hods:
In the case of orchards and vneyards acqured subsequent to March 1, 1913,
and ater destroyed, any deducton for oss shoud be confned to the amounts
of capta orgnay nvested n the growng trees and n the new nursery stock
whch was totay destroyed and the amount e pended from date of acqurement
to date of destructon n an endeavor to brng such trees and stock to an ncome-
producng stage, emnatng a e pendtures on account of permanent mprove-
ments or on account of trees and vnes the growth of whch was merey retarded
and not entrey destroyed.
The prncpe that osses may be aowabe wth respect to parta
destructon of trees and shrubs on nonbusness property was recog-
nzed n G. C. M. 21013 (C. . 1939-1 (Part 1), 101) and n cases
cted theren. G. C. M. 21013 hods that where a resdenta estate
contanng ornamenta trees and shrubbery s damaged by hurrcane
and many of the trees destroyed, the oss deductbe under secton
Secton 29.23(e)-: Losses by ndvduas.
( so Secton 23(f), Secton 29.23(f)- .)
19 8-19-12920
I. T. 3921
INT RN L R NU COD
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33
5 29.23(o)-
23(e)(3) of the Revenue ct of 1938 s the dfference between the
vaue of the estate mmedatey precedng the casuaty and the vaue
of the estate mmedatey thereafter, but not n e cess of an amount
equa to the ad|usted bass of the property. In Mary Cheney Davs
v. Commssoner (16 . T. . 65, acquescence, C. . III-2,13 (1929))
and ohn S. a et a. v. Commssoner (16 . T. . 71, acquescence,
C. . III-2, 21 (1929)), wheren trees and shrubs on the ta payers
estates were damaged or destroyed by severe ce storms, the Unted
States oard of Ta ppeas (now The Ta Court of the Unted
States) hed that eac of the ta payers was entted to deduct a oss
wth respect to the damaged trees and shrubs. The prncpe of aow-
ng nonbusness osses wth respect to damaged trees and shrubs, as
we as wth respect to those whch were totay destroyed, s aso
appcabe to smar osses n the case of busness property.
In vew of the foregong, t s hed that an actua physca oss wth
respect to trees used m the ta payer s trade or busness, whch trees
are partay destroyed by freeze, hurrcane, or other casuaty, s de-
ductbe for Federa ncome ta purposes under secton 23 (e)(1)
or (f) of the Interna Revenue Code where the oss does not consst
of ncdenta or mnor damage or mere retardaton of growTth and
where satsfactory proof of oss s furnshed. O. D. 37 , supra, s
hereby modfed. The bass to be used n determnng the amount of
oss sustaned s the ad|usted bass of the property tor determnng
gan or oss, and the amount of any oss aowed w reduce the bass
for deprecaton.
S CTION 23(f). D DUCTIONS FROM GROSS INCOM :
LOSS S Y CORPOR TIONS
Secton 29.23(f)-: Losses by corporatons.
INT RN L R NU COD
Loss wth respect to trees used n trade or busness and partay
destroyed by freeze, hurrcane, or other casuaty. (See I. T. 3921,
page 32.)
S CTION 23(o). D DUCTIONS FROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS
Secton 29.23(o)-: Contrbutons or gfts 19 8-17-12903
by ndvduas. I. T. 3918
INT RN L R NU COD
I erusson to use and occupy property, granted to nn organzaton
descrbed n secton 23(o) of the Interna Revenue Code, does not
represent a payment made to or for the use of the organzaton
wthn the meanng of that secton, and the owner of the property
s not entted to deduct, n hs Federa ncome ta return, the vaue
of such use and occupancy.
dvce s requested whether an owner of property who grants per-
msson to use and occupy the property to an organzaton descrbed
n secton 23(o) of the Interna Revenue Code s entted to deduct,
n hs Federa ncome ta return, the vaue of suc use and occupancy.
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29.23(p)-
3
The ta payer n the nstant case s the owner of certan property
whch he has heretofore rented for a substanta amount. For the
year 19 8, the ta payer has not rented the property but has granted
the use and occupancy thereof to an organzaton descrbed n secton
23(o) (2) of the Code.
Secton 23(o) (2) of the Code provdes n part that n computng net
ncome there sha be aowed as deductons, n the case of an ndvd-
ua, contrbutons or gfts payment of whch s made wthn the ta -
abe year to or for the use of a corporaton, trust, or communty chest,
fund, or foundaton organzed and operated e cusvey for regous,
chartabe, scentfc, terary, or educatona purposes, etc., to an
amount not n e cess of 15 percent of the ta payer s ad|usted gross
ncome.
It s the vew of ths offce that permsson to use and occupy prop-
erty granted to an organzaton descrbed n secton 23(o) of the
Code does not represent a payment made to or for the use of the
organzaton wthn the meanng of that secton. Such an arrange-
ment does not consttute a gft of property. It s merey the grantng
of a prvege for whch no charge s made.
ccordngy, t s hed that the owner of property who grants
permsson to use and occupy the property to an organzaton descrbed
n secton 23(o) of the Code s not entted to deduct, n hs Federa
ncome ta return, an amount representng the vaue of such use and
occupancy.
S CTION 23(p). D DUCTIONS FROM GROSS INCOM :
CONTRI UTIONS OF N MPLOY R TO N MPLOY-
S TRUST OR NNUITY PL N ND COMP NS TION
UND R D F RR D-P YM NT PL N
Secton 29.23 (p)-: Contrbutons of an em- 19 8-2 -12972
poyer to an empoyees trust or annuty T. D. 5666
pan and compensaton under a deferred
payment pan In genera.
( so Sectons 29.23(p)-2, 29.23(p)-3, 29.23(p)- ,
29.23 (p)-5, 29.23(p)-6, 29.23 (p)-7, 29.23 (p)-8,
29.23(p)-9, 29.23(p)-10, 29.23(p)-, and
29.23 (p)-12.)
TITL 2(5 INT RN L R NU C PT R I, SU C PT R , P RT 29.
INCOM T ; T L Y RS GINNING FT R D C M R 31, 18 1
Reguatons 111 amended Contrbutons of an empoyer to an em-
poyees trust or annuty pan and compensaton under a deferred
payment pan.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
On November 1 , 19 7, notce of proposed rue makng reatng to
contrbutons of an empoyer to an empoyees trust or annuty pan
and compensaton under a deferred payment pan was pubshed n
the Federa Regster (12 F. R. 7596). fter consderaton of a such
reevant matter as was presented by nterested persons regardne the
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35
29.23(p)-
proposa, the foowng amendments to Reguatons 111 26 CFR, Part
29 are hereby adopted.
Paragraph 1. Secton 29.23(p)- 26 CFR 29.23(p)- s amended
as foows:
( ) The thrd and foowng sentences of the frst paragraph thereof
are strcken out and there s nserted n eu thereof the foowng:
Secton 23(p) does not appy to a pan whch does not defer the recept of com-
pensaton. Nether does secton 23(p) appy to deductons for contrbutons
under a pan whch s prmary a dsmssa wage, or unempoyment beneft pan
or a sckness, accdent, hosptazaton, medca e pense, recreatona, wefare,
or smar beneft pan, or a combnaton thereof. Secton 23(p) s, however,
appcabe to a contrbutons (ncudng contrbutons to provde ncdenta
benefts such as fe Insurance protecton) under a stock bonus, penson, proft-
sharng, or annuty pan, whether or not the empoyees rghts n such contrbu-
tons are nonforfetabe, but deductons under ths secton are sub|ect to con-
dtons and mtatons under secton 23(a) as we as those partcuary provded
n secton 23(p).
( ) The second paragraph thereof s amended to read as foows:
In order to be deductbe under secton 23(p), contrbutons must he e penses
whch woud be deductbe under secton 23(n) f t were not for the provson
n secton 23(p) (1) that they are deductbe, f at a, ony under secton 23(p).
Contrbutons may therefore be deducted under secton 23 (p) ony to the e tent
that they are ordnary and necessary e penses durng the ta abe year n carry-
ng on trade or busness and are compensaton for persona servces actuay
rendered. In no case s a deducton aowabe under secton 23(p) for the amount
of any contrbuton for the beneft of an empoyee In e cess of the amount whch,
together wth other deductons aowed for compensaton for such empoyee s
servces, consttutes a reasonabe aowance for compensaton for the servces
actuay rendered. What consttutes a reasonabe aowance depends upon the
facts n the partcuar case. mong the eements to be consdered In determnng
ths are the persona servces actuay rendered n pror years as we as the
current year and a compensaton and contrbutons pad to or for such empoyee
n pror years as we as n the current year. Thus, a contrbuton whch s n
the nature of addtona compensaton for servces performed n pror years may
be deductbe, even f the tota of such contrbutons and other compensaton
for the current year woud be In e cess of reasonabe compensaton for servces
performed In the current year, provded that such tota pus a compensaton
and contrbutons pad to or for such empoyee n pror years represents a
reasonabe aowance for a servces rendered by the empoyee by the end of
the current year. contrbuton under a pan whch s prmary for the beneft
of sharehoders of the empoyer Is not deductbe. Such a contrbuton may
consttute a dvdend wthn the meanng of secton 115(a). (See aso sectons
29.23(a)-6 and 20.23(a)-8.) In addton to the mtatons referred to above,
deductons under secton 23(p) are aso sub|ect to further condtons and m-
tatons partcuary provded theren.
(C) The second sentence of the thrd paragraph thereof s amended
to read as foows:
Thus, where a corporaton pays pensons to such of ts retred empoyees and n
such amounts as may be determned from tme to tme by the board of drectors
or responsbe offcers of the company, or where a corporaton s under an obga-
ton, whether funded or unfunded, to pay a penson or other deferred com-
pensaton to an empoyee, there s a method havng the effect of a pan deferrng
the recept of compensaton for whch deductons are governed by secton 23(p).
Par. 2. Secton 29.23(p)-2 26 CFR 29.23(p)-2 s amended to
read as foows:
Sec. 29.23(p)-2. Informaton to be Furnshed by mpoyer Camng De-
ductons. If a deducton from gross ncome Is camed under secton 23(p)()
( ), ( ), (C). or (F), the empoyer, e cept as otherwse provded n paragraph
( ), must fe the foowng nformaton for each pan nvoved to estabsh that
It meets the requrements of secton 165(a) or 23(p)()( ), and that the de-
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29.23(p)-
36
ductons camed do not e ceed the amount aowabe under subparagraphs ( ),
( ), (C), or (F) of secton 23(p) (1), as the case may be:
(a) erfed copes of a the nstruments consttutng or evdencng the pan,
Incudng trust ndentures, group annuty contracts, specmen copy of each type
of ndvdua contract, and specmen copy of forma announcement and compre-
hensve detaed descrpton to empoyees, wth a amendments to any such
nstruments.
(6) statement descrbng the pan whch dentfes t and whch sets forth
the name or names of the empoyers, the effectve date of the pan and of any
amendments thereto, the method of dstrbuton or of dsbursng benefts (whether
by trustee, nsurance company, or otherwse), the dates when the nstruments or
amendments were e ecuted, the date of forma announcement and the dates
when comprehensve detaed descrpton of the pan and of each amendment
thereto were made avaabe to empoyees generay, the dates when the pan and
when the trust or the contract evdencng the pan and of any amendments thereto
were put nto effect so that contrbutons thereunder were rrevocabe, and a
summary of the provsons and rues reatng to
(1) mpoyee egbty requrements for partcpaton n the pan,
(2) mpoyee contrbutons,
(3) mpoyer contrbutons,
( ) The bass or formua for determnng the amount of each type of
beneft and the requrements for obtanng such benefts and the vestng
condtons,
(5) The medum of fundng (e. g., sef-nsured, unt purchase group an-
nuty contract, Indvdua eve annua premum retrement endowment n-
surance contracts, etc.) and, f not whoy nsured, the medum of contrbu-
tons and the knd of nvestments, and
(6) The dscontnuance or modfcaton of the pan and dstrbutons or
beneft payments upon qudaton or termnaton.
(c) tabuaton n coumnar form showng the nformaton specfed beow
wth respect to each of the 25 hghest pad empoyees covered by the pan n the
ta abe year, sted n order of ther noudeferred compensaton (where there
are severa pans of deferred compensaton, the nformaton for each of the
pans may be shown on a snge tabuaton wthout repetton of the nformaton
common to the severa pans) :
(1) Name.
(2) Whether an offcer.
(3) Percentage of each cass of stock owned drecty or ndrecty by the
empoyee or members of hs famy.
( ) Whether the prncpa dutes consst n supervsng the work of other
empoyees.
(5) Year of brth.
(0) Length of servce for empoyer to the cose of the year.
(7) Tota nondeferred compensaton pad or accrued durng the ta abe
year wt a breakdown of such compensaton nto the foowng components:
() basc compensaton and overtme pay, () other drect payments, such
as bonuses and commssons, () compensaton pad other than n cash,
such as goods, servces, nsurance not drecty reated to the benefts or pro-
vded from funds under the pan, etc.
(8) mount aocated durng the year for the beneft of the empoyee or
hs benefcary (ncudng any nsurance provded thereby or drecty reated
thereto), ess the empoyee s contrbutons durng the year, under each other
pan of deferred compensaton.
(0) mount aocated durng the year for the beneft of the empoyee or
hs benefcary (ncudng any Insurance provded thereby or drecty reated
thereto), ess the empoyee s contrbutons durng the year, under the pan.
If a proft-sharng or stock bonus pan, aso a breakdown of such amounts
Into the foowng components: ( amounts orgnay aocated n the year,
and () amounts reaocated n the year.
(10) mount of empoyee contrbutons durng the year under the pan.
(11) If a penson or annuty pan, () the retrement age and date and
the form of the retrement beneft, () the annua rate or amount of the re-
trement beneft, and () the aggregate of a of the empoyee s contrbutons
under the pan, a based, n the case of an empoyee who s not on retre-
ment beneft under the pan, upon the assumpton of hs contnued empoy-
ment at hs current rate of compensaton unt hs norma retrement age
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37
29.23(p)-
(or the end of the current year f ater) and retrement on such date wth
the norma form of retrement beneft under the pan,
(d) The foowng totas:
(1) Tota nondeferred compensaton pad or accrued durng the ta abe
year for a empoyees covered under the pan and aso for a empoyees of the
empoyer.
(2) Tota amount aocated durng the year for the beneft of empoyees,
former or retred empoyees, or ther benefcares (ncudng any nsurance
provded thereby or drecty reated thereto), ess empoyees contrbutons
durng the year under the pan and, f a proft-sharng or stock bonus pan,
aso a breakdown of such tota Into the foowng components: (1) amount
orgnay aocated n the year, and () amount reaocated n the year.
(c) schedue showng the tota number of empoyees as of the cose of the
year for each of the foowng groups, based on reasonabe estmates:
(1) empoyees Inegbe for coverage under the pan because of requre-
ments as to empoyment cassfcaton, specfyng the reasons appcabe to
the group (as, for e ampe, temporary, seasona, part tme, houry pay bass,
etc.).
(2) empoyees negbe for coverage under the pan because of re-
qurements as to ength of servce and not ncuded n Item (1).
(3) empoyees negbe for coverage under the pan because of re-
qurements as to mnmum age and not ncuded n tem (1) or (2).
( ) empoyees negbe for coverage under the pan soey because
of requrements as to mnmum rate of compensaton.
(5) empoyees negbe for coverage under the pan other than those
empoyees Incuded n tems (1), (2), (3), or ( ) above, specfyng the rea-
sons appcabe to the group.
(6) empoyees negbe for coverage under the pan for any reasons,
whch shoud be the sum of tems (1) to (5), ncusve.
(7) empoyees egbe for coverage but not covered under the pan.
(8) empoyees covered under the pan.
(9) empoyees of the empoyer, whch shoud be the sum of tems (6),
(7), and (8).
If t s camed that the requrements of secton 165(a) (3) ( ) are satsfed, aso
the data and computatons necessary to show that such requrements are satsfed.
(f) In the case of a trust, a detaed baance sheet and a detaed statement
of recepts and dsbursements durng the year; n the case of a nontrusteed
annuty pan, a detaed statement of the names of the Insurers, the contrbutons
pad by the empoyer and by the empoyees, and a statement as to the amounts
and knds of premum refunds or smar credts made avaabe and the dspos-
ton of such credts n the year.
g) If a penson or annuty pan, a detaed descrpton of a the methods,
factors, and assumptons used n determnng costs and n ad|ustng the costs
for actua e perence under the pan (ncudng any oadngs, contngency re-
serves, or speca factors and the bass of any nsured costs or abtes nvoved
theren) e panng ther source and appcaton n suffcent deta to permt
ready anayss and verfcaton ereof, and, n the case of a trust, a detaed
descrpton of the bass used n vnung the nvestments hed. so a summary
of the resutng costs or abtes and ad|ustments for the year under the penson
or annuty pan In suffcent deta to permt ready verfcaton of the reasonabe-
ness thereof.
(ft) statement of the appcabe mtatons under secton 23(p) (1) ( ),
( ), (C), or (F) and an e panaton of the method of determnng such mta-
tons and a summary of the data and computatons necessary to determne the
aowabe deductons for the ta abe year.
() statement of the contrbutons pad n the ta abe year, showng the
date and amount of each payment. so a summary of the deductons camed
for the ta abe year for the pan wth a breakdown of the deductons camed
nto the foowng components: (1) under secton 23(p) (1) for contrbutons pad
n the ta abe year before gvng effect to the provsons of subparagraph (F)
thereof, (2) under secton 23(p) (1) for contrbutons pad n pror ta abe years
begnnng after December 31, 19 1, n accordance wth the carry-over provsons
of subparagraphs ( ) and (C) thereof before gvng effect to the provsons of .
subparagraph (F) thereof, (3) any reductons or ncreases n the deductons n
accordance wth the provsons of subparagraph (F) thereof, and ( ) under
secton 23(p)(2) for contrbutons pad to a penson trust n a ta abe year
begnnng before anuary 1, 19 2.
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29.23(p)-
38
(/) If there s any change n the pnn. nstruments, methods, factors, or as-
sumptons upon whch the data and nformaton specfed n paragraph (a), (6),
or (g) are bnsfd, a detaed statement e panng the change and ts effect must
be fed wth the nformaton otherwse requred for the ta abe year n whch
the change s put nto effect and, nsofar as there s no such change, after the
data and nformaton specfed n those paragraphs has been fed n connecton
wth a ta return, uness otherwse requested by the Commssoner, a statement
that there s no such change may be fed n eu of repeated fng of the nforma-
ton. fter the nformaton specfed n paragraph (c) has been fed for two
consecutve years, uness otherwse requested by the Commssoner, so ong as
the pnn and the mehod and bass of aocatons are not changed, the tabuaton
need show such nformaton ony wth respect to empoyees who, at any tme n
the ta abe year, own, drecty or ndrecty, more than o percent of the votng
stock, consderng stock so owned by an ndvdua s spouse or mnor nea
descendant as owned by the ndvdua for ths purpose.
If a deducton Is camed under secton 23(p) (1)(D) for the ta abe year, the
ta payer sha furnsh such nforma on as s necessary to show that the deduc-
ton s not aowabe under the other subparagraphs of secton 23(p)(). that
the amount pad s an ordnary and necessary e pense, and that the empoyees
rghts to or derved from such empoyer s contrbuton or such compensaton
were nonforfetabe at the tme the contrbuton or compensaton was pad.
For the purpose of the above nformaton, contrbutons pad n a ta abe year
shoud ncude those deemed to be so pad n accordance wth the provsons of
secton 23(p) (1) ( ) and e cude those deemed to be pad n the pror ta abe
year n accordance wth such provsons. s used n ths secton ta abe year
refers to the ta abe year of the empoyer and, uness otherwse requested by the
Commssoner, a year whch s not specfed as a ta abe year may be taken
as the ta abe year of the empoyer or as the pan, trust, vauaton, or group con-
tract year begnnng n the ta abe year of the empoyer provded the same rue
Is foowed consstenty so that there Is no gap or overap n the nformaton
furnshed for each tem. In any case the date or perod to whch each tem of
nformaton furnshed reates shoud be ceary shown. the nformaton re-
qured by ths secton shoud be fed wh the ta return for the ta abe year
n whch the deducton s camed e cept that, uness sooner requested by the
Commssoner, such nformaton, other than that specfed n tem (1) of para-
graph (d) and n paragraph ( ), may be fed wthn 12 months after the cose
of the ta abe year provded there Is fed wth the ta return a statement that
the nformaton cannot reasonaby be fed therewth, settng forth the reasons
therefor.
In any case a the nformaton and data requred by ths secton must be fed
n the coector s offce n whch the empoyer fes hs ta returns and dentfed
for assocaton wth the approprate returns and must be fed ndependenty of
any nformaton and data otherwse submtted n connecton wth a determna-
ton of the quafcaton of the trust or pan under secton 165(a). The Comms-
soner may, n addton, requre any further Informaton that he consders
necessary to determne aowabe deductons under secton 23(p) or quafca-
ton under secton 165(a) and may wave the fng of such nformaton requred
heren whch he fnds unnecessary In a partcuar case. Uness requested by the
Commssoner, the nformaton specfed above need not be fed for any ta abe
year endng pror to anuary 1, 19 9, f the nformaton specfed n ths secton
pror to ts amendment by Treasury Decson 5666 s fed for such year.
Records substantatng a data and nformaton requred by ths secton to be
fed must be kept at a tmes avaabe for nspecton by nterna revenue offcers
at the man offce or pace of busness of the empoyer.
Par. 3. Secton 29.23(p)-3 26 CF 29.23(p)-3 s amended as
foows:
( ) The words aows addtona deductons n the frst sentence
thereof are strcken out and there s nserted n eu thereof the words
provdes aternatve mtatons.
( ) The foowng paragraph s nserted at the end thereof:
If contrbutons are pad to or under more than one pan n the ta abe year
begnnng n 19 2 and pror to September 1, 19 2, the aternatve mtatons pro-
vded n secton 102(d) (1) (C) of the Revenue ct of 19 2 are determned by
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29.23(p)-
appyng the provsons of ths secton severay to the severa pans and respectve
contrbutons. (See aso secton 29.23(p)-12.)
Par. . Secton 29.23(p)- 26 CFR 29.23(p)- s amended to read
as foows:
Sec. 29.23(p) . Contrbutons of an mpoyer to or Under an mpoyees
Penson Trust or nnuty Pan That Meets the Requrements of Secton
105(a) ppcaton of Secton 26(p)()( ). In genera. If contrbutons
are pad by an empoyer In a ta abe year begnnng after December 81, 19 1, to or
under a penson trust or annuty pan for empoyees and the genera condtons
nnd mtatons appcabe to deductons for such contrbutons are satsfed (see
secton 29.23(p)-), the contrbutons are deductbe under secton 23(p)()
( ) or ( ) f the further condtons provded theren are aso satsfed. s
used here, n penson trust means a trust formng part of a penson pan and
an annuty pan means a penson pan under whch retrement benefts are pro-
vded under annuty or nsurance contracts wthout a trust. For the meanng
of penson pan as used here, see secton 29.1(55-1 (a). Where dsabty, wth-
drawa, nsurance, or survvorshp benefts ncdenta and drecty reated to the
retrement benefts under a penson or annuty pan are provded for the em-
poyees or ther benefcares by contrbutons under the pan, deductons on
account of such ncdenta benefts are aso covered under secton 23(p)()
( ) or ( ). (See secton 29.165-0 as to ta abty to empoyees of cost of nc-
denta nsurance protecton.) In order to be deductbe under secton
23(p)( ), contrbutons to a penson trust must be pad n a ta abe year of
the empoyer whch ends wth or wthn a year of the trust for whch t s e empt
under secton 105(a). In order that contrbutons carred over may be deducted
n a succeedng ta abe year of the empoyer n accordance wth secton
23(p) (1) ( ) (v), the succeedng year aso must end wth or wthn a ta abe
year of the trust for whch t s e empt under secton 165(a). (St e secton
29.23(p)-9 as to condtons for deductons under secton 23(p)()( ) n the
case of an annuty pan.) In ether case the deductons are aso sub|ect to further
mtatons provded n secton 23(p)()( ). The mtatons provded n sec-
ton 23(p) (1) ( ), wth an e cepton provded for certan years under cause ()
thereof (see secton 29.23(p)-5), are based on the actuara costs of the pan
and secton 23(p) (1) ( ) requres that the costs and the mtatons based on
costs under that secton sha be determned under reguatons prescrbed by the
Commssoner wth the approva of the Secretary (or, n certan cases under
secton 23(p) (1) ( ) (1), n accordance wth a fndng of the Commssoner).
In determnng costs for the purpose of mtatons under secton 23(p) (1) ( ),
the effects of e pected mortaty and Interest must be dscounted and the effects
of e pected wthdrawas, changes n compensaton, retrements at varous ages,
and other pertnent factors may be dscounted or otherwse reasonaby recognzed.
propery weghted retrement age based on adequate anayses of representatve
e perence may be used as an assumed retrement age. Dfferent basc assump-
tons or rates may be used for dfferent casses of rsks or dfferent groups where
ustfed by condtons or requred by contract. In no event sha costs for the
purpose of secton 23(p) (1) ( ) e ceed costs based on assumptons and methods
n of whch are reasonabe n vew of the provsons and coverage of the pan,
fundng medum, reasonabe e pectatons as to the eff cts of mortaty and nter-
est, reasonabe and adequate regard for other factors such as wthdrawa and
deferred retrement, whether or not dscounted, whch can be e pected to reduce
costs materay, reasonabe e penses of operaton, and a other reevant cond-
tons and crcumstances. In any case, n determnng the costs and mtatons
an ad|ustment sha be made on account of any e perence more favorabe than
that assumed n the bass of mtatons for pror years, and, uness such ad|ust-
ments are consstenty made every year by reducng the mtatons otherwse
determned by any decrease n abty or cost arsng from e perence n the
ne t precedng ta abe year more favorabe than the assumed e perence on
whch the costs and mtatons were based, the ad|ustment sha be made by some
other method approved by the Commssoner.
ny e penses ncurred by the empoyer n connecton wth the pan, such as
trustee s and actuary s fees, whch are not provded for by contrbutons under t
are deductbe under secton 23(a) to the e tent that they are ordnary and
necessary.
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29.23(p)-
0
a case contrbutons are pad n the empoyer s ta abe year begnnng n 19 2
and pror to September 1,19 2. the mtaton on deductons for such ta abe year
s sub|ect to an e cepton provded In secton 162(d) (1) (C) of the Revenue ct
of 19 2 (see secton 29.23 (p) -3).
In case deductons are aowabe under secton 23(p) (1) (C) as we as under
secton 23(p)() ( ) or ( ), the mtatons under secton 23(p)() ( ) and
(C) are determned and apped wthout gvng effect to the provsons of secton
23(p) (1) (P) but the amounts aowabe as deductons are sub|ect to the further
mtatons provded In secton 23(p)()(F). (Sec secton 29.23(p)-12.)
Par. 5. Secton 29.23(p)-5 26 CFR 29.23(p)-5 s amended to read
as foows:
Sec. 29.23(p)-5. Penson and nnuty Pans Lmtatons Under Secton
23(p) (1) ( ) (I). Sub|ect to the appcabe genera condtons and mtatons
(see secton 29.23(p)- ), the nta mtaton under secton 23(p) (1) ( ) (I)
s 5 percent of the compensaton otherwse pad or accrued durng the ta abe
. ear to a empoyees under the penson or annuty pan. Ths nta 5 percent
mtaton appes to the frst ta abe year begnnng after December 31, 19 1,
for whch a deducton s aowed for contrbutons to or under such a pan and
aso appes to any subsequent year for whch the f percent fgure s not reduced
by the Commssoner as provded beow. For years to whch the nta 5 percent
mtaton appes no ad|ustment on account of pror e perence s requred. If
the contrbutons do not e ceed the nta 5 percent mtaton n the frst ta abe
year to whch ths mtaton appes, the ta payer need not submt actuara
data for such year.
For the frst ta abe year foowng the frst year to whch the Inta 5 percent
mtaton appes, and for every ffth year thereafter, or more frequenty where
preferabe to the ta payer, the ta payer sha submt wth hs return a certfca-
ton by a quafed actuary or by the company underwrtng a nontrusteed annuty
pan of the amount reasonaby necessary to provde the remanng unfunded cost
of past nnd current servce credts of a empoyees under the pan wth a statement
e panng a the methods, factors, and assumptons used In determnng such
amount. Ths amount may be determned as the sum of (a) the unfunded past
servce cost as of the begnnng of the year, and (b) the norma cost for the year,
a determned by methods, factors, and assumptons approprate as a bass of
mtatons under cause (). Whenever requested by the Commssoner a
smar certfcaton and statement sha be submtted for the year or years spec-
fed n such request. The Commssoner w make perodca e amnatons of such
data at not ess than 5-year Intervas and w reduce the mtaton under cause
() beow the 5 pe cent mtaton for the years wth respect to whch he fnds
th .t the 5 percent mtaton e ceeds the amount reasonaby necessary to provde
the remanng unfunded cost of past and current servce credts of a empoyees
under the pan. Where the mtaton Is so reduced, the reduced mtaton sha
appy unt the Commssoner fnds thnt a subsequent actuara vauaton shows
a change to be necessary. Such subsequent vauaton may be made by the
ta payer at any tme and submtted to the Commssoner wt a request for a
change n the mtaton.
For the purpose of mtatons under cause (I), compensaton otherwse pad
or accrued means a of the compensaton pad or accrued e cept that for whch
a deducton s aowabe under a pan that quafes under secton 105(a), Incud-
ng a pan that quafes under secton 23(p)()( ). Where two or more pen-
son or annuty pans cover the same empoyee, under cause (I) the deductons
wth respect to each such pan are sub|ect to the mtatons appcabe to the
partcuar pan and the tota deductons for a such pans are aso sub|ect to the
mtatons whch woud be appcabe thereto f they consttuted a snge pan.
Where, because of the partcuar provsons appcabe to a arge cass of em-
poyees under a pan, the costs wth respect to such empoyees are nomna n
comparson wth ther compensaton, after the frst year to whch the nta 5
percent mtaton appes, deductons under cause () are sub|ect to mtatons
determned by consderng the pan appcabe to such cass as f t were a separate
pan. Deductons are aowabe to the e tent of the appcabe mtatons under
cause () even where these are greater than the appcabe mtatons under
cause (11) or cause ( I).
Par. G. Secton 29.23(p)-6 26 CFR 29.23(p)-6 s amended to
read as foows:
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1
29.23(p)-
Sec. 29.23(p)-6. Penson and nnuty Pans Lmtatons Undeb Secton
23(p) (1) ( ) (). Sub|ect to tbe appcabe genera condtons and mtatons
(see secton 29.23(p)- ), under secton 23(p) (1) ( ) () deductons may be a-
owed to the e tent of mtatons based on costs determned by dstrbutng the
remanng unfunded cost of the past and current servce credts wth respect to
a empoyees covered under the trust or pan as a eve amount or eve percent-
age of compensaton over the remanng servce of each such empoyee e cept
that, as to any three ndvduas wth respect to whom more than 50 percent of
such remanng unfunded cost s attrbutabe, the remanng unfunded cost at-
trbutabe to such ndvduas sha be dstrbuted over a perod of at east 3
ta abe years.
The determnaton of costs as a bass of deductons under cause () of secton
23(p)()( ) may be ustrated by a case where t s estmated actuaray as
of the begnnng of the pan on the bass of approprate assumptons and factors
that empoyer contrbutons of percent of compensaton of each covered em-
poyee durng hs remanng servce w be suffcent to provde the current
servce credts of a empoyees under the pan and empoyer contrbutons of 3
percent of compensaton of each covered empoyee durng hs remanng servce
w be suffcent to provde the past servce credts of a empoyees under the
pan, so that the estmated cost for the frst year s 7 percent of compensaton of
covered empoyees.
The statutory mtaton for any ta abe year under cause () s any e cess
of the amount necessary for the year on the bass of the costs over the amount
aowabe as a deducton under cause (), a determned under reguatons pre-
scrbed by the Commssoner wth the approva of the Secretary.
For ths purpose such e cess, ad|usted for pror e perence, may be computed
for each year as foows, a determnatons beng made as of the begnnng of
fhe year:
(a) Determne the vaue of a benefts e pected to be pad after the begnnng
of the year for a empoyees, any former empoyees, and any other benefcares,
then covered under the pan.
(6) If empoyees contrbute under the pan, determne the vaue of a con-
trbutons e pected to be made after the begnnng of the year by empoyees
then covered under the pan.
(c) Determne the vaue of a funds of the pan as of the begnnng of the
year.
(d) Determne the amount remanng to be dstrbuted as a eve amount or
as a eve percentage of compensaton over tbe remanng future servce of ea h
empoyee by subtractng from tem (a) the sum of tems (6) and (c).
(c) Determne the vaue of a compensaton e pected to be pad after tbe
begnnng of the year to a empoyees then covered under the pan.
(/) Determne an accrua rate for each empoyee by dvdng Item (e) Into
Item (d).
(g) Compute the e cess under cause () for the year by mutpyng the com-
pensaton pnd to a empoyees covered under the pan durng the year by any
e cess of Item (f) over 5 percent. In genera, where ths method Is used, the
mtaton under cause () w be equa to the e cess so computed wthout fur-
ther ad|ustment on account of pror favorabe e perence, provded a the factors
and assumptons used are reasonabe n vew of a appcabe consderatons
(see secton 29.23(p)- ) and provded Item (e) s not ess than fve tmes the
annua rate of compensaton In effect at the begnnng of the year.
Instead of determnng the e cess deductbe under cause () by the above
method, such e cess may be based upon costs determned by some other method
whch s reasonabe and approprate under the crcumstances. Thus, such e cess
may be based on the amounts necessary wth respect to each ndvdua covered
empoyee to provde the remanng unfunded cost of a hs benefts under the
pan dstrbuted as a eve amount over the perod remanng unt the norma
commencement of hs retrement benefts, In accordance wth other generay
accepted actuara methods whch are reasonabe and approprate In vew of
the provsons of the pan and the fundng medum. In vew of the reatonshp
of cause () to causes () and (), however, f the e cess s determned by a
method other than that set forth n the precedng paragraph the tota mtatons
under causes (1) and () combned must be determned by a methed approved
by the Commssoner, e cept where they do not e ceed the mtatons under
cause (In), ad|usted for pror favorabe e perence,
820823 9
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29.23(p)-
2
Par. 7. Secton 29.23 (p)-7 26 CFR 29.23 (p)-7 s amended to
read as foows:
Skc. 29.23(p)-7. Penson and nnuty Pans Lmtatons Under Secton
23(p) (1) ( ) (). Sub|ect to the appcabe genera condtons and mtatons
(see secton 29.23(p)- ), under secton 23(p) (1) ( ) (), n eu of amounts
deductbe under the mtatons of cause (1) and cause (), deductons may be
aowed to the e tent of mtatons based on norma and past servce or suppe-
mentary costs of provdng benefts under the pan. Norma cost for any year
s the amount actuaray determned whch woud be requred as a contrbuton
by the empoyer In such year to mantan the pan f the pan had been n effect
from the begnnng of servce of each then ncuded empoyee and f such costs
for pror years had been pad and a assumptons as to nterest, mortaty, tme
of payment, etc., had been fufed. Past servce or suppementary cost at any
tme s the amount actuaray determned whch woud be requred at such tme to
meet a the future benefts provded under the pan whch woud not be met by
future norma costs and empoyee contrbutons wth respect to the empoyees
covered under the pan at such tme.
The mtaton under cause () for any ta abe year s the sum of norma
cost for the year pus an amount not In e cess of one-tenth of the past servce
or suppementary cost as of the date the past servce or suppementary credts
are provded under the pan, a determned under reguatons prescrbed by the
Commssoner wth the approva of the Secretary. For ths purpose the norma
costs may be determned by any generay accepted actuara method and may be
e pressed ether as (a) the aggregate of eve amounts wth respect to each
empoyee covered under the pan, (6) a eve percentage of payro wth respect
to each empoyee covered under the pan, or (c) the aggregate of the snge pre-
mum or unt costs for the unt credts accrung durng the year wth respect to
each empoyee covered under the pan, provded, n any case, that the method s
reasonabe n vew of the provsons and coverage of the pan, fundng medum,
and other appcabe consderatons. The mtaton may ncude one-tenth of
the past servce or suppementary cost as of the date the provsons resutng n
such cost were put nto effect, but s sub|ect to ad|ustments for pror favorabe
e perence. (See secton 29.23(p)- .) In any case past servce or suppe-
mentary costs sha not be ncuded n the mtaton for any year when the
amount requred to fuy fund or purchase such past servce or suppementary
crets has been deducted and no deducton s aowabe for any amount (other
than the norma cost) whch s pad n after such credts are fuy funded or
purchased.
Par. 8. Secton 29.23(p)-8 26 CFR 29.23(p)-8 s amended to
read as foows:
Sec. 29.23(p)-8. Penson and nnuty Pans Contrbutons n cess of
Lmtatons Under Secton 23(p)()( ) ppcaton of Secton 23(p)()
( ) (v). Where contrbutons pad by an empoyer n a ta abe year begnnng
after December 31, 19 1, to or under a penson or annuty pan e ceed the mta-
tons appcabe to such year under secton 23(p)()( ) but otherwse satsfy
the condtons for deducton under secton 23 (p) (1) ( ) or ( ), n accordance
wth cause (v) of secton 23(p) (1) ( ) the e cess contrbutons are carred over
and deductbe n succeedng ta abe years n order of tme to the e tent of the
dfference between the amount pad and deductbe n each such succeedng year
and the mtaton appcabe to such year under cause (), (), or (). Such
e cess contrbutons are deductbe under cause (v) of secton 23(p) (1) ( ) n
succeedng ta abe years n order of tme to the e tent of the dfference between
the amount pad and deductbe n each such succeedng year and the mtaton
appcabe to such year under cause (), (), or (). The provsons of cause
(v) are to be apped after gvng effect to the e cepton provded n secton
(2u) (1) (C) of the Revenue ct of 19 2 for a ta abe year begnnng n 19 2
(see secton 29.23(p)-3) but before gvng effect to the provsons of secton
23(p)()(F) for any year. The carry-over provsons of secton 23(p)()
( ) (v), after effect has been gven to secton 102(d) (1) (C) of the Revenue ct
of 19 2. but before effect has bpen gven to secton 23(p)()(F) may be us-
trate 1 by the foowng e ampe:
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3
29.23(p)-
Ta abe year endng December 81, 19 2:
mount of contrbutons pad n year 100. 000
Lmtaton appcabe to year GO. 000
mount deductbe for year 60, 000
cess carred over to succeedng years 0, 000
Ta abe year endng December 31, 10 3 :
mount of contrbutons pad n year 25, 000
Carred over from prevous years 0, 000
Tota deductbe sub|ect to mtaton 65, 000
Lmtaton appcabe to year 50,000
mount deductbe for year 50.000
cess carred over to succeedng years 15, 000
Ta abe year endng December 31, 19 :
mount of contrbutons pad n year 10, 000
Carred over from prevous years _ 15,000
Tota deductbe sub|ect to mtaton 25, 000
Lmtaton appcabe to year 5.000
mount deductbe for year 25, 000
cess carred over to succeedng years None
Par. 9. Secton 29.23(p)-9, ts amended by Treasury Decson 5 36
C. . 19 5, 115 , approved February 3, 19 5 26 CF 29.23(p)-9 ,
s further amended to read as foows:
Sec. 2 ).23(p)-9. Contrbutons of an mpoyer Under an mpoyees n-
nuty Pan That Meets the Requrements of Secton 165(a)- ppcaton of
Secton 23(p)()( ). If contrbutons are pad by an empoyer n a ta abe
year begnnng after December 31, 19 1, under an annuty pan for empoyees
and the genera condtons and mtatons appcabe to deductons for such
contrbutons are satsfed (see secton 29.23(p)-), the contrbutons are de-
ductbe under secton 23(p) (1) ( ) f the further condtons provded there-
n are satsfed. For the meanng of annuty pan as used here, see secton
29.23(p)- . In order that contrbutons by the empoyer may be deducted under
secton 23(p) (1) ( ) a of the foowng condtons must be satsfed:
(a) The contrbutons must be pad toward the purchase of retrement an-
nutes (or for dsabty, severance, nsurance, or survvorshp benefts nc-
denta and drecty reated to such annutes) under an annuty pan for the
e cusve beneft of the empoyer s empoyees or ther benefcares. (See sec-
ton 29.105- o).)
(6) The contrbutons must e pad In a ta abe year of the empoyer whch
ends wth or wthn a year of the pan for whch t meets the appcabe requre-
ments wth respect to dscrmnaton set out In paragraphs (3), ( ), (5), and
(6) of secton 165(a). In order that contrbutons carred over may be deducted
In a succeedng ta abe year of the empoyer n accordance wth secton 23
(p) (1) ( ) (v), the succeedng year aso must end wth or wthn a ta abe
year of the pan for whch t meets such requrements. (See sectons 20.105-3
and 29.165- .) In the case of an annuty pan n effect on or before September
1, 19 2, the requrements of these paragraphs do not appy to any perod of
the pan wthn the ta abe year of the empoyer begnnng In 19 2 and are
consdered to be satsfed for the perod begnnng wth the begnnng of the
frst ta abe year of the empoyer foowng December 31, 10 2, and endng
une 30, 19 5, If the provsons thereof satsfy such requrements by une 30,
19 5, and f by that tme a provsons of such pan whch are necessary to
satsfy such requrements are In effect and have been made effectve for a
purposes wth respect to the porton of such perod after December 31, 19 3.
In the case of an annuty pan put nto effect after September 1, 19 2, and pror
to anuary 1, 19 5, these requrements are consdered to be satsfed for the
perod begnnng wth the date on whch t was put nto effect and endng wth
une 30, 19 5, f a provsons of the pan whch are necessary to satsfy such
requrements are n effect by the end of such perod and have been made effec-
tve for a purposes wth respect to the porton of such perod after December
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29.23(p)-

31, 19 3. In the ease of an annuty pan put nto effect after December 31,
19 , these requrements are consdered to be satsfed for the perod begnnng
wth the date on whch t was put Into effect and endng wth the 15th day
of the thrd month foowng-the cose of the ta abe year of the empoyer n
whch the pan was put nto effect, f a provsons of the pan whch are
necessary to satsfy such requrements are n effect by the end of such perod
and hare been made effectve for a purposes wth respect to the whoe of
such perod. (See secton 162(d) of the Revenue ct of 19 2, as amended by
Pubc Law o (Seventy-eghth Congress) C. . 19 5, 5 2 , approved December
20, 19 , and secton 29.165-5.
(c) There must be a defnte wrtten arrangement between the empoyer and
the nsurer that refunds of premums, f any, sha be apped wthn the ta abe
year of the empoyer n whch receved or wthn the ne t succeedng ta abe
year toward the purchase of retrement annutes (or for dsabty, severance,
nsurance, or survvorshp benefts ncdenta and drecty reated to such annu-
tes) under the pan. For the purpose of ths condton, refunds of premums
means payments by the nsurer on account of credts such as dvdends, e per-
ence ratng credts, or surrender or canceaton credts. The arrangement may
be n the form of contract provsons or wrtten drectons of the empoyer or
party n one form and party n another. Ths condton w be consdered
satsfed where (1) a credts are apped reguary as they are determned
toward the premums ne t due under the contracts before any further empoyer
contrbutons are so apped, and (2) under the arrangement ( ) no refund of
premums may be made durng contnuance of the pan uness apped as afore-
sad and ( ) f refunds of premums may be made after dscontnuance of the
pan on account of surrenders or canceatons before a retrement annutes
provded under the pan wth respect to servce pror to ts dscontnuance have
been purchased, such refunds w be apped n the ta abe year of the empoyer
n whch receved or n the ne t succeedng ta abe year to purchase retrement
annutes for empoyees by a procedure whch does not contravene the condtons
of secton 165(a) ( ).
Where the above condtons are satsfed, the amounts of deductons under
secton 23(p) (1) ( ) are governed by the mtatons provded n secton 23(p)
(1) ( ). (See sectons 29.23(p)- to 29.23(p)-8, ncusve.)
Par. 10. Secton 29.23(p)-10 26 CFR 29.23(p)-10 s amended to
read as foows:
Sec. 29.23(p)-10. Contrbutons of an mpoyer to an mpoyees Proft-
Sharng or Stock onus Trust That Meets the Requrements of Secton
105(a) ppcaton of Secton 23(p) (1) (C). If contrbutons are pad by an
empoyer n a ta abe year begnnng after December 31, 19 1, to a proft-sharng
or stock bonus trust for empoyees and the genera condtons and mtatons
appcabe to deductons for such contrbutons are satsfed (see secton 29.23
(p)-), the contrbutons are deductbe under secton 23(p)()(C) f the
further condtons provded theren are aso satsfed. In order to be deductbe
under secton 23(p) (1) (C) the contrbutons must be pad n a ta abe year of
the empoyer whch ends wth or wthn a ta abe year of the trust for whch t
s e empt under secton 165(a) and the trust must not be desgned to provde
retrement benefts for whch the contrbutons can be determned actuaray.
In order that contrbutons carred over may be deducted n a succeedng ta ab .e
year of the empoyer n accordance wth the thrd sentence of secton 23(p) (1)
(C), the succeedng year aso must end wth or wthn a ta abe year of the
trust for whch t s e empt under secton 165(a).
The amount of deductons under secton 23(p) (1) (C) for any ta abe year s
sub|ect to mtatons based on the compensaton otherwse pad or accrued dur-
ng such ta abe year to the empoyees who, n such year, are benefcares of
the trust funds accumuated under the pan. For ths purpose compensaton
otherwse pad or accrued means a of the compensaton pad or accrued e -
cept that for whch a deducton s aowabe under a pan that quafes under
secton 165(a), ncudng a pan that quafes under secton 23(p)()( ).
The mtatons under secton 23(p) (1) (C) appy to the tota amount deductbe
for contrbutons to the trust regardess of how the funds of the trust are nvested,
apped, or dstrbuted, and no other deducton s aowabe on account of any
benefts provded by contrbutons to the trust or by the funds thereof. Where
contrbutons are pad to two or more proft-sharng or stock bonus trusts sats-
fyng the condtons for deducton under secton 23(p) (1) (C), such trusts are
consdered as a snge trust n appyng these mtatons.
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5
29.23(p)-
The prmary mtaton on deductons for a ta abe year s 15 percent of the
compensaton otherwse pad or accrued durng such ta abe year to the em-
poyees who, n such year, are benefcares of the trust funds accumuated under
the pan. So ong as the contrbutons do not n any year e ceed the prmary
mtaton, ths Is the ony mtaton under secton 23(p) (1) (C) whch has any
effect.
In order that the deductons may average 15 percent of compensaton otherwse
pad or accrued over a perod of years where contrbutons n some ta abe
year begnnng after December 31, 19 1, are ess than the prmary mtaton
but contrbutons n some succeedng ta abe year e ceed the prmary mta-
ton, deductons n each succeedng year are sub|ect to a secondary mtaton
nstead of to the prmary mtaton. The secondary mtaton for any year Is
equa to the esser of (a) twce the prmary mtaton for the year, or (6)
any e cess of (1) the aggregate of the prmary mtatons for the year and
for a pror years begnnng after December 31, 19 1, over (2) the aggregate
of the deductons aowed or aowabe under tbe mtatons provded n secton
23(p) (1) (C) for a pror years begnnng after December 31, 19 1. after gvng
effect to the provsons of secton 102(d) (1) (C) of the Revenue ct of 19 2 n
computng both tems (1) and (2).
In any case where the contrbutons n a ta abe year begnnng after Decem-
ber 31, 19 1, e ceed the amount aowabe as a deducton for the year under
secton 23tp) (1) (C) after gvng effect to secton 162(d) (1) (C) of the Revenue
ct of 19 2, the e cess s deductbe n succeedng ta abe years, n order of tme,
n whch the contrbutons are ess than the prmary mtatons, so that the tota
deducton for any such succeedng year s equa to the prmary mtaton for
such year but not more than the sum of the contrbutons n such year and the
e cess contrbutons not deducted under the mtatons of secton 23(p) (1) (C)
for pror years begnnng after December 31, 19 1.
In case contrbutons are pad n the empoyer s ta abe year begnnng n 19 2
and pror to September 1, 19 2, the mtaton on deductons for such ta abe
vear s sub|ect to an e cepton provded n secton 162(d) (1) (C) of the Revenue
ct of 19 2. (See secton 29.23(p)-3.)
In case deductons are aowabe under secton 23(p) (1) ( ) or ( ), as we
as under secton 23(p) (1) (C), the mtatons under secton 23(p) (1) ( ) and
(C) are determned and apped wthout gvng effect to the provsons of secton
23(p) (1) (F but the amounts aowabe as deductons are sub|ect to the further
mtatons provded n secton 23(p)()(F). (See secton 29.23(p)-12.)
The provsons of secton 23(p) (1) (C), after effect has been gven to secton
162(d)(1)(C) of tbe Revenue ct of 19 2 but wthout gvng effect to secton
23(p) (1) (F), may be ustrated as foows:
Iustraton of /n-ovsons of secton 23(p) (I) (C) after effect has been gven to
secton G: (d) (/) (C) of the Revenue ct of 19 2 hut wthout (vng effect to
secton 23(p) (/) (F) (a fgures represent thousands of doars)
1. mount of contrbutons:
(a) In ta abe year
(6) Carred over from pror ta abe years...
2. Prmary mtaton appcabe to year:
15 percent of covered compensaton n year 1
3. Secondary mtaton appcabe to year:
(a) Twce prmary mtaton
(b) (1) ggregate prmary mtatons (see tem 2).
(2) ggregate pror deductons (see tem (c))..
ce sof()over (2).
esser of (o) or (6)
. mount deductbe for year on account of:
(a) Contrbutons n year..
(6) Contrbutons carred over
(c) Tota
. cesscontrbutonscarredoverto
Ta abe (caendar) years
10 2 19 3 19 19 5 19 6 19 7 19 S
100
0
210
III
120
255
186
297
255
80
3
30
3
83
0
Compensaton otherwse pad or accrued durng the year to the empoyees who are benefcares of trust
funds accumuated under the pan n the year.
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29.23(p)-
6
Par. 11. Secton 29.23(p)- 26 CFR 29.23(p)- s amended by
strkng out the ast sentence thereof and nsertng n eu thereof the
foowng two sentences:
If an amount s accrued but not pad durng the ta abe year, no deducton Is
aowabe for such amount for such year. If an amount s pad durng the ta abe
year but the rghts of the empoyee theren are forfetabe at the tme the amount
Is pad, no deducton s aowabe for such amount for any ta abe year.
Pah. 12. Secton 29.23(p)-12 26 CFR 29.23(p)-12 s amended to
read as foows:
Sec. 29.23 (p)-12. Contrbutons of an mpoyes Where Deductons be
owabe Undeb Secton 23(p) (1) ( ) ob ( ) and aso Under Secto.v
23(p)()(0) ppcaton of Secton 23(p)()(F). Where deductons are
aowabe under secton 23(p)() ( ) or ( ) for any ta abe year begnnng
after December 31, 19 1, on account of contrbutons under a penson or annuty
pan and deductons are aso aowabe under secton 23(p)()(C) for the
same year, on account of contrbutons to a proft-sharng or stock bonus
trust, the tota deductons under these sectons are sub|ect to the pro-
vsons of secton 23(p) (1) (F) uness no empoyee who s a benefcary
under the trusts or pans for whch deductons are aowabe under sec-
ton 23(p)() ( ) or ( ) s aso a benefcary under the trusts for
whch deductons are aowabe under secton 23(p)()(C). The provsons
of secton 23(p) (1) (F) appy ony to deductons for overappng trusts
or pans, . e., for a trusts or pans for whch deductons are aowabe
under secton 23(p) (1) ( ), ( ), or (C) e cept (a) any trust or pan for whch
deductons are aowabe under secton 23(p) (1) ( ) or ( ) and whch does not
cover any empoyee who s aso covered under a trust for whch deductons are
aowabe under secton 23(p)()(C), and (6) any trust for whch deductons
are aowabe under secton 23(p) (1) (C) and whch does not cover any empoyee
who s aso covered under a trust or pan for whch deductons are aowabe
under secton 23 (p) (1) ( ) or ( ). The mtatons under secton 23 (p) (1) (F)
for any ta abe year are based on the compensaton otherwse pad or accrued
durng the year to a the empoyees who are benefcares under the overappng
trusts or pans n the year. For ths purpose compensaton otherwse pad or
accrued means a of the compensaton pad or accrued e cept that for whch
a deducton s aowabe under a pan that quafed under secton 165(a), n-
cudng a.pan that quafes under secton 23(p)()( ). The empoyees who
are benefcares under overappng trusts or pans n a year ncude a the
empoyees who, n the year, are benefcares of the funds accumuated under
one or more of the overappng trusts or pans.
Under secton 23(p) (1) (F), any e cess of the tota amount otherwse de-
ductbe under secton 23(p)() ( ), ( ), or (C) for a ta abe year begnnng
after December 31, 19 1, for overappng trusts or pans n the year over 25
ercent of the compensaton otherwse pad or accrued durng the year to a the
empoyees who are benefcares under such trusts or pans s not deductbe for
such year but s deductbe for succeedng ta abe years, n order of tme, so
that the tota deductons for such trusts or pans for a succeedng ta abe year
Is equa to the esser of
(a) 30 percent of the compensaton otherwse pad or accrued durng the
ta abe year to a the empoyees who are benefcares under such trusts
or pans n the year, or
(6) The sum of (1) the smaer of (1) 25 percent of the compensaton
otherwse pad or accrued durng the ta abe year to a the empoyees
who are benefcares under such trusts or pans n the year, or () the
tota of the amounts otherwse deductbe under secton 23(p)() ( ),
( ), or (C) for the year for such trusts or pans, and (2) any carry-over
to the year from pror years under secton 23(p) (1) (F , I. e., any e cess
otherwse deductbe under secton 23(p) (1) ( ), ( ), or (C) for a pror
ta abe year begnnng after December 31, 19 1, but not deducted for a
pror ta abe year because of the mtatons under secton 23(p) (1) (F).
The mtatons under secton 23(p) (1) (F) are determned and apped after
a the mtatons, deductons otherwse aowabe, and carry-overs under sec-
ton 23(p)() ( ), ( ), and (C) have been determned and apped, and, In
partcuar, after effect has been gven to the carry-over provson In cause (v)
under secton 23(p)()( ) and n the second and thrd sentences of secton
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7
29.23(p)-
23(p)()(C). Where the mtaton under secton 23(p)()(F) reduce the
tota amount deductbe, the e cess deductbe n succeedng years s treated as
a carry-over whch s dstnct from and addtona to any e cess contrbutons
carred over and deductbe n succeedng years under the provsons In cause
(v) of secton 23(p) (1) ( ) or In the thrd sentence of secton 23(p) (1) (C).
The appcaton of the provsons of secton 23(p) (1) (F) and the treatment of
carry-overs for a case where the ta abe years are caendar years fnd the over-
appng trusts or pans consst of a penson trust and-a proft-sharng trust
put nto effect n 10 3 and coverng the same empoyees may be ustrated as
foows:
Iustraton of appcaton of provson of secton 23(p)()(F) and of treatment
of carry-overs for overappng penson and proft-sharng trusts put nto effect
n 10 3 and coverng the same empoyees (a fgures represent thousands of
doars)
FOR OI ING FFFCT TO S CTION 23(p)()(F)
Ta abe (caendar) years
Penson trust contrbutons and mtatons, deductons, and carry-overs under
secton 23(p)()( ):
19 3
19
10 5
19 0
215
0
85
5
1 III
60
0
20
215
210
210
SO
175
90
1 0
120
120
SO
85
80
Pront-shnrf trust contrbutons and mtatons, deductons, and carry-overs
under sect on 2:Up)()(C):
5
0
211
0
7. Contrbutons pad n year
200
0
125
35
105
10
65
0
. Tota deductbe tor year sub|ect to mtntnn
200
165
165
160
150
150
115
135
115
65
1 110
85
10. Lmtaton appcabe to year _
11. mount deductbe for year
35
10
0
0
PPLIC TION OF S CTION 23(p)()(F)
Totas for penson and proft-sharng trust:
13. mount deductbe for year under secton 23(p)()(F):
( )
300
250
2 0
270
225
235
180
150
1 5
(6) (1) () 25 percent of compensaton covered In year
275
() Tota amount otherwse deductbe for year: (5) pus (11)..
375
(I) Smaer of () or ()
275
0
2 0
100
225
0
1 5
10
(2) Carry-over from pror years under secton 23(p)()(F)
(3) Sum of ()() and (2)
275
275
3 0
300
265
265
165
155
(c) mount deductbe: Lesser of (0) or (6)(3) ..........
1 . Carry-over to succeedng years under secton 23(p)()(F):
100
0
10
0
1 Incudes carry-over of 20 from 19 5.
Compensaton otherwse pad or accrued durng the year to the empoyees who are benefcares under
the trusts n the year.
30 percent mtaton not appcabe to frst yoar of pan.
In case contrbutons are pad In the empoyer s ta abe year begnnng n 10 2
and pror to September 1, 10 2, and the deducton aowabe for such year s
Increased by the effect of secton 162(d)(1) (C) of the Revenue ct of 19 2
(see secton 20.23(p)-3), the deductons otherwse aowabe for such year under
secton 23(p)() ( ), ( ), or (C) are consdered to be those aowabe after
gvng effect to the provsons of secton 162(d)(1)(C) of the Revenue ct of
19 2 severay for the severa overappng trusts or pans n such year and the
mtaton appcabe to such year under secton 23(p)()(F) s not ess than
the sum of (a) the amounts pad n such ta abe year pror to September 1,
19 2, to or under the overappng trusts or pans and deductbe under secton
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29.25-3
8
23(a) or 23(p) pror to amendment by secton 162(d) of the Revenue ct of
19 2, and (6) so much of the amounts pad n such ta abe year on or after
September 1, 19 2, to or under such trusts or pans as does not e ceed that
proporton of 25 percent of the compensaton otherwse pad or accrued durng
such ta abe year to a empoyees who are benefcares under such trusts or
pans n the year, whch the number of months n such ta abe year after ugust
31, 19 2, bears to 12.
Par. 13. Ths Treasury Decson sha be effectve on the thrty-
frst day after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 23(p), 62, and 3791 of the Interna Revenue Code (56 Stat.
863,53 Stat. 32, 67; 26 U. S. C. 23 (p), 62,3791).)
Fred S. Martn,
ctng Commssoner of Interna Revenue.
pproved November 2,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster November 6, 19 8)
S CTION 2 . IT MS NOT D DUCTI L
Secton 29.2 -2: Capta e pendtures.
INT RN L R NU COD
Massachusetts ta on meas pad by purchasers. (See I. T. 3915,
page 30.)
S CTION 25. CR DITS OF INDI IDU L
G INST N T INCOM
Secton 29.25-3: Persona e empton, surta 19 8-22-129 6
e emptons, and e emptons for both norma I. T. 3926
ta and surta .
( so Secton 21 , Secton 29.21 -1; Secton
0 , Secton 29. 0 -1.)
INT RN L R NU COD
n aen, not a resdent of a contguous country, whose status
changed durng the ta abe year 19 6 from that of a nonresdent
aen engaged n trade or busness wthn the Unted States to that
of n resdent aen s entted, for 19 6, to an e empton of 500 for
hmsef and e emptons of 500 each for hs wfe and hs dependents;
however, the tota of the e emptons aowabe wth respect to the
ta payer s wfe and dependents may not e ceed the ta payer s
net ncome for the perod durng whch he was a resdent aen.
Such a ta payer s not entted to compute hs ta for 19 6 or
any part thereof under secton 00 of the Interna Revenue Code.
dvce s requested as to (1) the e emptons aowabe under sec-
ton 25(b) of the Interna Revenue Code for the ta abe year 19 6,
and (2) the appcabty of secton 00 of the Code, n the case of a
ta payer wth a wfe and dependent daughter where the ta payer s
status changed on September 1, 19 6, from that of nonresdent aen,
not a resdent of a contguous country, engaged n trade or busness
wthn the Unted States to that of resdent aen.
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9
29.25-3
In the nstant case, the ta payer s entre ncome for 19 6 conssted
of saary ( 2,666.6 ) receved tor servces performed n the Unted
States. In hs Federa ncome ta return, Form 10 0, the ta payer
reported hs saary, whch consttuted hs entre net ncome, camed
tota e emptons of 1,500 for hmsef, hs wfe (who had no ncome),
and hs dependent daughter, and computed the ta pursuant to sec-
ton 00 of the Code.
In the case of a ta payer who, durng the ta abe year, changes hs
status from that of a nonresdent aen to that of a resdent ahen| or
from that of a resdent aen or ctzen to that of a nonresdent aen,
the Federa ncome ta wth respect to ncome for the perod durng
whch the ta payer was a nonresdent aen must be computed pur-
suant to the provsons of aw reatng to such ndvduas, whereas
the ta wth respect to ncome for the perod durng whch the ta -
payer was a resdent aen or ctzen must be computed pursuant to
the provsons reatng to them. (See G. C. M. 906 , C. . -,
31 (1931), and I. T. 3237, C. . 1938-2,188.) In such a case, ony one
return need be fed. (See G. C. M. 10759, C. . I-2, 99 (1932), and
I. T. 3237, supra.)
Under the aw appcabe to ta abe years begnnng pror to anu-
ary 1, 19 , f the status of a ta payer, nsofar as t affected the per-
sona e empton or credt for dependents to whch the ta payer was
entted, changed durng the ta abe year, the persona e empton
and credt for dependents were sub|ect to apportonment. (See
secton 25(b) (3) of the Interna Revenue Code pror to amendment
by secton 103 of the Revenue ct of 19 3; see aso I. T. 28 7, C. .
-1, 1 8 (1935).) s appcabe to ta abe years begnnng after
December 31, 19 3, the Interna Revenue Code does not provde for
apportonment of e emptons where the status of the ta payer changes
durng the ta abe year.
Secton 0 of the Interna Revenue Code provdes n part that
Suppement T, the provsons reatng to ta aton of ndvduas under
secton 00 of the Code, sha not appy to a nonresdent aen. In
Senate Report No. 673, Part 1, Seventy-seventh Congress, frst sesson
(C. . 19 1-2, 66, at 87), on the Revenue of 19 1, the foowng
statement s made:
Secton 0 provdes that Suppement T sha not appy to a nonresdent
aen Indvdua, or an estate or trust. Ths provson Is aso necesstated n
the Interest of smpcty. Such ta payers are sub|ect to speca provsons of
the statute that are not ready adaptabe to the method of ta aton empoyed
In Suppement T.
For the reasons stated n the Senate report, t s not beeved that
secton 00 of the Code s appcabe to a ta payer who was a non-
resdent aen durng any part of the ta abeyear. It s beeved that
Congress ntended that secton 00 of the Code woud be appcabe
ony n the case of an ndvdua who was a ctzen or resdent aen
durng the entre ta abe year.
The ta payer n the nstant case, a nonresdent aen engaged n
trade or busness n the Unted States for the frst eght months of
19 6, s sub|ect to Federa ncome ta n accordance wth the provsons
of secton 211(b) of the Code and, n accordance wth secton 21 of
the Code, 9 entted, nsofar as the perod durng whch he was a
nonresdent aen s concerned, to an e empton for hmsef ony. s
a resdent aen for the ast four months of 19 6, he s entted to add-
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( 29. 3-2
50
tona e emptons for hs wfe and dependent daughter. owever,
these e emptons, athough not requred to be apportoned, cannot
e ceed the ta payer s net ncome for the perod durng whch he was
a resdent aen. The ta payer s net ncome for that perod amounted
to 888.88. To aow more than that amount woud n effect gve the
ta payer more than one e empton for the perod durng whch he was
a nonresdent aen. ccordngy, the tota e emptons aowabe to
the ta payer n respect of hs wfe and daughter cannot e ceed 888.88.
Computaton of the ta s as foows:
Saary, anuary 1, 19 6. to ugust 81, 19 6 (nonresence perod) 1, 777. 70
Saary, September 1,19 6, to December 31,19 6 (resdence perod) 888.8S
Net ncome 2, 666.6
emptons:
Ta payer t. 500. 00
Wfe and daughter ( 1,000.00 mted to ncome durng
resdence perod) 888.88
1, 388. 88
Norma and surta net ncome 1, 27 . Tf
Tentatve surta at 17 percent 217.22
Tentatve norma ta at 3 percent 38.33
255. 55
Less: 5 percent of 255.55 . 12- 7)5
Combned norma ta and surta 2 2. 77
s ndcated above, the ta payer s not entted to determne hs
ta abty for 19 6 under secton 00 of the Code.
S CTION 27 (). CORPOR TION DI ID NDS P ID
CR DIT: NONT L DISTRI UTIONS
Secton 29.27()-: Nonta abe dstrbutons.
INT RN L R NU COD
Reguatons 111 amended. (See T. D. 5670, page 6 .)
P RT I . CCOUNTING P RIODS ND M T ODS OF CCOUNTING
S CTION 3. P RIOD FOR W IC D DUCTIONS
ND CR DITS T N
Secton 29. 3-2: When charges deductbe. 19 8-18-12913.
I. T. 3920
INT RN L R NU COD
The Rhode Isand busness corporaton ta mposed by chapter 37,
as amended, of the Rhode Isand genera aws accrues, for Federa
ncome ta purposes, at the cose of the caendar or fsca year for
whch mposed and, n the case of a ta payer whch keeps ts books
and fes ts Federa ncome ta returns on the accrua bass, s
deductbe for that year. In the case of a ta payer whch keeps ts
books and fes ts Federa ncome ta returns on the cash recepts
and dsbursements bass, the ta s deductbe for the ta abe year
n whc pad.
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51
29.51-1
dvce s requested as to when the busness corporaton ta mposed
by chapter 37, as amended, of the Rhode Isand genera aws s deduc-
tbe for Federa ncome ta purposes. The amendatory act n ques-
ton was passed by the State Genera ssemby at the anuary sesson,
19 7, became effectve May 28, 19 7, and was retroactve to anuary
1, 19 7.
Secton 2 of chapter 37, as amended, of the Rhode Isand genera aws
provdes as foows:
Sec. 2. Imposton of Ta . very corporaton sha annuny pay to the State
a ta equa to
(1) three per centum (3 ) of Its net ncome, as defned n secton 5. and
apportoned to ths State as provded n secton 6, for the ta abe year;
provded, however, that for the caendar years 1017 and 19 8 and for portons
of fsca years fang wthn 10 7 and 19 S, such rate sha be four per
centum ( r/r) ; or
(2) forty cents ( 0c) for each one hundred doars ( 100) of the amount
of ts corporate e cess, as defned n secton 7, as of the ast day of the
ta abe year, whchever amount sha yed the greater ta .
Secton 1(c) of the Rhode Isand statute defnes the term ta abe
year as the caendar year or the fsca year endng durng such caen-
dar year upon the bass of whch the net ncome s computed under
chapter 37. Secton 1 (c) further provdes that n the case of a return
made for a fractona part of a year, ta abe year means the perod
for whch such a return s made. Secton 1 (e) of the statute provdes
that the frst ta abe year sha be the caendar year 19 7 or the porton
n 19 7 of any fsca year endng n 19 7.
Secton 23(c) of the Interna Revenue Code provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad or
accrued wthn the ta abe year, wth certan e ceptons not here
matera.
The Rhode Isand busness corporaton ta s based on net ncome
for the ta abe year or on the amount of corporate e cess as of the
ast day of the ta abe year, whchever yeds the greater ta . There-
fore, n the case of a ta payer empoyng the accrua method of ac-
countng, the Rhode Isand ta accrues, for Federa ncome ta pur-
poses, at the cose of the ta abe year, caendar or fsca, at whch tme
a the events have occurred whch f the ta payer s abty for the
ta wthn the rue ad down n Unted States v. nderson et a. (2(59
U. S. 22, T. D. 3839, C. . -, 179 (1926)), and t s deductbe for
such year. In the case of a ta payer empoyng the cash recepts and
dsbursements method of accountng., the ta s deductbe for the
ta abe year n whch t s actuay pad.
P RT . R TURNS ND P YM NT OF T
S CTION 51. INDI IDU L R TURNS
Secton 29.51-1: Indvdua returns. 19 8-16-12889
I. T. 3916
INT RN L R NU COD ND PRIOR R NU L WS
husband and wfe who are Unted States ctzens and who are
domced n the Phppne Isands may each report n a separate
Federa Income ta return one-haf of the communty Income.
I. T. 1297 (C. . 1-1, 235 (1 ) 2)) revoked and I. T. 3173 (C. .
1938-1, 160) modfed.
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29.51-1
52
Reconsderaton has been gven to I. T. 1297 (C. . 1-1,235 (1922))
and I. T. 3173 (C. . 1938-1, 160) n the ght of the decsons n
Commssoner v. Cadwaader (127 Fed. (2d) 5 7) and everng v.
Campbe (139 Fed. (2d) 865). I. T. 1297, supra, ad down certan
rues concernng the reportng of ncome, for Federa ncome ta
purposes, by Unted States ctzens domced n the Phppnes.
That rung was modfed by I. T. 3173, supra, wth respect to ncome
from the wfe s parapherna property. owever, I. T. 3173, supra,
reaffrmed the ureau s poston, as e pressed n the earer rung,
namey, that the communty ncome of Unted States ctzens dom-
ced n the Phppnes may not be reported one-haf by the husband
and one-haf by the wfe, but s returnabe n ts entrety by the
husband.
I. T. 1297, supra, was based upon a 1918 decson (Madrga and
Paterno v. Rafferty and Concepcon (38 Phppne 1 )) of the
Phppne Supreme Court hodng that, for the purposes of the
Unted States ncome ta as e tended to the Phppne Isands n
1913, the ncome of the con|uga partnershp was reportabe n fu
by the husband. ven though the Phppne court cted pror de-
csons of that court n Nobe ose v. Name ose ( 1 Phppne 713)
and n Manue and La amana v. Losano ( 1 Phppne 855) and
regarded them as havng hed that the wfe has ony an nterest
nchoate, a mere e pectancy n the communty property durng the
e stence of the con|uga partnershp, and obtans no absoute n-
terest theren pror to the dssouton of the partnershp, the qudaton
of ts assets, and the settement of ts debts, ths concuson was pre-
ceded by what the court descrbed as genera observatons reatve
to the Income Ta Law n force n the Phppne Isands. Incuded
n ths dscusson of the background and theory of the Federa ncome
ta aw was a statement to the effect that the purposes of such aw
coud not be defeated by provsons of the oca aw deang wth
the con|uga partnershp. The court, after quotng a rung of the
Commssoner of Interna Revenue, as we as a then e stent Treasury
reguaton that appears to amount to a compusory requrement for
|ont returns wthout regard to the communty property queston,
stated that great weght must be gven to the nterpretatons of
the Federa ncome ta aw by the offcas charged wth ts admns-
traton. These comments have produced the vew that n the Madrga
case the court was chefy nfuenced by a convcton that the oca aw
woud n any event be superseded by the Federa ncome ta aw.
Thus, n everng v. Campbe, supra, the Unted States Crcut
Court of ppeas for the Fourth Crcut sad that the Madrga de-
cson was not of mportance because of the subsequent decson of
the Unted States Supreme Court n Poe v. Seaborn (282 U. S. 101, Ct.
D. 259, C. . I -2, 202 (1930)), whch hed that the answer to the
queston concernng the nature of the wfe s nterest must n each
case be found n the oca aw.
In the earer decson n Commssoner v. Cadwaader, supra, a
Federa estate ta case, the Unted States Crcut Court of ppeas
for the Nnth Crcut stated that Gbbs v. The Government of the
Phppne Isands (59 Phppne 293) sets fort the correct char-
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29.51-1
acterzaton of the wfe s nterest n communty property under the
Phppne aw, and the Madrga case was consdered to be ncon-
cusve. The Gbbs case hed that the Phppne nhertance ta
was due on the passng of the wfe s nterest n communty property
to her husband upon her death, and the court sad (pages 301 and
302) that the wfe, upon the acquston of any con|uga property,
becomes mmedatey vested wth an nterest and tte theren equa
to that of her husband, sub|ect to the power of management and
dsposton whch the aw vests n the husband. Immedatey upon
her death, f there are no obgatons of the decedent, her
share n the con|uga property s transmtted to her hers by succes-
son. The court concuded that the wfe was vested of a descendbe
nterest, equa to that of her husband, n the Phppne ands
from the date of ther acquston to the date of her death.
Thereafter, n everng v. Campbe, supra, the court stated that
t had e amned the appcabe Phppne decsons, and t agreed wth
the concuson n Commssoner v. CadwaUader, supra, that the Gbbs
case s the controng Phppne decson. The court accepted the
proposton that the wfe acqures a haf nterest n communty prop-
erty mmedatey upon ts acquston by the communty and not a
mere nchoate e pectancy.
In the CadwaUader case, the court went to great engths to demon-
strate that the Phppne Supreme Court n the ose and Manue de-
csons dd not actuay hod that the wfe had ony a mere e pectancy.
It took nto consderaton the case of Onas v. avo (59 Phppne
733), decded by the Phppne Supreme Court about three months
after the Gbbs case, and noted that the Phppne court dd not refer
to the Gbbs case athough the nature of the wfe s nterest n com-
munty property was nvoved. It aso noted that the Phppne
court cted the ose case as authorty for the statement that the wfe
has a mere e pectancy pror to qudaton. The court ponted out,
however, that the Phppne court actuay decded n Onas v. avo,
supra, that the hers of the wfe coud mantan an acton for partton
of comnuntv rea property after the death of the wfe, notwthstand-
ng there had been no qudaton, and thus reasoned that the decson
was n harmony wth the decson n the Gbbs case. The court s ana-
yss was unquafedy endorsed n the Campbe case.
In vew of the foregong, t s hed that a husband and wfe who are
Unted States ctzens and who are domced n the Phppne Isands
may each report n a separate Federa ncome ta return one-haf of
the communty ncome. ccordngy, I. T. 1297, supra, s revoked, and
I. T. 3173, supra, s modfed to conform to the vested nterest theory
as e pounded bv the decsons n the CadwaUader and Campbe cases.
Ths rung, however, shoud not be consdered as affectng rungs
reatng to other communty property |ursdctons snce t rees upon
the doctrne e pressed n Poe v. Seaborn, supra, to the effect that the
oca nterpretaton of oca aw governs. (See I. T. 1 79, C. . 1-2,
172 (1922), reatng to Cuba: I. T 1513, C. . 1-2,1 9 (1922), reatng
to Span; I. T. 16 0. C. . II-1, 1 5 ( )2.f), reatng to Me co; and
I. T. 1763, C. . II-2, 180 (1923), reatng to the rgn Isands.)
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29.51-1
5
Secton 29.51-1: Indvdua returns. 19 8-19-12921
L T. 3922
INT RN L R NU COD
That part of the Income receved durng the perod of admn-
straton by the estate of a deceased husband who ded whe
domced In New Me co whch Is derved from the survvng wfe s
share (f communty property s ta abe to the wfe for Federa
ncome ta purposes.
dvce s requested reatve to the ta abty of ncome receved
from communty property n the State of New Me co after the
husband des and durng the process of admnstraton of hs estate.
Under secton 68- 03 of the 1929 New Me co Statutes nnotated,
the husband, durng coverture, has the management, contro, and
the soe power of dsposton, other than testamentary, of the persona
property of the communty, but the husband and wfe must |on n
a deeds and mortgages affectng rea estate. The nterest of the
wfe n the communty property s a vested nterest. (See eas v.
res, 25 N. M. 59. 185 Pac. 780; aca v. age of e en et aL, 30
N. M. 5 1, 2 0 Pac. 803; ernandez v. ecker, 5 Fed. (2d) 5 2.)
Upon the death of the husband, one-haf of the communty property
goes to the survvng wfe and the other haf s sub|ect to the testa-
mentary dsposton of the husband. In the absence of such dspos-
ton, the husband s haf goes one-fourth to the survvng wfe and
the remander n equa shares to the chdren of the decedent and
further as provded by aw. (See sec. 38-105 of the 1929 New Me co
Statutes nnotated.)
In vew of the foregong, the prncpe enuncated n G. C. M. 25008
(C. . 19 6-2, 9) to the effect that That part of the ncome receved
durng the perod of admnstraton by the estate of a deceased hus-
band, who ded whe domced n Caforna, whch s derved from
the survvng wfe s share of communty property s ta -
abe to the wfe for Federa ncome ta purposes, s controng. It
s accordngy hed that that part of the ncome receved durng the
perod of admnstraton by the estate of a deceased husband who ded
whe domced n New Me co whch s derved from the survvng
wfe s share of communty property s ta abe to the wfe for Federa
ncome ta purposes.
Secton 29.51-1: Indvdua returns. 19 8-25-12976
G. C. M. 25812
INT RN L R NU COD
husband and wfe who empoy dfferent accountng methods may
fe a |ont Federa ncome ta return aggregatng ther gross n-
comes and deductons as determned pursuant to ther respectve
accountng methods f such methos ceary or accuratey refect
ther ncome.
n opnon s requested whether a husband and wfe who empoy
dfferent accountng methods are precuded from fng a |ont Federa
ncome ta return aggregatng theren ther gross ncomes and deduc-
tons as determned pursuant to ther respectve accountng methods.
Secton 1 of the Interna Revenue Code provdes n part as foows:
The net ncome sha be computed upon the bass of the ta payer s annua ac-
countng perod (fsca year or caendar year, as the case may be) In accordance
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29 51-1
wth the method of accountng reguary empoyed In keepng the books of such
ta payer; but If no such method of accountng has been so empoyed, or f the
method empoyed does not ceary reect the ncome, the computaton sha be
made n accordance wth such method as n the opnon of the Commssoner does
ceary refect the ncome.
Secton 29. 1-1 of Reguatons 111 provdes n part as foows:
The tme as of whch any tem of gross ncome or any deducton s
to be accounted for must be determned n the ght of the fundamenta rue that
the computaton sha be made n such a manner as ceary refects the ta payer s
ncome. If the method of accountng reguary empoyed by hm n keepng hs
books ceary refects hs ncome, t s to be foowed wth respect to the tme as
of whch tems of gross ncome and deductons are to be accounted for. (See
sectons 29. 2-1 to 29. 2-3, ncusve.)
In The Massachusetts Mutua Lfe Insurance Co. v. Unted States
(288 U. S. 269 Ct. D. 638, C. . II-1,286 (1933)), t s stated: It s
setted beyond cav that ta payers other than nsurance companes
may not accrue recepts and treat e pendtures on a cash bass, or vce
versa. Nor may they accrue a porton of ncome and dea wth the
remander on a cash bass, nor take deductons party on one and party
on the other bass. In Unted States v. P. C. nderson et at. (269
U. S. 22, T. D. 3839, C. . -, 179 (1926)), t was defntey ndcated
that ta payers may not make returns upon a bass of recepts and
dsbursements as to some tems and accrua as to other tems, as such a
return woud not refect true net ncome. In Unted States v. ohn .
Mtche et a, ecutors (271 U. S. 9, T. D. 3865, C. . -, 233
(1926)), t was stated, wth respect to the accounts of an estate whch
t was assumed were kept on the bass of actua recepts and dsburse-
ments, that the e ecutors were requred to make a return on that bass
and coud not deduct for 1919 ta es whch accrued n that year but
were not pad unt 1920. It was aso stated: It s a reasonabe con-
structon of the aw that the same method be apped to both sdes of the
account. In The ygenc Products Co. v. Commssoner (111 Fed.
(2d) 330, certorar dened, 311 U. S. 665), the court sad: Pettoner
characterzes ts system of accountng as hybrd. No such system,
however, s recognzed by the ct; uness the system conforms to one
method, t does not refect ncome n accordance wth the ct, and the
Commssoner s empowered to make such correctons as are necessary
to make the return accuratey refect ncome.
The Commssoner has, however, been sustaned n resortng to the
use of a hybrd method n determnng net ncome where the ta payer
was engaged n severa dfferent enterprses and empoyed no partcu-
ar method of accountng whch woud ceary refect ncome, hs
records were such that t was mpossbe to ascertan ncome on ether a
cash recepts and dsbursements bass or on an accrua bass (hs books
havng been kept on nether bass but on a combnaton of both), there
was no voucher system, and memoranda upon whch the bookkeepng
entres were based had been destroyed. (See S. . Moore v. Unted
States, 6 Fed. Supp. 8 7.) Where a ta payer owned a ranch for whch
t kept a separate set of books on the cash bass, the Commssoner was
sustaned n dsaowng as deductons, to the e tent not pad n the
ta abe years nvoved, amounts of nterest accrued on certan bonds
of a recamaton dstrct n whch the ranch was ocated (whch nter-
est, under an agreement, woud consttute a en on the ranch prop-
erty), athough the ta payer entered the accrued nterest on ts ranch
books and may have kept books on an accrua bass wth respect to
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56
other enterprses whch t conducted. (See rch Ranch and O Co.
v. Commssoner, 152 Fed. (2d) 87 , certorar dened, 328 U. S. 863.)
so, where a ta payer acqured a schoo book depostory busness and
kept the books therefor on an accrua bass (as they had been kept for
severa years by a pror owner), the Commssoner was sustaned n
determnng hs ncome from the busness on the accrua bass
athough, as stated by the court, the pettoner consdered hmsef
personay upon a cash bass and may have kept records of other
ncome on such bass. (See erryman D. Fncannon v. Comms-
soner, 2 T. C. 216.) The Ta Court reed upon the decson n
Cornea . Cec v. Commssoner (37 . T. . 90 , affrmed on ths
ssue, 100 Fed. (2d) 896). In that case, certan State ta es on the
ta payer s arge estate, operated by her as a museum, park, and dary,
the books for whch were reguary kept on an accrua bass, were hed
to be deductbe for the ta abe year 1930 when they accrued and not
for the ta abe year 1931 when they were pad, athough she had
substanta tems of ncome and deductons from other sources whch
were accounted for and returned on a cash bass.
In oseph Stern et a. v. Commssoner (1 . T. . 838, acques-
cence, C. . III-2, 50 (1929)), t was hed, where the two ndvdua
ta payers owned and operated, as partners, two dstncty separate
busnesses, one beng reta merchandsng and the other buyng and
seng ands, the books for each busness beng kept separatey but
those for the mercante busness beng kept on an accrua bass and
those for the and busness on a cash bass, that the system used for
each busness refected accuratey ncome therefrom and, hence, that
the use of a dfferent accountng system for each busness was proper
for Federa ncome ta purposes.
In enry W. Taft et u . v. everng (311 U. S. 195, Ct. D. 1 78,
C. . 19 0-2, 218), t was hed that a husband and wfe who fed
|ont returns for 193 and 1935 were entted to deduct theren ther
combned chartabe contrbutons mted to 15 percent of ther com-
bned net ncome for each ta abe year (before deductng contrbu-
tons). The Commssoner had determned that deductons n the
|ont returns on account of the separate chartabe contrbutons of
each spouse shoud be mted to 15 percent of hs or her separate net
ncome for each ta abe year (before deductng contrbutons). The
Court espoused the prncpe that the |ont return s to be treated as
the return of a ta abe unt and as though t were made by a snge
ndvdua, and sad: The prncpe of a |ont return permtted
aggregaton of ncome and deductons and thus overrode the mta-
tons ncdent to separate returns. It s thus mpct that the Court
n the Taft case dsapproved aggregaton, n a Tont return, of sep-
aratey computed net ncomes of the spouses. owever, ts hodng
that aggregaton n a |ont return of the ncome and deductons of
the spouses was proper does not precude accountng for, and deter-
mnaton of, the ncome and deductons of one spouse n accordance
wth a dfferent accountng method than that used for such purposes
by the other spouse. In everng v. Water C. anney et a. (311
U. S. 189, Ct. D. 1 79, C. . 19 0-2, 220), t was hed that where a
husband and wfe fed a |ont return for 193 , capta osses of one
spouse were deductbe from the capta gans of the other. ppy-
ng the same prncpe as that n the Taft case, supra, the Court sad:
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57
29.61-2
In that vew the deductons to whch ether spouse woud be entted
woud be taken, n the case of a |ont return, from the aggregate gross
ncome. See aso Treasury Decson 5057 (C. . 19 1-2, 97) whch
amended severa reguatons to conform to the prncpes set forth n
the anney and Tart decsons, supra.
In vew of the foregong, t s the opnon of ths offce that a hus-
band and wfe who empoy dfferent accountng methods may fe a
|ont Federa ncome ta return aggregatng ther gross ncomes and
deductons as determned pursuant to ther respectve accountng
methods f such methods ceary or accuratey refect ther ncome.
Ths concuson s beeved to be proper for ta abe years wth respect
to whch the Interna Revenue Code amendments made by the Revenue
ct of 19 8 are appcabe, as we as for pror ta abe years.
Chares O phant,
Chef Counse, ureau of Interna Revenue.
Secton 29.51-2: Form of return. 19 8-19-12922
T. D.56 9
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 29.
INCOM T ; T L Y RS GINNING FT R D C M R 81, 10 1
mendng secton 29.51-2 of Reguatons 111, reatng to ncome
ta returns of ndvduas.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
On uy 29, 19 8, notce of proposed rue makng, regardng the n-
come ta return forms to be used by ndvduas, was pubshed n
the Federa Regster (13 F. R. 361). fter consderaton of a such
reevant matter as was presented by nterested persons regardng the
proposa, the foowng amendments to Reguatons 111 26 CFR,
Part 29 are hereby adopted. These amendments are desgned to
prescrbe the ncome ta return forms to be used by ndvduas for
ta abe years begnnng after December 31, 19 7.
Secton 29.51-2 of Reguatons 111, as amended by Treasury De-
cson 5 25 C. . 19 5, 10 , approved December 29, 19 26 CFR
29.51-2 s further amended as foows:
( ) y changng December 31, 19 3 appearng n the headng
of subsecton (o) and esewhere n such subsecton to read December
31,19 3, and pror to anuary 1,19 8.
( ) y addng at the end of such secton 29.51-2 the foowng
new subsecton:
(c) Tamabe years begnnng after December SI, 19 7. .(1) Genera. For
ta abe years begnnng after December 31, 19 7, the return sha be on Form
10 0, e cept n the case of a ta payer entted to eect, and who so eects, to
use the Form 1O 0 n accordance wth the rues prescrbed n subsecton (c)
(2) of ths secton. ta payer, even though entted to use Form 10 0 for
the ta abe year may, nevertheess, use Form 10 0 as hs return. Such ta payer
otherwse entted to use Form 10 0 as hs return for the ta abe year but
who does not desre to take the standard deducton provded n secton 23 (aa)
s requred to use Form 1O 0 as hs return for such ta abe year. The provsons
of subsecton (a) of ths secton Insofar as they appy to the tme and manner
S20S3 13 5
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S 29.53-1
58
of makng a return on Form 10 0 are equay appcabe to ta abe years begn-
nng after December 31. 19 7.
(2) Use of optona return on Form 10 0 ; n genera. For ta abe years
begnnng after December 31, 19 7, an Indvdua entted to eect to pay the ta
Imposed by Suppement T (e cept a ta payer makng hs returns on a fsca
year bass) may at hs eecton use as hs return Form 10 0 provded hs
gross ncome s ess than 5,000, conssts entrey of remuneraton for persona
servces performed by hm as an empoyee, dvdends, or Interest, and hs gross
ncome from sources other than wages, as defned n secton 1621(a), does not
e ceed 100. ta payer who makes hs return on a bass other than the
cash recepts and dsbursements bass may not use Form 10 0 as hs return.
ta payer who has made payments of estmated ta for a ta abe year may
not use Form 10 0 as hs return for such year. In the case of marred persons
domced In a communty property State, Form 10 0 may not be used as a
return by ether spouse uness the aggregate gross ncome of husband and wfe
meets the tests prescrbed above and they make a ont return. If they desre
to fe separate returns, Form 10 0 must be used.
n eecton to make a return on Form 10 0 sha be e ercsed by propery
e ecutng and fng such form, to whch sha be attached a Forms W-2 re-
ceved for the ta abe year, wth the coector on or before the due date of
the ta payer s return. Such Form 10 O , when fed out and e ecuted and
havng attached thereto a Forms W-2 receved wth respect to wages pad n
the ta abe year, sha, when tmey fed, consttute such ndvdua s return
for such year If he Is egbe under secton 51(f) to use the optona return.
(3) ont return of husband and wfe on Form IO O . If durng the ta abe
year ether husband or wfe, or both, derve ncome from wages, as defned
n secton 1621(a), and are furnshed one or more Forms W-2, and the aggregate
gross ncome of both spouses s ess than 5,000, conssts soey of remuneraton
for servces performed as an empoyee, dvdends, or Interest, and ncudes a
tota of not more than 100 from dvdends, Interest, and remuneraton for
persona servces other than such wages, the spouses may fe a |ont return
on Form 10 0 sgned by both spouses, and a Forms W-2 receved by bot
spouses for the ta abe year shoud bo attached thereto.
The ta computed by the coector upon the bass of a ont return on Form
10 0 sha be the esser of the foowng amounts:
(I) a ta computed as though the return on Form 10 0 consttuted the
separate returns of the spouses, and
() a ta computed as though the return on Form 10 0 consttuted a
|ont return.
If a ont return s made by husband and wfe on Form 10 0 , the abty
for the ta sha be |ont and severa.
(Ths Treasury Decson s ssued under the authorty of secton
62 of the Interna Revenue Code (53 Stat. 32; 26 U. S. C. 62).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved ugust 25, 19 8.
ohn S. Graham,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster ugust 30, 19 8, 8: 6 a. m.)
S CTION 53. TIM ND PL C FOR
FILING R TURNS
Secton 29.58-1: Tme for fng returns. 19 8-22-1295
T. D.5662
TITL 28 INT RN L R NU . C PT R I, SU C PT R , P RT 29. IN-
COM T ; T L Y RS GINNING FT R D C M R 31, 19 1
Reguatons 111 amended Tme for fng fna returns of
decedents.
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( 29.57-1
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D.C.
To Coectors of Interna Revenue and Others Concerned:
On ugust 1 , 19 8, notce of proposed rue makng regardng the
tme for fng the fna ncome ta return of a decedent for a frac-
tona part of the year was pubshed n the Federa Regster (13 F. R.
712). No ob|ecton to the rues proposed havng been receved, the
foowng amendments to Reguatons 111 (26 CFR, Part 29) are
hereby adopted. The amendments are desgned to provde a unform
rue so that the tme for fng the fna ncome ta return of a decedent
s the tme the return woud have been due had death not occurred,
regardess of whether pror to hs death the decedent made hs returns
on the fsca year bass or the caendar year bass.
Paragraph 1. Secton 29.53-1 of Reguatons 111, as amended by
Treasury Decson 5616 C. . 19 8-1, 58 , approved May 20, 19 8
26 CFR 29.53-1 , s further amended as foows:
( ) y nsertng n subdvson ( ) thereof after fractona part
of a year the foowng: endng pror to anuary 1, 19 ).
( ) y nsertng n subdvson (5) thereof after fractona part
of a year the foowng: endng n 19 7 or 19 8.
(C) y redesgnatng subdvson (6) thereof as subdvson (7).
(D) y nsertng mmedatey after subdvson (5) thereof the
foowng new subdvson:
(6) In the case of a fna return of a decedent for a fractona part of a year
endng In 19 9 or thereafter, on or before the 15th day of the thrd month
foowng the cose of the 12-month perod whch began wth the frst day of such
fractona part of the year.
Par. 2. Ths Treasury Decson sha be effectve on the thrty-frst
day after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 02 and 3791 of the Interna Revenue Code (53 Stat. 32, 67,
26 U.S. C 62,3791).)
Fred S. Martn,
ctng C omna noner of Interna Revenue.
pproved October 21, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster October 28, 19 8)
S CTION 57. MIN TION OF R TURN ND
D T RMIN TION OF T
Secton 29.57-1: amnaton of return and 19 8-18-1291
determnaton of ta by the Commssoner. Mm. 6293
Grantng of hearngs n Washngton where nterna revenue
agent n charge refers ssue to Washngton for technca advce.
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29.57-1
60
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. C, ugust 5, 19 f8.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
1. (a) When, durng the course of e amnaton of an ncome,
profts, estate, or gft ta return, the nterna revenue agent n charge
of the fed dvson havng |ursdcton of a case decdes that t n-
voves an ssue requrng technca advce from the ureau, the ta -
payer or hs representatve shoud, e cept as provded n paragraph
, be advsed by the nterna revenue agent m charge (1) that he
proposes to refer the ssue to Washngton for advce and (2) that
f the ta payer or hs representatve so desres, a hearng w be
granted n Washngton, n the event of an adverse decson, before
a representatve of the Deputy Commssoner of the Income Ta
Unt or a representatve of the Deputy Commssoner of the Ms-
ceaneous Ta Unt, dependng upon the character of the case n-
voved. The ta payer shoud be afforded an opportunty to submt,
wthn a specfed number of days, a bref or the facts, aw, and
arguments, whch bref w be transmtted to Washngton as an
attachment to the etter requestng advce on the ssue.
(b) The request from the nterna revenue agent n charge for
technca advce on an ssue shoud ncude a statement ndcatng
(1) whether the ta payer or hs representatve has been nformed
of the reference of the ssue to Washngton, and (2) whether the
ta payer or hs representatve, n the event of an adverse decson,
desres a hearng n Washngton before a representatve of the agency
havng responsbty for consderng and furnshng advce on the
ssue. If the ta payer or hs representatve has submtted a bref
for concurrent transmtta wth the etter requestng advce on the
ssue, the etter shoud state whether the nterna revenue agent
concurs wth the statement of facts theren.
2. If the ta payer or hs representatve has ndcated a desre for
a hearng, the Washngton offce concerned w advse the ta payer
or hs representatve of the tme and pace of the hearng f a de-
cson adverse to the ta payer s ndcated on the bass of the record
n the case. When deemed necessary or advsabe, the presence of
a representatve of the nterna revenue agent n charge at the con-
ference w be requested.
3. ny decson reached as a consequence of consderaton of the
ssue w be set forth n a etter addressed to the nterna revenue
agent n charge, prepared for the sgnature of the Deputy Comms-
soner of the unt havng responsbty for furnshng advce to the
nterna revenue agent n charge.
. The provsons of ths mmeograph w not be appcabe to
requests for advce reatng to matters prmary of nterna con-
cern, or n nstances where t woud be pre|udca to the nterests
of the ureau to appy such procedure; for e ampe, cases nvovng
fraud or |eopardy assessment.
5. pror nstructons are modfed to the e tent nconsstent
wth the provsons of ths mmeograph.
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61
29.107-1
6. Correspondence n regard to the procedure descrbed heren
shoud refer to the number of ths mmeograph and to the symbos
IT: IM.
Fred S. Martn,
ctng Commssoner.
SU C PT R O SUPPL M NT L PRO ISIONS
SUPPL M NT . R T S OF T
S CTION 107. COMP NS TION FOR S R IC S R N-
D R D FOR P RIOD OF T IRTY-SI MONT S OR
MOR ND C P Y
Secton 29.107-1: Persona servces. 19 8-23-12957
G. C. M. 25795
INT RN L R NU COD
In 19-13 a partnershp consstng of ndvduas who had been part-
ners for 36 months or more and one ndvdua who became a partner
In 19 3 receved a fee for persona servces rendered over a perod
of more than 36 caendar months. Such fee was dvded among a
the partners, together wth other ncome, n accordance wth the
partnershp s proft-sharng agreement.
ed, Insofar as the fee s concerned, each of the ndvduas who
had been a partner for 36 caendar months or more when the fee was
receved s entted to the benefts of secton 107(a) of the Interna
Revenue Code. The ta attrbutabe to the part of the fee whch s
ncudbe n the gross ncome of such ndvdua may not be greater
than the aggregate of the ta es attrbutabe to such part had t been
ncuded n hs gross ncome rataby over the perod of servce or
the perod of hs membershp n the partnershp or predecessor
partnershps, whchever s shorter, whch preceded the date of re-
cept of the fee. ed further, the ndvdua who became a partner
In 19 3 s not entted to the benefts of secton 107(a) of the Code.
n opnon s requested as to the appcaton of secton 107(a) of
the Interna Revenue Code to a fee receved by a partnershp -where
the servces rendered by such partnershp or ts predecessors, wth
respect to whch the fee was receved, were rendered over a perod of
more than 36 caendar months and at east 80 percent of the fee was
receved n one ta abe year.
In the nstant case, the partnershp conssted of 1 members n the
atter part of 19 3. Four of these members became partners n 1921,
four n 1932, one n 1935, three n 1937, one n 1939, and one n 19 3.
Durng 19 3 the partnershp receved fu payment of a fee for per-
sona servces rendered, whch servces began n 1922. Ths fee was
dvded among the 1 partners n 19 3, together wth other ncome, n
accordance wth the partnershp s proft-sharng agreement. The
partnershp keeps ts accounts and fes ts Federa returns of ncome
on the cash recepts and dsbursements bass. Thrteen of the part-
ners camed the benefts of secton 107(a) of the Code n ther nd-
vdua Federa ncome ta returns. Some of the partners aocated
the ncome wth respect to the fee to the years 1922 to 19 3, athough
they were not partners n 1922. the other partners, wth the e -
cepton of the partner who became a member of the partnershp n
19 3, aocated the ncome wth respect to the fee over a perod startng
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29.107-1
62
wth the year n whch they were frst empoyed by the partnershp,
athough they dd not become partners unt a ater date. The nd-
vdua who became a partner m 19 3 dd not cam the benefts of
secton 107(a) of the Code.
Secton 107(a) of the Code provdes, effectve for ta abe years be-
gnnng after December 31,19 0, n part as foows:
(a) Peksona Servces. If at east 80 per centum of the tota compensaton
for persona servces coverng a perod of thrty-s caendar months or more
(from the begnnng to the competon of such servces) Is receved or accrued n
one ta abe year by an ndvdua or a partnershp, the ta attrbutabe to any
part thereof whch s ncuded n the gross ncome of any ndvdua sha not
be greater than the aggregate of the ta es attrbutabe to such part had It been
ncuded n the gross ncome of such Indvdua rataby over that part of the
perod whch precedes the date of such recept or accrua. Itacs supped.
Prevous to ts amendment by secton 139(a) of the Revenue ct of
19 2, secton 107(a) of the Code reated to compensaton for persona
servces rendered by an ndvdua n hs ndvdua capacty, or as a
member of a partnershp. Itacs supped.
Secton 29.107-1 of Reguatons 111 provdes n part as foows:
It s not necessary, n order for secton 107(a) to be appcabe, that the n-
dvdua who Incudes In hs gross ncome compensaton for such persona servces
be the person who renders the servces. For e ampe, a partner who shares n
the compensaton for such persona servces rendered by the partnershp may
be entted to the benefts of secton 107(a), notwthstandng that he took no
part n the renderng of such servces.
partnershp s an assocaton of ndvduas dong busness as
artners. For Federa ncome ta purposes, t s not a ta abe entty
ut an nformaton return unt. Ta wse, ncome fowng nto the
partnershp as a resut of servces rendered by ts members becomes
the ncome of those members as soon as earned. Smary, where
servces have been rendered, but as yet no ncome therefor has been
receved, the vaue of such servces becomes the asset of the partners
mmedatey, aocabe to them n proporton to ther respectve shares.
The methods of accountng empoyed by ether the partnershp or
the ndvdua partners do not affect ths process. They are con-
trong ony for the purpose of determnng when ncome sha become
ta abe to the partners as ndvduas
Congress recognzed that such was the process by whch partnershp
ncome fowed (through the partnershp) to the ndvdua n enactng
secton 107(a) of the Code so as to afford ta reef to ndvdua
wth respect to ncome receved by them as members of partnershps.
Ceary, ths ta reef was made avaabe to partners because thev,
ndvduay, bear the ta burden. That no dstncton shoud be made
between ncome receved by ndvduas as partners and ncome re-
ceved n ther ndvdua capactes s consstent wth the obvous
purpose of Congress n enactng secton 107(a), namey, to aevate
ta hardshps of ndvduas who receve a arge share of ong-term
earnngs for persona servces n one ta abe year. It seems cear
that under secton 107(a), as orgnay enacted; Congress ntended
and endeavored to estabsh the same quafcatons for ndvduas
n ther capactes as ndvduas and as partners.
y amendment n the Revenue ct of 19 2, secton 107(a) was
changed to appy to ncome receved or accrued n one ta abe year
by an ndvdua or a partnershp. In vew of the treatment of a
partnershp as but an assocaton of ndvduas, t s not beeved that
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63
29.107-1
Congress by ths change of termnoogy ntended to beneft the part-
nershp (as respects ncome receved or accrued by t for accountng
purposes ony), snce no partnershp has a ta status, but ntended to
contnue to afford reef to ndvduas wth respect to ncome receved
by them through the partnershp of whch they are members, thereby
enabng ncome receved by ndvduas from persona servces ren-
dered by them as partners to receve a ta treatment dentca to that
accorded to ncome derved by ndvduas from persona servces
rendered by them as ndvduas. Were a dfferent ntent attrbuted
to Congress, t woud requre the concuson that Congress had adopted
an entrey dfferent concept of the nature of a partnershp than that
apparenty accepted n the orgna verson of secton 107(a). No
evdence that such a drastc revson was ntended s contaned n
the Commttee reports on the Revenue of 19 2. On the contrary,
the Senate report speaks ony of ncome of ndvduas as beng bene-
fted. ccordngy, t s the opnon of ths offce that secton 107(a)
of the Code, as amended by the Revenue ct of 19 2, must be construed
as reachng the same resut as was attaned under the orgna aw.
In Raph G. Lndstrom v. Commssoner (8 T. C. 686, affrmed, 1 9
Fed. (2d) 3 ), reatng to the ta abe year 19 0, t was hed that a
partner coud not tack on to the perod durng whch he rendered
persona servces that perod durng whch hs partner rendered per-
sona servces as an ndvdua pror to the formaton of ther partner-
shp. In the nstant case, the dssouton of the e stng partnershp
and the formaton of the new partnershp n 19 3 to admt a new
partner presents a stuaton anaogous to that n the cted case. s
respects the new partner, he cannot tack on perods durng whch hs
assocates rendered servces pror to the formaton of the frm of
whch he s a member for the same reason that Lndstrom (n the
cted case) coud not tack on the perod durng whch hs partner ren-
dered servces as an ndvdua. Ths s a necessary consequence of
the treatment accorded assets of a partnershp durng the process of
dssouton of an e stng partnershp and the organzaton of a new
partnershp. When a partnershp dssoves, there s an accountng
whereby a assets of the partnershp, both contngent and earned, are
aocated among the members. Pursuant to ths accountng, these
assets of the dssoved partnershp are dstrbuted to the partners.
Thereafter, as ndvduas, they contrbute these assets to the new
partnershp. Merey because these assets had been earned n a pre-
vous partnershp venture, rather than accumuated ndvduay, does
not afford a bass for treatng them dfferenty as respects the new
partner. Therefore, t s beeved that the nstant case must foow
and be controed by the decson n the Lndstrom case.
In vew of the foregong, t s the opnon of ths offce that the
Lndstrom decson appes to cases nvovng ta abe years begnnng
after December 31, 19 0. s speca ta e empton provsons of
the Interna Revenue Code must be strcty construed, ths means that
no ta payer, as an ndvdua or a partner, may quafy for the bene-
fts of secton 107(a) who dd not render the persona servces n
queston over a perod of 36 months or more. In recognton of how
partnershps operate, ths rue has been quafed wth regard to
partners to permt them to secure secton 107(a) benefts even though
they have not personay rendered the servces for whch the ncome
s receved. (See secton 29.107-1, Reguatons 111, supra.) Pursuant
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29.115-1
G
to the Lndstrom decson, partners may use ony ther own terms of
membershp n a partnershp or predecessor frms (workng on the
same pro|ect for 36 months or more pror to the recept or accrua
of the fee n queston) for the purpose of securng secton 107(a)
benefts. Where a partner s terms of membershp equa 36 months or
more n such a case, he meets the test of secton 107(a) for ndvduas,
as modfed for partners, and s entted to ta reef.
ccordngy, n the nstant case, a partners e cept the partner
who became a member through the formaton of a new partnershp
n 1913 quafy for secton 107(a) reef to the e tent of ther perods
of membershp even though they may never have rendered persona
servces n connecton wth the partcuar ncome nvoved. The
partner who became a member n 19 3 does not quafy. It s cear
that the proraton aowed to those quafyng covers ony those ta -
abe years endng after the begnnng of the servces from whch the
ncome was eventuay derved, and for a partcuar partner cannot
e ceed hs term of membershp as a partner.
Chares Ophant,
Chef Counse, ureau of Interna Revenue.
SUPPL M NT . COMPUT TION OF N T INCOM
S CTION 113(a). D UST D SIS FOR D T RMINING
G IN OR LOSS: SIS (UN D UST D) OF PROP RTY
Secton 29.113(a) (2)-: Property transmtted
by gft after December 31, 1920.
INT RN L R NU COD
S:de of vestock receved by son as gft from father. (See I. T. 3932,
page 7.)
S CTION 115. DISTRI UTIONS Y CORPOR TIONS
Secton 29.115-1: Dvdends. 19 8-25-12978
( so Secton 27(), Secton 29.27()-.) T. D. 5670
TITL 26 INT RN L R NU C PT R I. SU C PT R , P RT 29.
INCOM T ; T L Y RS GINNING FT R D C M R 31, 19 1
Reguatons 111 amended to conform to Pubc Law 113 ( ghteth
Congress) C. . 19 7-2, 33 , reatng to dstrbutons by persona
hodng companes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
On uy 29, 19 8, notce of proposed rue makng, reatng to ds-
trbutons by persona hodng companes, was pubshed n the Fed-
era Regster (13 F. R. 361). No ob|ectons to the rues proposed
havng been receved, the foowng amendments to Reguatons 111
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65
29.115-1
(26 CFR, Part 29) are hereby adopted. Such amendments are neces-
sary n order to conform Reguatons 111 (26 CFR, Part 29) to
Pubc Law 113 ( ghteth Congress, Frst Sesson) C. . 19 7-2,
33 , approved une 25, 19 7, reatng to dstrbutons by persona
hodng companes.
Paragraph 1. There s nserted mmedatey precedng secton
29.115-1 the foowng:
PU LIC L W 118 ( IG TI T CONGR SS, FIRST S SSION),
PPRO D UN 25, 19 7
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Conare s assembed, That the ast sentence
of secton 115(a) of the Interna Revenue Code s amended to read as
foows: In the case of a corporaton whch, under the aw app-
cabe to the ta abe year n whch the dstrbuton s made, s u persona
hodng company, or whch, for the ta abe year n respect of whch the
dstrbuton s made under secton 50 (c) or secton 506 or a corre-
spondng provson of a pror ncome-ta aw, s a persona hodng
company under the aw appcabe to such ta abe year, such term
aso means any dstrbuton (whether or not a dvdend as defned
n the precedng sentence) to ts sharehoders, whether n money or n
other property, to the e tent of ts subchapter net ncome, ess the
sum of the foowng:
(1) The net operatng oss credt provded n secton 26(c)(1);
(2) The dvdend carry-over provded n secton 27(c); and
(3) The deducton for amounts for retrement of ndebtedness pro-
vded n secton 50 (b).
Sf |. 2. The amendment made by secton 1 sha be effectve for a
ta abe years begnnng after December 31,19 3.
Sec. 3. No nterest sha be aowed or pad n respect of any over-
payment of ta resutng from the foregong amendment.
Par. 2. Secton 29.115-1, as amended by Treasury Decson 5377
C. . 19 , 257 , approved une 6, 19 26 CFR 29.115-1 , s
amended as foows:
( ) y strkng out the second paragraph and nsertng n eu
thereof the foowng:
In the case of a corporaton whch, under the aw appcabe to the ta abe
year In whch a dstrbuton s made, s a persona hodng company or whch,
for the ta abe year n respect of whch a dstrbuton s made under secton
50 (c), reatng to dvdends pad wthn 2 months after the cose of the ta -
abe year, or secton 506, reatng to defcency dvdends, or correspondng pro-
vsons of a pror ncome ta aw, was under the appcabe aw a persona
hodng company, the term dvdend, n addton to the meanng set forth
n the frst sentence of secton 115(a), aso means the foowng dstrbutons
to ts sharehoders:
(1) dstrbuton wthn a ta abe year of the corporaton, and of a share-
hoder, both of whch ta abe years begn pror to anuary 1, 19 , s a dvdend
(e cept as herenafter ndcated) to the e tent of the corporaton s subchapter
net ncome for the ta abe year n whch, or, n the case of a dstrbuton
under secton 50 (c) or secton 506, the ta abe year n respect of whch, the
dstrbuton s made.
(2) dstrbuton wthn a ta abe year of the corporaton, or of a share-
hoder, where ether ta abe year begns after December 31, 19 3, Is a dvdend
to the e tent of the corporaton s subchapter net Income ess the sum of the
net operatng oss credt provded In secton 26(c) (1), the dvdend carry-over
provded n secton 27(c), and the deducton for amounts for retrement of
ndebtedness provded n secton 50 (b), for the ta abe year n whch, or,
n the case of a dstrbuton under secton 50 (c) or secton 506, the ta abe year
In respect of whch, the dstrbuton Is made. Thus, n the case of a dstrbu-
ton In pr, 19 , by a corporaton reportng on a caendar year bass to a
sharehoder reportng on the bass of a fsca year endng une 30, 19 , the
ta abe year of the corporaton begns after December 31, 19 3, and the r r.
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I 29.115-1
66
19 , dstrbuton 1b a dvdend, In the case of the corporaton and the share-
hoder ake, ony to the e tent of the corporaton s subchapter net Income
reduced by the specfed credts. Smary, In the case of a dstrbuton In
pr, 19 , by a corporaton reportng on the bass of a fsca year endng une
80, 19 , to a sharehoder reportng on the caendar year bass, the ta abe
year of the sharehoder begns after December 31, 19 3, and the pr, 19 ,
dstrbuton w consttute a dvdend, In the case of the corporaton and the
sharehoder ake, ony to the e tent of the corporaton s subchapter net
ncome reduced by the specfed credts.
No Interest sha be aowed or pad In respect of any overpayment of ta
resutng from the amendment to secton 115(a) made by Pubc Law 113 ( ght-
eth Congress). For treatment of any dstrbuton made pror to October 21,
19 2, whch Is a dvdend soey by reason of the ast sentence of secton 115(a)
pror to Its amendment by Pubc Law 118, see secton 29.50 -3.
The term dvdend does not Incude dstrbutons under secton 115(c), re-
atng to dstrbutons In qudaton, secton 115(e), reatng to dstrbutons
by persona servce corporatons, or secton 115(f), reatng to stock dvdends,
or certan dstrbutons by nsurance companes (see secton 115(a)). In a
other cases the term Incudes any dstrbuton to sharehoders to the e tent
made out of accumuated or current earnngs or profts.
( ) y strkng out e ampe (3) and nsertng n eu thereof the
ampe (3). In 19 , a defcency In persona hodng company ta was
estabshed aganst the O Corporaton for the ta abe year 19 0 In the amount of
3 , 30 based on an undstrbuted subchapter net Income of 2,000 whch
conssted of a subchapter net ncome of 52,000 mnus a deducton of 10,000
for amounts used for retrement of ndebtedness provded n secton 50 (b). The
O Corporaton comped wth the provsons of secton 506 and n December,
19 , dstrbuted 2,000 to ts stockhoders as defcency dvdends. The
dstrbuton of 2,000 Is a ta abe dvdend snce It does not e ceed 2,000
(subchapter net ncome of 52,000 for 19 0, the ta abe year wth respect to
whch the dstrbuton was made, mnus the deducton for retrement of ndebted-
ness of 10,000). It s Immatera whether the O Corporaton s a persona
hodng company for the ta abe year 19 or whether It had any ncome for
that year.
ampe ( ). t the begnnng of the ta abe year 19 6, the P Corporaton,
a persona hodng company, had a defct In earnngs and profts of 200,000.
Durng that year t made earnngs and profts of 55,000. For that year, how-
ever, It had a subchapter net Income of 100,000, a net operatng oss credt
under secton 26(c) (1) of 10,000 and a deducton for retrement of Indebtedness
under secton 50 (b) of 10,000. Durng such ta abe year It dstrbuted to ts
sharehoders 100,000. The dstrbuton of 100,000 Is a ta abe dvdend to the
e tent of 80,000 (subchapter net ncome of 100,000 mnus the net operatng
oss credt of 10,000 and the deducton for retrement of ndebtedness of
10,000). No nterest sha be aowed or pad n respect of any overpayment
of ta resutng from the Incuson n ta abe ncome by any sharehoder of hs
proportonate share of the dstrbuton of 100,000.
ampe (5). If the facts were the same as In e ampe ( ) e cept that the
P Corporaton had earnngs and profts for the ta abe year 19 6 of 90,000, the
dstrbuton of 100,000 woud be a ta abe dvdend to the e tent of 90,000
snce Its earnngs and profts for that year, 90,000, e ceed 80,000 (subchapter
net Income of 100,000 mnus the net operatng oss credt of 10,000 and the
deducton for retrement of ndebtedness of 10,000).
Pah. 3. Secton 29.27()-, as amended by Treasury Decson 5 58
C. . 19 5, 5 , approved une 15, 19 5 26 CFR 29.27 ()- , s
amended by strkng out e ampes (1) and (2) and nsertng n eu
thereof the foowng e ampes:
ampe (1). , , and C are sharehoders of the Y Corporaton, a persona
hodng company, whch makes Its returns on the bass of a fsca year endng
uy 31. Is an educatona corporaton e empt from Income ta under secton
101. On uy 15, 19 , the Y Corporaton dstrbuted 90,000 In cash to Its
sharehoders, 30,000 to each. The Y Corporaton had a defct In earnngs and
profts ns of e begnnng of Its ta abe year n the amount of 200,000, but had
a subchapter net Income for the ta abe year In the amount of 90,000. Its earn-
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67
29.117-
nga and profts for the ta abe year were ony 50,000. It was entted under
secton 26(c) (1) to a net operatng oss credt of 30,000. makes hs return
on the caendar year bass, but C makes hs return on the bass of a fsca year
endng uy 81. Snce s sub|ect to ta aton under the ncome ta provsons
of the Code wth respect to ta abe recepts reazed n uy, 19 , and snce hs
ta abe year began after December 31, 19 3, the 30,000 dstrbuton receved
by hm from the T Corporaton w consttute a ta abe dvdend n hs hands
ony to the e tent of 20,000, the amount of 30,000 reduced by a proportonate
part of the net operatng oss credt See secton 29.115-1. The T Corporaton,
accordngy, w be entted to an aowance for dvdends pad n the amount
of 80,000 wth respect to the dstrbuton on uy 15.
ampe (2). If the facts n the precedng e ampe are the same, e cept that
C makes hs return on the caendar year bass, the Y Corporaton s entted to
an aowance for dvdends pad n the amount of 70,000 wth respect to the
dstrbuton on uy 15.
Par. . Ths Treasury Decson sha be effectve on the thrty-frst
day after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
secton 62 of the Interna Revenue Code (53 Stat. 32: 26 U. S. C. 62).)
Geo. . Schoeneman.
Commssoner of Interna Revenue.
pproved November 17, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster November 23, 19 8)
S CTION 117. C PIT L G INS ND LOSS S
Secton 29.117- : Determnaton of perod 19 8-17-1290
for whch capta assets are hed. I. T. 3919
nterna revenue code
For the purpose of determnng the perod durng whch capta
assets are hed under secton 117 of the Interna Revenue Code, the
perod durng whch a futures purchase contract s hed by an Ind-
vdua trader may not be ncuded as part of the hodng perod of
the commodty receved pursuant to the contract.
dvce s requested whether, for the purpose of secton 117 of the
Interna Revenue Code, the hodng perod of a commodty receved
pursuant to a futures purchase contract ncudes the perod durng
whch the contract s hed.
In the nstant case, an ndvdua trader (not a deaer) purchased
20,000 bushes of December wheat on the Chcago oard of Trade on
October 1, 19 7, by a contract entered nto by hm on that date. De-
very of the wheat was accepted when tendered on December 31,19 7,
n accordance wth the terms of the contract. Of the 20,000 bushes of
cash wheat thus acqured pursuant to the contract, 10,000 bushes
were sod on pr 5, 19 8, more than s months after the futures
purchase contract was entered nto but not more than s months
after the cash wheat was acqured. The remanng 10,000 bushes
were sod on uy 2,19 8.
Under secton 117(a) (2), (3), ( ), and (5) of the Interna Revenue
Code, defnng short-term and ong-term capta gans and osses, a
capta asset s requred to be hed for more than s months n order
that a ong-term capta gan or oss may be refected upon ts sae
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121
68
or e change. If the capta asset s hed for s months or ess, the
gan or oss w be a short-term capta gan or oss.
When the ndvdua trader entered nto the futures purchase con-
tract on October 1,19 7, he acqured a capta asset, that s. the rght
to demand and receve devery of 20,000 bushes of wheat n December,
19 7. When he accepted devery of the 20,000 bushes of wheat n
December, 19 7, n consummaton of the futures purchase contract,
he reazed, for Federa ncome ta purposes, no ta abe ncome or
deductbe oss, but he acqured another capta asset, that s, the cash
wheat, to be hed as an nvestment and not for sae to customers n
the ordnary course of hs trade or busness.
The gan reazed or oss sustaned on the sae of 10,000 bushes of
cash wheat on uy 2,19 8, s a ong-term capta gan or oss nas-
much as the wheat had been hed snce December 31, 19 7, a perod of
more than s months. Wth respect to the 10,000 bushes of wheat
sod on pr 5, 19 8, the capta asset sod (the cash wheat ) not
havng been hed for more than s months, the gan or oss was neces-
sary a short-term capta gan or oss.
ccordngy, t s ned that for the purpose of determnng the
perod durng whch capta assets are hed under secton 117 of the
Interna Revenue Code, the perod durng whch a futures purchase
contract s hed by an ndvdua trader may not be ncuded as part
of the hodng perod of the commodty receved pursuant to the
contract.
S CTION 121. D DUCTION OF DD7ID NDS P ID ON
C RT IN PR F RR D STOC OF C RT IN CORPO-
R TIONS
19 8-1 -128 3
I. T. 3912
INT RN L R NU COD
The deducton from gross Income aowed by secton 121 of the
Interna Revenue Code to certan bankng and Insurance corpora-
tons, for dvdends pad on preferred stock owned by the Unted
States or any nstrumentaty thereof e empt from Federa ncome
ta es, s aowabe even If such dvdends e ceed the amount of
earnngs or profts avaabe for dstrbuton as dvdends wthn
the meanng of secton 115(a) of the Ode.
dvce s requested whether the deducton from gross ncome
aowed by secton 121 of the Interna Revenue Code to certan bank-
ng and nsurance corporatons s mted to the amount of earnngs
or profts whch, f dstrbuted, woud consttute dvdends wthn the
defnton of secton 115(a) of the Code.
In the nstant case, the ta payer, a natona bank, pad for the ta -
abe year 19 3 as a dvdend on shares of ts preferred stock owned by
the Reconstructon Fnance Corporaton an amount n e cess of ts
net earnngs for 19 3 computed before deducton of the dvdend n
queston. s a resut, a net operatng oss was sustaned for the ta -
abe year 19 3 whch s camed as a net operatng oss deducton for
the ta abe year 19 . The amount of the dvdend pad to the Re-
constructon Fnance Corporaton aso e ceeded the earnngs or prof-
ts accumuated after February 28,1913.
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69
121
Secton 121 of the Interna evenue Code provdes as foows:
In computng the net Income of any natona bankng assocaton, or of any
bank or trust company organzed under the aws of any State , there
sha be aowed as a deducton from gross ncome, n addton to deductons
otherwse provded for n ths chapter Chapter 1 of the Code , any dvdend
(not Incudng any dstrbuton n qudaton) pad, wthn the ta abe year,
to the Unted States or to any nstrumentaty thereof e empt from Federa
ncome ta es, on the preferred stock of the corporaton owned by the Unted
States or such nstrumentaty.
Secton 115(a) of the Code, nsofar as t s pertnent to the ssue pre-
sented, provdes as foows:
(a) Defnton of Dvdend. The term dvdend when used n ths chapter
Chapter 1 of the Code (e cept n secton 201(c) (5), secton 20 (c) (11), and
secton 207(a)(2) and (b)(3) (where the reference s to dvdends of nsur-
ance companes pad to pocy hoders)) means any dstrbuton made by a
corporaton to ts sharehoders, whether n money or In other property, (1) out
of ts earnngs or profts accumuated after February 28, 1013, or (2) out of the
earnngs or profts of the ta abe year tacs supped.
Snce the above-quoted defnton of a dvdend, by ts e pct
anguage, appes to a sectons of Chapter 1 of the Code (wth cer-
tan e ceptons not heren pertnent), the queston has been rased
whether the deducton aowed by secton 121 of the Code s mted
to an amount whch woud consttute a dvdend as defned n secton
115 (a) of the Code, supra.
fter carefu consderaton of the queston presented, t s beeved
that secton 115(a) of the Code s not appcabe to the deducton
aowabe under secton 121 of the Code. Ths vew s supported by
the anguage empoyed n ouse of epresentatves Report No. 1759,
Seventy-fourth Congress, frst sesson (C. . 1939-1 (Part 2), 891,
893), whch reads n part as foows:
Secton 3 of the b permts a deducton for Income ta purposes of dvdends
pad for any ta abe year begnnng after December 31, 103 , by bankng asso-
catons and nsurance companes on preferred stock owned by the Unted States
or any nstrumentaty thereof. The purpose of ths secton of the b Is to pace
natona banks and State banks on an equa bass. In case State banks Issue
capta notes or debentures to the Reconstructon Fnance Corporaton or the
pubc, the nterest pad on such notes or debentures s aowed as a deducton
from gross ncome In computng net ncome. owever, n cases where the Recon-
structon Fnance Corporaton or any other governmenta nstrumentaty, n-
stead of hodng capta notes or debentures of the banks, hods preferred stock
n such banks, the banks are not permtted to deduct the dvdends pad to the
governmenta nstrumentates on such preferred stock. Secton 3 of the b
corrects ths stuaton by permttng a deducton for dvdends on the preferred
stock owned by the Reconstructon Fnance Corporaton or other governmenta
nstrumentates.
In vew of the foregong, t s hed that the deducton from gross
ncome aowed by secton 121 of the Interna Revenue Code to certan
bankng and nsurance coporatons, for dvdends pad on preferred
stock owned by the Unted States or any nstrumentaty thereof e -
empt from Federa ncome ta es, s aowabe even f such dvdends
e ceed the amount of earnngs or profts avaabe for dstrbuton as
dvdends wthn the meanng of secton 115(a) of the Code. (See
Unted States Fdety and Guaranty Co. v. Commssoner, 0 . T. .
1010, acquescence, C. . 19 0-1,5.)
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29.122-1
70
S CTION 122. N T OP R TING LOSS
D DUCTION
Secton 29.122-1: Net operatng oss deducton. 19 8-15-12879
( so Secton 19.122-1, Reguatons 103; Secton T. D. 56 2
710, Secton 35.710-3, Reguatons 112, and Sec-
ton 30.710-3, Reguatons 109.)
TITL 26 INT RN L R NU . C PT R I. SU C PT R , P RT 37.
C RRY O RS OF R ILRO DS UND R PU LIC L W 189 ( IG TI T CONGR SS.
61 ST T. 32 ), PPRO D ULY 15, 19 7
Reguatons ssued under Pubc Law 189 (61 Stat. 32 ) C. .
19 7-2, 337 , approved uy 15, 19 7, reatng to carry-overs of net
operatng osses and unused e cess profts credts n the case of
certan successor raroad corporatons.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 5, D. C.
To Coectors of Interna Revenue and Others Concerned:
On March 25, 19 8, notce of proposed rue makng, regardng the
appcaton of Pubc Law 189 ( ghteth Congress, 61 Stat. 32 )
C. . 19 7-2, 337 , approved uy 15, 19 7, reatng to carry-overs
of net operatng osses and unused e cess profts credts n the case of
certan successor raroad corporatons, was pubshed n the Federa
Regster (13 F. R. 1581). fter consderaton of a such reevant
matter as was presented by nterested persons regardng the proposa,
the foowng reguatons are hereby adopted (26 CFR, Part 37).
These reguatons are necessary to prescrbe rues for the appcaton
of Pubc Law 189 ( ghteth Congress, 61 Stat. 32 ).
Tabe of Gontents
Secton
37.0. Scope of reguatons.
37.1. owance of carry-overs to certan successor raroad corporatons.
37.2. Lmtaton on effect of carry-overs.
37.3. Rue where two or more predecessors or two or more successors.
37. . tenson of perod of mtaton on refunds and defcences.
Secton 37.0. Scope of Reguatons. These reguatons pertan to
the appcaton of Pubc Law 189 ( ghteth Congress, 61 Stat. 32 ),
approved uy 15,19 7, whch aw s referred to heren as the ct.
These reguatons appy for the purpose of certan determnatons
under the Interna Revenue Code (herenafter referred to as the
Code ) as affected by the ct. The sectons of the Code nvoved,
and the appcaton thereof generay, are not set forth n these regua-
tons; as to such sectons and ther genera appcaton, see Regua-
tons 103 and 111, reatng to the ncome ta , Reguatons 109 and 112,
reatng to the e cess profts ta , and Reguatons 10 and 110, reat-
ng to consodated ncome and e cess profts ta returns.
Inasmuch as these reguatons consttute Part 37 of Tte 26 of the
Code of Federa Reguatons, each secton of these reguatons begns
wth the number 37 and a decma pont.
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29.122-1
PU LIC L W 189 ( IG TI T CONGR SS, 61 ST T. 82 ),
PPRO D ULY 15, 19 7
n ct To aow to a successor raroad corporaton the benefts of certan
carry-overs of a predecessor corporaton for the purposes of certan pro-
vsons of the Interna Revenue Code.
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congresss assembed, That Sec. 1 (a) f a ra-
road corporaton (as defned n secton 77m of the Natona ankruptcy
ct, as amended) herenafter referred to as successor corporaton) has
acqured, pror to anuary 1, 1950, property from another such raroad
corporaton (herenafter referred to as predecessor corporaton) In a
recevershp proceedng, or n a proceedng under secton 77 of the Na-
tona ankruptcy ct, as amended, and f the bass of the property
so acqured s determned under secton 113(a) (20) of the Interna
Revenue Code, then, for the purposes of the determnaton under the
Interna Revenue Code of
(1) the net operatng oss carry-over from any ta abe year
begnnng after December 31, 1938, under the aw appcabe to such
ta abe year, and
(2) the e cess profts credt carry-over or the unused e cess
profts credt carry-over from any ta abe year begnnng after
December 31, 1939, under the aw appcabe to such ta abe year.
the net operatng osses and the unused e cess profts credts of such
predecessor corporaton for the ta abe year n whch the acquston
occurred and for the two precedng ta abe years sha be carry-overs
to such successor corporaton n the manner and to the e tent provded
n reguatons prescrbed by the Commssoner of Interna Revenue, wt
the approva of the Secretary of the Treasury, as necessary to appy
such net operatng osses and unused e cess profts credts as carry-overs
so far as possbe as f the predecessor corporaton had been made use
of In such proceedng nstead of the successor corporaton.
(b) For the purposes of ths secton, the ta abe year of the successor
corporaton n whch the acquston occurred sha be consdered as a
ta abe year succeedng the ta abe year of the predecessor corporaton
n whch the acquston occurred.
(c) For the purposes of ths secton, f the perod, begnnng on the
frst day of the ta abe year of the predecessor corporaton n whch the
acquston occurred and endng on the ast day of the ta abe year of
the successor corporaton n whch the acquston occurred, s not more
than tweve months, the number of ta abe years to whch such net
operatng oss or unused e cess profts credt s a carry-over sha be
three nstead of two, and such reguatons sha prescrbe (as neary
as possbe n the same manner as provded n secton 122(b) (2) and
secton 710(c) (3) ( ) of such Code) the amount to be carred over to
the ast of such succeedng years.
Sec. 37.1. owance or Carry-Overs to Certan Successor Ra-
road Corporatons. (a) In genera. The ct appes ony to ra-
road corporatons (as defned n secton 77m of the Natona ank-
ruptcy ct, as amended) whch acqured, pror to anuary 1, 1950,
property of one or more other raroad corporatons (as so defned)
m a recevershp proceedng or n a proceedng under secton 77 of
the Natona ankruptcy ct, as amended, and where the bass of
the property so acqured s determned under secton 113(a) (20) of
the Code. raroad corporaton whch has thus acqured property
s herenafter referred to as the successor corporaton or the suc-
cessor and the corporaton from whch the property was so acqured
s referred to as the predecessor corporaton or the predecessor.
In the case of a successor corporaton, the net operatng osses and
unused e cess profts credts of the predecessor corporaton are a-
owed, as provded under secton 1 of the ct and these reguatons,
as carry-overs to the successor corporaton for the purposes of the
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I 20.122-1
72
determnaton under the Code of the net operatng oss carry-over
from any ta abe year begnnng after December 31, 1938, and the
e cess profts credt carry-over and the unused e cess profts credt
carry-over from any ta abe year begnnng after December 31,
1939, n each case under the aw appcabe to such ta abe year.
Thus, the method of computaton of the carry-overs as we as the
years for whch such carry-overs are avaabe (e cept as provded
n subsectons (b) and (c) of secton 1 of the ct) and the computa-
ton of the net operatng oss deducton and the unused e cess profts
credt ad|ustment (caed the e cess profts credt carry-over for
ta abe years begnnng n 19 0) are governed by the provsons of
the appcabe aw under the Code.
In genera, the carry-over to whch the predecessor was entted
at the tme of the acquston w be avaabe to the successor. More-
over, n genera the successor corporaton w not be aowed a carry-
over for a ta abe year, or a carry-over from a ta abe year, whch
woud not.be aowed to the predecessor corporaton under the Code
f the predecessor corporaton had been made use of under the re-
cevershp proceedngs or the proceedngs under secton 77 of the
ankruptcy ct nstead of the successor corporaton. Thus, e cept
as provded n subsectons (b) and (c) of secton 1 of the ct, carry-
overs w be aowed as provded under the Code ony for the two
mmedatey succeedng ta abe years, and carry-overs w not be
created from any year f the otherwse appcabe provsons of the
Code provde no carry-over from such year. For e ampe, a net op-
eratng oss carry-over w not be aowed from a ta abe year begn-
nng pror to anuary 1, 1939. and w not be aowed from any
subsequent year f a carry-over from such year woud not be aowed
under the Code to the reorganzed raroad corporaton f t had
come out of the recevershp or bankruptcy proceedng under the
same charter nstead of beng reorganzed under a new charter.
The provsons of subsecton (a) of secton 1 of the ct to the
effect that there sha be carred over to the successor corporaton the
net operatng osses and unused e cess profts credts of the predecessor
corporaton from the second ta abe year precedng ts ta abe year
n whch acquston occurred are appcabe as to such second pre-
cedng year ony f subsecton (c) of secton 1 of the ct s appcabe.
See paragraph (c) of ths secton of these reguatons.
Secton 1 of the ct does not appy to any carry-back of a successor
corporaton or of a predecessor corporaton. Thus, a net operatng
oss or unused e cess profts credt of a successor corporaton cannot
be carred back for the use of a predecessor corporaton. s to a
mtaton on the reducton of ta of the successor corporaton for a
ta abe year for whch t has a carry-back, where such carry-back s
made avaabe or ncreased n amount by reason of the use n a
pror ta abe year of a carry-over provded for by secton 1 of the
ct, see secton 2 of the ct and secton 37.2 of these reguatons.
For appcaton of secton 1 of the ct and of ths secton of these
reguatons where there are two or more predecessor corporatons or
two or more successor corporatons, see secton S of the ct and
secton 37.3 of these reguatons.
(b) Rues for determnng manner and e tent of aowance of carry-
overs to successor corporaton. The net operatng osses and unused
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73
29.122-1
e cess profts credts of a predecessor corporaton sha be carry-overs
to ts successor corporaton n the manner and to the e tent provded
n the ct and n these reguatons so far as possbe as f the pred-
ecessor corporaton had been made use of n the recevershp or
bankruptcy proceedng nstead of the successor corporatons.
In determnng the ta abe years for whch there are such carry-
overs, the ta abe year of the successor n whch the acquston oc-
curred s the frst ta abe year succeedng the ta abe year of the
predecessor n whch the acquston occurred and subsequent ta abe
years of the successor foow n order. ny such succeedng ta abe
year may aso be an ntervenng ta abe year for the purposes of
the appcaton of sectons 122 and 710(c) of the Code. s a genera
rue, therefore, a net operatng oss or unused e cess profts credt of
the predecessor corporaton
(1) for the ta abe year of the predecessor mmedatey pre-
cedng ts ta abe year n whch the acquston occurred w be
a carry-over for the ta abe year of the predecessor n whch the
acquston occurred and for the ta abe year of the successor n
whch the acquston occurred;
(2) for the ta abe year of the predecessor n whch the acqu-
ston occurred w be a carry-over for the ta abe year of the
successor n whch the acquston occurred and for the ne t m-
medatey succeedng ta abe year of the successor foowng such
ta abe year of the successor n whch the acquston occurred.
varaton from such genera rue stated n the mmedatey pre-
cedng sentence may arse under the speca rue of subsecton (c) of
secton 1 of the ct, under whch there may be a carry-over for three
ta abe years. For appcaton of ths speca rue, see paragraph (c)
of ths secton of these reguatons.
nother varaton to the above stated genera rue may arse n
cases n whch the predecessor has contnued after the acquston
wth a ta abe year or ta abe years subsequent to the ta abe year
of the predecessor n whch the acquston occurred. In such cases,
the carry-overs sha not be dened to the predecessor for such subse-
quent year or years f avaabe to the predecessor under the other-
wse appcabe aw. owever, the amount of any net operatng
oss or unused e cess profts credt of the predecessor avaabe as a
carry-over to the successor under secton 1 of the ct sha be reduced
n order to prevent dupcaton of the use of a carry-over. Such
reducton sha be the amount by whch such carry-over woud be
reduced f such subsequent year or years of the predecessor were an
ntervenng ta abe year or ntervenng ta abe years of the successor,
succeedng the ta abe year of the predecessor n whch the acquston
occurred and precedng the ta abe vear of the successor n whch the
acquston occurred. Notwthstandng ths treatment, however, such
subsequent year or years of the predecessor sha not be counted for
the purpose of determnng the number of years for whch there may
be such a carry-over to the successor. The method of computng a
carry-over where there s more than one ntervenng ta abe year s
set forth n paragraph (c) of ths secton of these reguatons and ths
method sha be appcabe for the purposes of ths paragraph. The
pro rata reducton of the ad|usted e cess profts net ncome for an
ntervenng ta abe year provded for n certan cases under para-
820823 9 6
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29.122-1)
graph (c) where the ntervenng ta abe year s a perod of ess than
12 months s appcabe, however, ony where such an ntervenng
ta abe year s a ta abe year n whch the acquston occurred ana
s not appcabe to subsequent ta abe years of the predecessor whch
are consdered ntervenng ta abe years for the purposes of ths
paragraph.
There are no carry-overs to a successor corporaton under ths sec-
ton from a predece sor corporaton s ta abe year begnnng after
the ta abe year of the predecessor n whch the acquston occurred.
Moreover, the net operatng osses and unused e cess profts credts of
the predecessor sha not be carry-overs for any ta abe year of the
successor pror to the ta abe year of the successor n whch the ac-
quston occurred.
In appyng secton 1 of the ct, the computaton of the ta es of
the successor corporaton sha be made under the facts as they actu-
ay e st n the case of the successor corporaton, e cept for the aow-
ance of the carry-overs provded for by the ct. The amounts to be
ncuded on account of such carry-overs n the net operatng oss de-
ducton and unused e cess profts credt ad|ustment (caed the e -
cess profts credt carry-over for the ta abe years begnnng n 19 0)
of the successor for ts ta abe year n whch the acquston occurred
(e cept as provded above to prevent dupcaton and e cept as pro-
vded n paragraph (c) foowng) sha be the same amounts as woud
be ncuded f such ta abe year were the ta abe year of the predeces-
sor mmedatey succeedng the ta abe year of the predecessor n
whch the acquston occurred, e cept that the reducton of such
carry-overs requred under secton 122(c) n determnng the net oper-
atng oss deducton sha be made upon the bass of the net ncome and
norma ta net ncome (both computed as provded n secton 122(c))
of the successor corporaton. If the ta abe year of the successor m-
medatey foowng ts ta abe year n whch the acquston occurred
s the second succeedng ta abe year for whch there s a carry-over,
the amounts to be ncuded for such ta abe year (e cept as provded
above to prevent dupcaton and e cept as provded n paragraph
(c) foowng) sha be the same amounts as f such year were the
second succeedng ta abe year of the predecessor to whch there was
such carry-over, e cept that the reducton under secton 122(c) and
the reducton reatng to ntervenng years provded for under sec-
tons 122(b) (2) and 710(c) (3) ( ) (or secton 710(c) (2) for ta abe
years begnnng n 19 0) sha be made upon the bass of the tems of
the successor.
The operaton of the above provsons of the reguatons may be
ustrated by the foowng e ampe:
ampe. The Raroad Corporaton, whch made ts returns on
the caendar year bass, for 19 1 sustaned a net operatng oss of 100,-
000 and had an unused e cess profts credt of 1,000,000. dd not
have any carry-overs from any pror years. The Raway Corpora-
ton was organzed on uy 1, 19 1, and made ts frst return on the
bass of the fsca year ended une 30, 19 2. It receved permsson to
change ts accountng perod to a caendar year bass and made re-
turns for the short ta abe year, uy 1, 19 2-December 31, 19 2, and
for the caendar year 19 3. On ugust 31, 19 1, acqured a the
assets of , the bass of whch s determned under secton 113(a) (20)
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75
29.122-1
of the Code. termnated ts e stence as of December 31, 19 1.
dd not have any net operatng oss or any unused e cess profts credt
from ts operatons.
The net operatng oss of for 19 1 s a net operatng oss carry-
over of for ts fsca year ended une 30, 19 2, and for ts short
ta abe year ended December 31, 19 2, but not thereafter. The net
operatng oss carry-over for s fsca year ended une 30, 19 2, s
100,000; and the net operatng oss deducton of for such fsca
year s such carry-over reduced, however, by the amount, f any, by
whch s net ncome for such fsca year e ceeds s norma ta net
ncome for such fsca year, both beng computed as provded under
the appcabe provsons of secton 122(c) of the Code. The net
operatng oss carry-over for the short ta abe year ended December
31, 19 2, s the e cess of 100,000, f any, over the net ncome of
for ts fsca year ended une 30,19 2, computed as provded n secton
122(b) (2) of the Code under the appcabe aw; and the net operat-
ng oss deducton of for such short ta abe year s such e cess,
reduced, however, by the amount, f any, by whch s net ncome for
such short year e ceeds s norma ta net ncome for such short year,
both beng computed as provded under the appcabe provsons of
secton 122(c) (and secton 7(c), reatng to ncome paced on an
annua bass).
The unused e cess profts credt of for 19 1 s an unused e cess
profts credt carry-over of for ts fsca year ended une 30, 19 2,
and for ts short ta abe year ended December 31, 19 2, but not there-
after. The unused e cess profts credt carry-over for s fsca year
ended une 30, 19 2, s 1,000,000 and the unused e cess profts credt
ad|ustment for such fsca year s such carry-over. The unused e cess
profts credt carry-over for the short ta abe year ended December
31, 19 2, s the e cess, f any, of 1,000,000 over the ad|usted e cess
profts net ncome of for ts fsca year ended une 30, 19 2 (com-
puted as provded n secton 710(c)(3)( ) of the Code under the
appcabe aw), and the unused e cess profts credt ad|ustment of
for such short ta abe year s such e cess.
(a) Speca rue where ta abe years of predecessor and successor
n whch, acquston occurred heqn and end n same perod of not
more them 12 months. Under subsecton (c) of secton 1 of the ct
t s possbe to have a carry-over for three ta abe years. The pro-
vsons of subsecton (c) of secton 1 appy ony where the perod
begnnng on the frst day of the ta abe year of the predecessor cor-
poraton n whch the acquston occurred and endng on the ast day
of the ta abe year of the successor corporaton n whch the acqus-
ton occurred s not more than 12 months. In such a case, where a net
operatng oss or an unused e cess profts credt of the predecessor
arose n
(1) the predecessor s ta abe year n whch the acquston
occurred, there may be a carry-over for the successor s ta abe
year n whch the acquston occurred and for ts ne t two ta abe
years;
(2) the predecessor s frst ta abe year precedng ts ta abe
year n whch the acquston occurred, there may be a carry-over
for the successor s ta abe year n whch the acquston occurred
and for ts ne t ta abe year;
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5 29.122-1
7G
(3) the predecessor s second ta abe year precedng ts ta abe
year n whch the acquston occurred, there may be a carry-over
for the successor s ta abe year n whch the acquston occurred.
The rue of subsecton (c) of secton 1 s drected to stuatons n
whch, n effect, the perod n whch fa the ta abe years (of prede-
cessor and of successor) n whch the acquston occurred woud have
been but one ta abe year of the predecessor f the raroad had been
reorganzed under the od charter. Frequenty one or both of such
ta abe years n whch the acquston occurred are perods of ess
than 12 months, but such perods nevertheess are counted as ta abe
years for the purpose of determnng the number of years for whch
carry-overs are permtted.
In any case n whch there s a carry-over to a thrd succeedng ta -
abe year under subsecton (c) of secton 1 of the ct, t s necessary to
treat each of the frst and second ta abe years succeedng the ta abe
year n whch the net operatng oss or unused e cess profts credt
arose as ntervenng ta abe years for purposes of secton 122(b) (2)
and secton 710(c)(3)( ). In appyng these sectons of the Code,
the carry-over for the thrd succeedng ta abe year sha be the e cess,
f any, of the carry-over for the second succeedng ta abe year over,
n the case of a net operatng oss carry-over, the net ncome for the
second succeedng ta abe year (computed as provded n secton
122(b) (2)), or, n the case of an unused e cess profts credt carry-
over, the ad|usted e cess profts net ncome for the second succeedng
ta abe year (computed as provded n secton 710(c) (3) ( )).
The appcaton of subsecton (c) of secton 1 may be ustrated by
the foowng e ampe:
ampe. The M Raroad Corporaton s the predecessor cor-
poraton and the N Raway Corporaton s the successor corporaton,
both wthn the meanng of the ct, wth N havng acqured the
property of M on. May 31, 19 1. oth M and N make ther returns on
the caendar year bass. N was organzed on pr 1, 19 1, and made
ts frst return for the short ta abe year, pr 1, 19 1-December 31,
19 1. M was dssoved on ugust 31, 19 1, and made ts ast return
for the short ta abe year endng on that date.
For 19 0 M sustaned a net operatng oss n the amount of 150,000,
and for ts short ta abe year ended ugust 81, 19 1, t had a net
ncome, computed as provded n secton 122(b) (2), of 50,000. For
N s short ta abe year ended December 81, 19 1, t had 70,000 of net
ncome (and no ad|ustments under secton 122(d) (1), (2), ( ), and
(6) are appcabe). There are no carry-backs.
Under the above facts, there s a carry-over of 150,000 for the
ta abe year of M ended ugust 31, 19 1. There s a carry-over to N
for ts frst ta abe year (ended December 31, 19 1) of 100,000 (that
s, the e cess of 150,000 over 50,000). There s a carry-over to N
for ts ta abe year ended December 31, 19 2, of 30,000 (that s, the
e cess of 100 000 over 70,000).
In the appcaton of subsecton c) of secton 1, addtona steps are
necessary m some cases n computng the unused e cess profts credt
carry-over for the ta abe year of the successor n whch the acqus-
ton occurred and for succeedng ta abe years of the successor. In a
case where the ta abe year n whch the acquston occurred (of the
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77
29.122-1
predecessor or successor) s a perod of ess than 12 months, then
under secton 711(a) (3) of the Code the e cess profts net ncome for
such short ta abe year s requred to be computed upon the bass of a
perod of 12 months, and accordngy the ad|usted e cess profts net
ncome s on an annua bass. In such a case under subsecton (c) of
secton 1 of the ct, the ad|usted e cess profts net ncome for such a
short ta abe year (of the predecessor or successor, or such short ta -
abe years of both, as the case may be, taken separatey), when com-
puted for the purposes of secton 710(c) (3) ( ) (for an ntervenng
ta abe year) sha be reduced to an amount whch s the same pro-
porton thereof as the e cess profts net ncome for the short ta abe
year s of the e cess profts net ncome for such short ta abe year com-
puted on an annua bass.
The appcaton of the above rue n cases under subsecton (c) of
secton 1 nvovng unused e cess profts credt carry-overs s us-
trated by the foowng e ampe:
ampe. The Raroad Corporaton and the Y Raroad Corpo-
raton make ther returns on the caendar year bass. For 19 3,
had an unused e cess profts credt (after beng reduced by reason
of ts use as a carry-back as provded n secton 710(c) (3) ( ) of the
Code) of 60,000 avaabe as a carry-over. Y was organzed and com-
menced busness on uy 2,19 . The property of (the predecessor)
was acqured by Y (the successor) on ugust 31, 19 . was ds-
soved on ugust 31, 19 .
For ts ta abe year endng ugust 81,19 , had an e cess profts
credt of 336,000 and an e cess profts net ncome of 2 ,000 before
beng paced on an annua bass. For ts short ta abe year endng
December 31, 19 , Y had an e cess profts credt of 22 ,000 and an
e cess profts net ncome of 122,000 before beng paced on an annua
bass. Y had no carry-backs for any year.
w pay no e cess profts ta for ts ta abe year endng ugust
31, 19 , as shown by the foowng computaton:
cess profts net ncome paced on an annua bass under secton
71.1(a) (3) ( ) 866,000
Specfc e empton 10,000
cess profts credt 836,000
Unused e cess profts credt ad|ustment 60,000
06, 000
d|usted e cess profts net ncome 0
The unused e cess profts credt ad|ustment of Y w be the amounts
of the carry-overs computed beow:
For the short ta abe year endng December SI, 19
(1) Unused e cess profts credt of 60,000
(2) d|usted e cess profts net Income of for Its ta abe year endng
ugust 31, 19 , computed for the purposes of secton
710(c)(3)( ) ( 366,000 ess 336,000) 30,000
(8) mount n (2) paced on bass of s short ta abe year ended
ugust 81, 19 ( 2 /366ths of 30,000) 20,000
( ) Unused e cess profts credt carry-over for short ta abe year of
Y endng December 31, 19 (e cess of amount n (1) over
amount n (3)) 0,000
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29.122-1
78
For the tamabe year endng December SI, 19 5
(1) Unused e cess profts carry-over for second ntervenng year
(tem ( ) n computaton for year ended December 31,19 ) 0,000
() cess profts net ncome of Y for ts ta abe year ended Decem-
ber 31, 19 , paced on an annua bass as provded n secton
711(a) (3) ( ) of the Code 2 ,000
() d|usted e cess profts net ncome of Y for ts ta abe year
ended December 31, 10 , computed for the purposes of secton
710(a) (3) ( ) ( 2 ,000 ess 22 ,000) 20,000
(v) mount n () paced on bass of Y s short ta abe year ended
December 31, 19 (183/366ths of 20,000) 10,000
(v) Unused e cess profts credt carry-over for the ta abe year of Y
ended December 31, 19 5:
Unusued e cess profts credt carry-over for second
ntervenng ta abe year (tem (I)) 0,000
Less:
d|usted e cess profts net ncome for second Inter-
venng ta abe year (tem (v)) 10,000
30,000
PU LIC L W 189 ( IG T T CONGR SS, 61 ST T. 32 ),
PPRO D ULY 15. 19 7
Sec. 2. (a) In the case of any ta abe year of the successor corpora-
ton, f
(1) the aggregate for such ta abe year of the ta es of the
successor corporaton mposed by Chapter 1 and Subchapter of
Chapter 2 of the Interna Revenue Code, computed wthout regard
to ths ct,
Is ess than the amount of
(2) the aggregate of such ta es (determned under reguatons
prescrbed by the Commssoner wth the approva of the Secretary)
that woud have been mposed on the predecessor corporaton for
such ta abe year f the predecessor corporaton had been made
use of n such proceedng nstead of the successor corporaton,
then the ta es of the successor corporaton for such ta abe year sha
be the ta es computed wthout regard to ths ct.
(b) In the case of any ta abe year to whch subsecton (a) of ths
secton s not appcabe, f
(1) the aggregate for such ta abe year of the ta es of the suc-
cessor corporaton mposed by Chapter 1 and Subchapter of
Chapter 2 of the Interna Revenue Code, computed wthout regard to
ths secton,
s ess tmn the amount of
(2) the aggregate of such ta es (determned under reguatons
prescrbed by the Commssoner wth the approva of the Secretary)
that woud have been mposed on the predecessor corporaton for
such ta abe year f the predecessor corporaton had been made use
of In such proceedng nstead of the successor corporaton,
then the ta es of the successor corporaton for such ta abe year sha
be the ta es so determned under reguatons as the ta es that woud
have been mposed on the predecessor corporaton for such ta abe
year.
(c) Ths secton sha be appcabe to those ta abe years of the suc-
cessor corporaton to whch there s a carry-over of a net operatng oss
or unused e cess profts credt under secton 1, and to any ater ta abe
year for whch a net operatng oss deducton or unused e cess profts
credt ad|ustment resuts or s Increased by reason of the use n another
year of a carry-over permtted under secton 1.
Sec. 37.2. Lmtaton on ffect of Carry-Overs. Secton 2 of the
ct mts the effect of the carry-overs otherwse permtted under sec-
ton 1 of the ct, both for any ta abe year of the successor corporaton
for whch thpre s a carry-over permtted by secton 1 of the ct and
for certan ater ta abe years descrbed beow.
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79
29.122-1
Subsecton (a) of secton 2 provdes for a comparson of the aggre-
gate of the ncome and e cess profts ta es of the successor corporaton
for any ta abe year, determned wthout regard to any carry-overs
permtted by ths ct, wth the aggregate of the ncome and e cess
profts ta es that woud have been mposed on the predecessor corpo-
raton for such ta abe year f the predecessor corporaton had been
made use of n the proceedng nstead of the successor corporaton. If
for any ta abe year the successor s aggregate so determned wthout
regard to the carry-overs permtted by the ct s ess than the aggre-
gate of the predecessor for such year, then any carry-over permtted
by the ct sha be dsregarded n computng the successor s ta es for
such ta abe year.
Subsecton (b) of secton 2 provdes that f the successor s aggregate
as determned n the precedng paragraph, though not ess than the
aggregate of the predecessor, woud be reduced to a esser amount than
the predecessor s aggregate by an appcaton of secton 1 of the ct
(whch permts a carry-over), then the successor s ta es for that year
sha be the ta es that woud have been mposed on the predecessor
corporaton that s, the same amounts as the ta es that make up the
predecessor s aggregate.
Subsecton (c) of secton 2 provdes that subsectons (a) and (b),
descrbed above, sha appy to those ta abe years of the successor
corporaton for whch there s a carry-over under secton 1, and to
any ater ta abe year for whch a net operatng oss deducton or
unused e cess profts credt ad|ustment resuts or s ncreased by rea-
son of the use n another year of such a carry-over. Thus, for e ampe,
f a net operatng oss carry-over from the predecessor corporaton to
the successor corporaton, whch s on the caendar year bass, s per-
mtted under secton 1 for 19 1, secton 2 of the ct appes to 19 1.
If there s an unused e cess profts credt carry-over for 19 2 from
19 1, whch s ncreased by the net operatng oss carry-over from the
predecessor for 19 1, then secton 2 appes to 19 2. If there s an
unused e cess profts credt for 19 whch s a carry-back for 19 2
and 19 3, and f the amount of the carry-back for 19 3 (the porton
of the carry-back whch s not apped aganst ad|usted e cess profts
net ncome for 19 2) s ncreased by reason of the unused e cess profts
credt carry-over for 19 2, whch n turn was ncreased by the net oper-
atng oss carry-over from the predecessor corporaton to the successor
corporaton for 19 1, then secton 2 aso appes to 19 3.
Secton 2 of the ct s operatve ony to mt the net ta reducton
that woud otherwse resut from an appcaton of the provsons of
secton 1 of the ct. ny carry-overs permtted by secton 1 are con-
sdered as havng been used for the year to whch secton 2 appes to
the e tent that they woud have been used had secton 2 not been
appcabe.
The comparsons requred to be made under ths secton sha frst
be made for the ta abe year of the successor n whch the acquston
occurred. The ta es that woud have been mposed on the predecessor
corporaton had t been made use of n the proceedng nstead of the
successor corporaton sha be determned by ad|ustng the tems whch
enter nto the computaton of the successor corporaton s ta es to ac-
cord wth the amounts such tems woud have been for such ta abe
year f the charter of the predecessor corporaton had been used. The
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I 29.122-1
80
comparsons sha be made on the bass of the ta abe year of the
successor n whch the acquston occurred. Such ad|ustment sha
be made n the tems whch enter nto the computaton of the succes-
sor s ta es as are necessary to gve effect for the perod of ts ta abe
year on and after the date of tre acquston to such computatons as
woud be proper for the predecessor for such perod f the predecessor
had not transferred the property and had contnued under ts od
charter for such perod. Smar ad|ustments sha be made for a
ta abe years of the successor subsequent to the acquston, foowng
n order, for whch comparsons are requred to be made under ths
secton, regardess of the accountng perods of the predecessor or
whether the predecessor contnues n e stence.
The ad|ustments n the tems of the successor referred to mmed-
atey above and n ths paragraph are to be made for the purposes of
determnng the ta es that woud have been mposed on the predeces-
sor corporaton and are not actua ad|ustments to be made for a
purposes n determnng the ta es of the successor. If the successor
corporaton uses a dfferent method of computng deprecaton from
the predecessor corporaton, or f the successor corporaton uses a de-
precaton method of accountng and the predecessor used the retre-
ment method, ad|ustments sha be made to the e tent whch woud
be requred f the successor corporaton had frst been bound by the
predecessor corporaton s method and had then changed ts method to
that of the successor, wth the ad|ustments requred for such change,
after obtanng the permsson of the Commssoner. If the same
deprecaton method s used by the predecessor and the successor, then
the deprecaton sha be computed n the same manner as the suc-
cessor woud have been requred to compute t f t were the predeces-
sor operatng under the predecessor s charter that s, by usng the
same reserves and the same percentages as woud have been proper n
such case. Smary, the e cess profts credt of the successor sha be
ad|usted to refect the e cess profts credt whch t woud have f ts
capta structure were obtaned by usng the predecessor s charter and
makng the necessary changes n the capta structure of the predeces-
sor. Furthermore, ad|ustments sha aso be made by ncudng or
e cudng such addtona tems as woud be ncuded or e cuded f
the charter of the predecessor were used. Thus, f the predecessor
were ncorporated n State , and the successor n State , and f the
State ta es mposed on the successor are greater than the ta es whch
woud be mposed f t were ncorporated n State , then the deduc-
ton for State ta es sha be the amount whch woud be mposed f
the corporaton were ncorporated n State .
Secton 2 may be ustrated by the foowng e ampes n whch t
s assumed that the corporatons made ther returns on the caendar
year bass:
ampe (1). s of the begnnng of anuary 1,19 2, the successor
corporaton acqured a the propertes of the predecessor corporaton,
the predecessor corporaton beng dssoved mmedatey thereafter.
The successor corporaton was a new corporaton, havng no capta,
no ncome, and no deductons pror to ths acquston. For 19 2|
under secton 1 of the ct, the successor s aowed a net operatng
oss carry-over and an unused e cess profts credt carry-over from
ts predecessor. There are no other carry-overs or carry-backs. The
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81
29.122-1
ta es of the successor for 19 2 computed wthout regard to the carry-
overs provded by the ct areas foows:
cess profts ta 1, 800,000
Norma ta 1,920,000
Surta 1, 280, 000
ggregate of ta es 6,000,000
ssume for the purpose of ths e ampe that, f the predecessor
corporaton had been used n pace of the successor n the proceedng,
ts deductons and ts e cess profts credt woud be ess than that
of the successor. The ta es that woud have been mposed upon the
predecessor for 19 2, computed wth ts carry-overs, had t been used
n pace of the successor are as foows:
cess profts ta es 2,250,000
Norma ta 1,920,000
Surta 1,280. 000
ggregate of ta es 5, 50,000
Snce the aggregate of the ta es mposed on the successor wthout
regard to the ct ( 5,000,000) s ess than the aggregate that woud
have been mposed on the predecessor f t had been used n pace of
the successor ( 6, 50,000), the successor s not entted to any carry-
over under the ct n computng ts ta es for the ta abe year 19 2.
ampe (2). In ths e ampe, nvovng the same corporatons
for the same ta abe year, as n e ampe (1), there s no net operatng
oss carry-over from the predecessor corporaton but there s an
unused e cess profts credt carry-over, and the e cess profts credt
of the predecessor f t had been used n pace of the successor s more
than such credt n e ampe (1). The ta es that woud have been
mposed on the predecessor for 19 2 are as foows:
cess profts ta 900, 000
Norma ta 2,160,000
Surta 1, 0,000
ggregate of ta es , 500. 000
Secton 2(a) of the ct, ustrated n e ampe (1), does not appy
snce the aggregate of the ta es mposed on the successor wthout
regard to the ct ( 5,000,000) s not ess than the aggregate that
woud have been mposed on the predecessor had t been used n pace
of the successor n the proceedng ( ,500,000). owever, the ta es
of the successor computed wth the carry-overs for 19 2 provded by
secton 1 of the ct are as foows:
cess profts ta 0
Norma ta 2, 00,000
Surta 1,600,000
ggregate of ta es , 000,000
The aggregate of the ta es of the successor computed wth the carry-
overs provded by secton 1 of the ct ( ,000,000) s ess than the
aggregate of the ta es that woud have been mposed on the prede-
cessor f t had been used n the proceedng n pace of the successor
( ,500,000). Subsecton (b) of secton 2 provdes that n such a case,
where subsecton (a) of secton 2 does not appy, the ta es of the
successor corporaton sha be the ta es that woud have been mposed
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5 29.122-11
82
on the predecessor corporaton f t had been so used n pace of the
successor. ccordngy, the ta es of the successor corporaton for the
ta abe year 19 2 are as foows:
cess profts ta 900,000
Norma ta 2,160,000
Surta 1, 0,000
If n ths e ampe the aggregate of the ta es of the successor computed
wth the carry-overs provded by secton 1 of the ct had not been ess
than the aggregate of the ta es that woud have been mposed on the
predecessor f t had been used n the proceedng n pace of the suc-
cessor, the ta es of the successor woud be ts ta es computed wth the
carry-overs provded by secton 1.
ampe ( ). In ths e ampe the ta es are computed for 19 3, and
the facts as to 19 2 are the same as n e ampe (2). There s no unused
e cess profts credt carry-over for 19 3 as computed under secton
710(c) (3). though secton 2(b) operated to mt the ta reducton
for 19 2 whch woud have resuted from the fu use of the carry-over
for 19 2, the e tent to whch the carry-over s consdered used s
computed under secton 710(c) (3) wthout regard to that mtaton.
The successor corporaton had an unused e cess profts credt for 19
whch s a carry-back for 19 2 and 19 3. Snce the amount of the
carry-back for 19 3 depends on the e tent to whch the carry-back
was used for 19 2, and snce such use depends on the effect of the carry-
over for 19 2 permtted under secton 1 of the ct, subsecton (c) of
secton 2 requres that secton 2 be apped as a mtaton on the ta
for 19 3. ccordngy, the ta of the successor corporaton for 19 3
must be computed frst wthout regard to the carry-over under secton
1 for 19 2. The ta es of the successor so computed for 19 3 are as
foows:
cess profts ta 50,000
Norma ta 2,280,000
Surta 1,520,000
ggregate of ta es , 250,000
The ta es of the predecessor corporaton for 19 3 must be computed
aso wth the carry-back whch woud be appcabe n the case of the
predecessor corporaton (f t had been used n the proceedng n pace
of the successor corporaton) takng nto account the use of the carry-
back for 19 2 as affected by the carry-over for 19 2. The ta es of the
predecessor corporaton for 19 3 as so computed are:
cess profts ta 1,350,000
Norma ta 2,0 0, 000
Surta 1,860, 0C0
ggregate of ta es , 750, 000
Snce the aggregate of the ta es of the successor for 19 3 computed
wthout regard to the carry-overs provded by the ct ( ,250,000) s
ess than the aggregate of the ta es whch woud be mposed on the
predecessor f t had been used n pace of the successor ( ,750,000),
secton 2(a) provdes that the ta es of the successor are to be com-
puted wthout regard to the carry-over permtted under the ct. c-
cordngy, such ta es w be the amounts shown above as the ta es
of the successor computed wthout regard to the carry-overs permtted
by the ct.
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29.122-1
PU LIC L W 189 ( IG TI T CONGR SS, 61 ST T. 32 ),
PPRO D ULY 15, 19 7
Sec. 3. Where there are two or more predecessor corporatons or two
or more successor corporatons, the provsons of sectons 1 uu 2 of
ths ct sha be apped ony to such e tent and sub|ect to such con-
dtons, mtatons, and e ceptons as the Commssoner, wth the
approva of the Secretary, may by reguatons prescrbe.
Sec. 37.3. Rue Where Two or More Predecessors or Two or
More Successors. (a) owance of carry-overs. (1) Two or more
predecessor corporatons. If the successor corporaton has acqured
the propertes of two or more other raroad corporatons so that each
of the atter are predecessor corporatons wthn the meanng of the
ct, then secton 1 of the ct and secton 37.1 of these reguatons
sha be apped to the carry-over from any such predecessor corpora-
ton. If there are cany-overs from more than one predecessor cor-
poraton, then the foowng rues sha appy:
() There sha be determned under secton 37.1 of these reg-
uatons for each predecessor corporaton both ( ) those ta abe
years of the successor to whch such carry-over or carry-overs are
permtted and ( ) the amount of the carry-over or carry-overs
from such predecessor for the ta abe year of the successor n
whch the acquston occurred.
() If for any ta abe year n whch an acquston occurred
amounts are aowed as net operatng oss carry-overs or unused
e cess profts credt carry-overs from two or more predecessor
corporatons, such amounts n each case sha be aggregated and
treated as one net operatng oss carry-over or unused e cess
profts credt carry-over, as the case may be, for such ta abe
year and for each succeedng ta abe year for whch the carry-
overs makng up the aggregate are permtted, reducton beng
made for such succeedng year for the use of the carry-over n
the ntervenng year or years. If for any succeedng ta abe year
one or more but not a of such carry-overs are permtted, then
the amount of the carry-over permtted (or aggregate of the carry-
overs, f more than one) sha be computed by takng nto account
n determnng the net ncome, or ad|usted e cess profts net n-
come, as the case may be, for any ntervenng ta abe year the
carry-overs permtted for such ntervenng ta abe year whch .
are not permtted for the succeedng ta abe year.
n e ampe of the operaton of the above rues s gven n the foow-
ng case:
ampe. The Corporaton, whch makes ts returns on the ca-
endar year bass, was organzed on anuary 1, 19 . acqured on
pr 1, 19 . the propertes of the Corporaton and of t he Cor-
poraton, and on une 30, 19 5, the propertes of the C Corporaton,
so ns to be the successor of . , and C wthn the meanng of the ct.
The Corporaton, whch made ts returns on the caendar year
bass, had a net operatng oss for 19 2, whch, after reducton by
ts use as a carrv-back (secton 122(b) (2)), was 100,000. had net
ncome for 19 3 of 30,000 and for 19 of 50,000, both computed
wthout regard to such net operatng oss. was dssoved as of
December 31,19 .
The Corporaton, whch made ts returns on the caendar year
bass, had a net operatng oss for 19 whch, after reducton by
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I 29.122-1
8
ts use as a carry-back (secton 122(b)(2)), was 30,000. was
dssoved as of December 31, 19 .
The C Corporaton, whch made ts returns on the bass of a fsca
year endng une 30, had a net operatng oss for ts fsca year endng
une 30,19 5, whch, after reducton by ts use as a carry-back (secton
122(b) (2)), was 90,000. C was dssoved as of une 30,19 5.
The net ncome of wthout regard to any net operatng oss deduc-
ton s 25,000 for 19 and 80,000 for 19 5. has no carry-backs.
The ad|ustments provded for under secton 122(d) (1), (2), ( ),
and (6) are not appcabe n the case of the net ncome of . , ,
and C.
Under secton 37.1 of these reguatons, the net operatng oss of
s a carry-over to for 19 , the year of acquston. The amount
of such carry-over s 20,000, computed as foows:
Net operatng oss for 19 2 100, 000
Net ncome of for 19 3 (computed as provded In secton 122(b) (2)
for an ntervenng year) 30,000
Net operatng oss carry-over for 19 (second succeedng ta abe year) _ 70, 000
Net ncome for 19 (computed under secton 122(b) (2) ; see secton
37.1(c)) 50,000
Net operatng oss carry-over to for 19 (see secton 37.1) 20,000
Under secton 37.1, the net operatng oss of s a carry-over to
for 19 , the year of acquston, and for 19 5 and 19 6, the ne t two
succeedng ta abe years. The amount of such carry-over to for
19 s 30,000, the net operatng oss of for 19 . Under secton
37.1 the net operatng oss of C for 19 5 s a carry-over to for 19 5,
the year of acquston, and for 19 6, the ne t succeedng ta abe year.
The net operatng oss carry-over from C to for 19 5 s 90,000.
The net operatng oss carry-over (from and ) for s ta abe
year 19 s 50,000, computed as foows:
(a) Net operatng oss carry-over from s ta abe year 19 2 20, 000
(6) Net operatng oss carry-over from s ta abe year 19 30,000
(c) ggregate of carry-overs for ta abe year (Items (a) and (6)) 50,000
The net operatng oss carry-over (from and C) for s ta abe
year 19 5 s 115,000, computed as foows:
(1) Net operatng oss carry-over from for 19 5:
Net operatng oss carry-over from for 19 , year of acqus-
ton (tem (6) above) 30,000
Net Income of for ntervenng year 19 , computed
wthout net operatng oss deducton 25,000
Net operatng oss deducton for Intervenng year 19 ,
takng nto account carry-over from permtted for
19 but not for 19 5 20, 000
Net ncome for Intervenng year 19 under secton 122(b) (2)_ 5,000
Carry-over from for 19 5 1 25, 000
(2) Net operatng oss carry-over from C 90,000
(3) ggregate of carry-overs for the ta abe year (tem (1) and (2))__ 115,000
The net operatng oss carry-over (from and C) for s ta abe
year 19 6 s 35,000, computed as foows:
ggregate of net operatng oss carry-overs from and C for 19 5 115,000
Net ncome for 19 5, computed as an ntervenng year 80,000
Net operatng oss carry-over for 19 6 85,000
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85
29.122-1
(2) Two or more successor corporatons. If property of a raroad
corporaton has been acqured by two or more other raroad corpora-
tons so that each of the atter are successor corporatons wthn the
meanng of the ct, then secton 1 of the ct and secton 37.1 of these
reguatons sha be apped to the carry-overs from the predecessor
corporaton. The net operatng osses and unused e cess profts
credts of such predecessor sha be aowed as carry-overs to each
of the successor corporatons as provded n secton 37.1, but ony to
the e tent that such net operatng osses and unused e cess profts
credts are attrbutabe to the property of the predecessor so acqured
by such successor. s a genera rue, the net operatng osses and
unused e cess profts credts of the predecessor sha be attrbuted to
the property of the predecessor acqured by a successor n the rato
whch the ad|usted bass for determnng oss of such property bears
to the ad|usted bass for determnng oss of a the property of the
predecessor, each determned as of the cose of the ta abe year for
whch there was such net operatng oss or unused e cess profts credt,
or as of the date of acquston f the oss or the unused credt arose
n the year of acquston. If, however, the successor estabshes to
the satsfacton of the Commssoner (and submts, uness waved by
the Commssoner, approprate consents by the other successors) an
amount whch, n the opnon of the Commssoner, both more ceary
refects the porton of the net operatng oss or unused e cess profts
credt of the predecessor attrbutabe to the property so acqured and
does not dupcate the use of such oss or credt by another successor
or the predecessor, such an amount may be used by the successor n the
computaton of the carry-over.
(5) Lmtatons on effect of carry-overs. The mtatons under
secton 2 of the ct on the ta effect of carry-overs are appcabe to
the e tent provded n ths paragraph n cases where there are two or
more predecessors or two or more successors. For ths purpose, the
rues of secton 37.2 of these reguatons sha be appcabe, e cept as
heren provded.
If a comparson n ta es for a ta abe year prescrbed under secton
37.2 s to be made for a corporaton whch s the successor of two or
more predecessors (see paragraph (a)(1) of ths secton), for the
purposes of secton 2 the ta es that woud have been mposed on the
predecessor corporaton for such ta abe year f the predecessor corpo-
raton had been made use of n such proceedng nstead of the succes-
sor corporaton sha be the aggregate of the totas of each ta of the
predecessors for the ta abe year for whch the comparson s to be
made, determned as to each such predecessor as provded n secton
37.2. The successor must accordngy estabsh wth respect to each
such predecessor the ta es that woud have been mposed on such
f redecessor for such ta abe year as f the predecessor corporaton
ad emerged from the bankruptcy or recevershp proceedng wth ts
od charter and contnued ts separate e stence.
The foowng specfc rues are aso appcabe:
(1) The eectons, methods of accountng, etc., of the successor
sha be consdered as f made or used by each predecessor, sub|ect
to such condtons as woud be mposed n the case of the
predecessor;
(2) In the case of any acquston of addtona property and
other transactons by the successor (after the acquston of the
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29.122-1
predecessors property), a such acqustons and transactons
sha be consdered to have been made by the predecessors, wth
partcuar acqustons and other transactons to be attrbuted to
each predecessor on the bass of busness reasons whch mght have
motvated such predecessor so to act;
(3) The aggregate of the separate totas may be ad|usted to
refect the effect of addtona factors estabshed by the ta -
payer, such as decreased overhead, f any, resutng from the
operaton of the propertes of the separate predecessors by one
corporaton.
If a comparson n aggregate ta es for a ta abe year prescrbed
under secton 37.2 s to be made for a corporaton whch s one of
severa successor corporatons wth respect to a predecessor (see para-
graph (a) (2) of ths secton), then for the purposes of secton 2 the
ta es that woud have been mposed on the predecessor corporaton
for such ta abe year f the predecessor corporaton had been made use
of n such proceedng nstead of the successor corporaton sha be
determned as provded n secton 37.2 by ad|ustng the tems whch
enter nto the computaton of the successor s ta es to accord wth the
amounts such tems woud have been f the charter of the predecessor
had been used and such predecessor had ony the property of the
successor.
PU LIC L W 189 ( IG TI T CONGR SS, 61 ST T. 32 ),
PPRO D ULY 15, 19 7
Sec. . If the aowance of a credt or refund of an overpayment of
ta resutng from the appcaton of ths ct s prevented, on the date
of the enactment of ths ct or wthn one year from such date, by the
operaton of any aw or rue of aw other than ths secton and other than
secton 3761 of the Interna Revenue Code, such overpayment sha be
refunded or credted n the manner provded In the Interna Revenue
Code f cam therefor Is fed wthn one year from the date of the en-
actment of ths ct. No nterest sha be aowed or pad on any over-
payment or defcency resutng from the appcaton of ths ct.
Sec. 37. tenson of Perod of Lmtaton on Refunds and
Defcences. Secton of the ct e tends, for not more than 1
year after uy 15,19 7, the perod of mtaton as to a years affected
by the ct f the refund or credt of any overpayment to the e tent
resutng from the appcaton of the ct s prevented on uy 15,
19 7, or wthn 1 year from such date, e cept where refund or credt
s prevented by secton 3761 of the Interna Revenue Code, reatng
to compromses. In such cases where secton e tends the perod of
mtaton, such overpayment sha be refunded or credted f cam
therefor s fed wthn 1 year from uy 15, 19 7. Such overpayment
sha be credted or refunded n the manner provded n the Interna
Revenue Code. owever, no nterest sha be aowed or pad on any
overpayment or defcency resutng from the appcaton of the ct.
If an overpayment resutng from the appcaton of the ct (for
e ampe, n an amount of e cess profts ta ) gves rse to a defcency
n a reated ta (for e ampe, n an amount of ncome ta ), whch
defcency, however, woud be barred bv the statute of mtatons,
such defcency may be assessed and coected as provded n secton
8807 of the Interna Revenue Code.
Snce ths Treasury Decson prescrbes the reguatons under Pub-
c Law 189 ( ghteth Congress, 61 Stat. 32 ) whch s appcabe n
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29.120-1
computng ta for pror years as provded theren, ths Treasury De-
cson sha be effectve for the entre perod covered by such aw (as
provded n the e cepton appcabe under secton (c) of the dmn-
stratve Procedure ct).
(Ths Treasury Decson s ssued under the authorty contaned n
Pubc Law 189 ( ghteth Congress, 61 Stat. 32 ), approved uy
15, 19 7. and secton 3791, Interna Revenue Code (53 Stat. 67; 26
U. S. C. 3791).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved uy 6, 19 8.
ohn W. Snyder,
Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 9, 19 8, 8 : 50 a. m.)
S CTION 126. INCOM IN R SP CT OF D C D NTS
Secton 29.126-1: Incuson n gross ncome of 19 8-25-12977
ncome n respect of a decedent. I. T. 3931
INT RN L R NU COD
Pursuant to a |udgment of possesson rendered by a State court n
Lousana, a survvng wdow n communty of an ndvdua who
ded ntestate was paced n possesson of an undvded one-haf
Interest In her own rght n a communty property and her daugh-
ter was paced n possesson of the remanng undvded one-haf
nterest n a communty property sub|ect to a usufruct In such
Interest n favor of her mother. Thereafter, the baance of a bonus
due the decedent, a porton of whch bonus had been pad to hm,
was pad to the wdow. The wdow was entted to receve n her
own rght one-haf of such bonus payment, and she was aso entted
to use for her fetme or unt her remarrage the remanng one-haf
of such payment, sub|ect to accountng for t at the termnaton
of the usufruct. ed, the fu amount of the bonus payment s
ta abe to the wdow.
dvce s requested wth respect to the appcaton of secton
126(a) (1) of the Interna Revenue Code to a bonus payment whch
was receved by a survvng wdow n communty who s domced
n the State of Lousana.
In the nstant case, the decedent was an offcer of a corporaton. In
addton to hs saary, he was entted to a bonus based on a percentage
of profts of the busness. domcary of Lousana, he ded n-
testate n anuary, 19 7, after havng receved a substanta payment on
account of the bonus due hm for the year 19 6. |udgment of pos-
sesson was rendered n March, 19 7, under the terms of whch the
survvng spouse, as wdow n communty, was paced n possesson
of an undvded one-haf nterest n her own rght n a communty
property, and a daughter was paced n possesson of the remanng
undm ded one-haf nterest n a communty property sub|ect to a
usufruct n such nterest n favor of her mother. Fna audt of the
corporaton s books for the year 19 6 dscosed a baance due on ac-
count of the bonus, whch baance was pad to the wdow n May and
une, 19 7.
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I 29.126-1
88
The pertnent provsons of the Cv Code of Lousana (Tte 111,
chapter 3, artce 916, chapter 1, secton 1, artces 53 and 536, and
chapter 1, secton 2, artce 5 9) provde n part as foows:
916. Usufruct of Survvng Spouse of Communty When Issue Survvng.
In a cases, when the predeceased husband or wfe sha have eft Issue of the
marrage wth the survvor, and sha not have dsposed by ast w and testa-
ment, of hs or her share n the communty. property, the survvor sha hod
a n usufruct, durng hs or her natura fe, so much of the share of the
deceased n such communty property as may be nherted by such ssue. Ths
usufruct sha cease, however, whenever the survvor sha enter nto a second
marrage.

63 . nds of Usufruct Defntons. There are two knds of usufruct.
Perfect usufruct, whch s of thngs whch the usufructuary can en|oy
wthout changng ther substance,
n mperfect or quas usufruct, whch s of thngs whch woud be useess
to the usufructuary, f he dd not consume or e pend them, or change the
substance of them, as money, gran, quors.

536. Imperfect Usufructs. Imperfect usufruct, on the contrary, transfers
to the usufructuary the ownershp of the thngs sub|ect to the usufruct, so that
he may consume, se or dspose of them, as he thnks proper, sub|ect to certan
charges herenafter prescrbed.

5 9. Imperfect Usufruct ghts and Dutes of Usufructuary. If the
usufruct ncudes thngs, whch cannot be used wthout beng e pended or
consumed, or wthout ther substance beng changed, the usufructuary has a
rght to dspose of them at hs peasure, but under the obgaton of returnng
the same quantty, quaty and vaue to the owner, or ther estmated prce,
at the e praton of the usufruct.
Secton 126(a) (1) of the Interna Revenue Code provdes n part
as foows:
S C. 126. INCOM IN R SP CT OF D C D NTS,
(a) Incuson n Gross Income.
(1) Genera rue. The amount of a tems of gross Income n respect
of a decedent whch are not propery Incudbe n respect of the ta abe
perod n whch fas the date of hs death or a pror perod sha be In-
cuded n the gross ncome, for the ta abe year when receved, of:

( ) the person who, by reason of the death of the decedent, acqures
the rght to receve the amount, f the rght to receve the amount f
not acqured by the decedent s estate from the decedent; or
(C) the person who acqures from the decedent the rght to receve
the amount by bequest, devse, or nhertance, f the amount s receved
after a dstrbuton by the decedent s estate of such rght

(3) Character of ncome determned by reference to decedent. The
rght, descrbed n paragraph (1), to receve an amount sha be treated, n
the hands of the person who acqured such rght by reason of the
death of the decedent, as f t had been acqured by
such person n the transacton by whch the decedent acqured such rght;
and the amount Incudbe n gross ncome under paragraph (1)
sha be consdered n the hands of such person to have the
character whch t woud have had n the hands of the decedent f the
decedent had ved and receved such amount.
Snce, n the nstant case, the decedent ded ntestate, the above-
quoted provsons of the aws of Lousana were apped to the ds-
trbuton of hs estate. The rght to receve the baance of the dece-
dent s bonus passed to the wdow, and, n fact, actua payment was
made to her. s to the one-haf of the bonus payment whch s sub-
|ect to the usufruct, she has the ownershp of the funds, she has the
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89
29.126-
rght to use them, to consume them, or to dspose of them at her
peasure gvng good tte thereto, sub|ect ony to an accountng at
the termnaton of the usufruct. though her ownershp n the
funds s not perfect ( ohnson v. ot, 1 6 So. 375), nevertheess the
rghts acqured by her n the funds are suffcent to consder her the
owner thereof for the purpose of appyng secton 126 of the Interna
Revenue Code, supra. What actuay passed to her was the rght to the
decedent s share of the bonus payment, mpressed wth an obgaton
to pay the ta , and t s ony the net of hs share after payment of the
ta n whch she has a rght of usufruct.
In vew of the foregong, t s hed that the fu amount of the bonus
payment s ta abe to the wdow.
Secton 29.126- : Income n respect of dece- 19 8-15-12863
dent dyng n ta abe year begnnng before Ct. D. 1701
19 3; ta of decedent.
ncome ta revenue act op 19 2 decson of court
Income n Respect of Decedents ccrued Income Suffcency
of Consent Fed by ecutors.
Decedent ded testate on February 23, 19 2, at whch tme there
had accrued to hm ncome n the amount of 150,791.79. The e ec-
utors reported ths and other ncome as they coected It n the perod
from February 23, 19 2, to December 31, 19 2, and for the years
19 3 to 19 6, ncusve; pad ncome, State, and oca ta es thereon,
and camed deductons n the year of payment. Returns for the
decedent and for hs estate were prepared on the cash bass. The
e ecutors fed a consent to compy wth secton 13 of the Revenue
ct of 19 2, but no consents were fed by them In ther capacty as
trustees of the resduary estate nor by the resduary egatees. ed:
The consent fed by the e ecutors ony was nsuffcent to meet the
requrements of secton 13 (g) of the Revenue ct of 19 2, and the
accruas were ta abe as part of the decedent s ncome for the fna
perod precedng hs death. ta payer must brng hmsef wthn
the strct terms requred by the statute and reguatons n order to
secure the benefts granted thereunder.
Unted States ( rcut Court of ppeas for the Second Crcut
state of dran . Larkn, deceased, bert . Maynnes, and Centra anover
ank d Trust Co., ecutors, pettoner, v. Commssoner of Interna Revenue
efore uoustus N. and, Chase, and Cark, Crcut udges
ppea from a decson of The Ta Court of the Unted States determnng a defcency In
the Income ta payabe by the state of dran . Larkn, deceased, tor the perod from
anuary 1, 19 2, to February 23, 10 2, n amount of 95, 97.17 ffrmed
pr 1, 19 8
OPINION
ugustus N. and, Crcut udge: The ta payer s the state of dran .
Larkn who ded a resdent of the State of New York on February 23, 19 2,
eavng a w whereby he devsed and bequeathed one-twenteth of hs resduary
estate to hs wfe and one-twenteth to each of hs three chdren and the re-
manng s teen-twenteths to bert . Magnnes and the Centra anover
820823 9 7
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29.126-
90
unk Trust Co. as trustees for hs wfe for fe, wth remander to hs chdren
or ther ssue. t the tme of hs death there had accrued to hm 150,791.79
n dvdends, nterest, saary, payment from hs aw partnershp, and n e ecutors
and trustees commssons. There had aso accrued aganst hm 20,9 1. for
State and oca ta es.
The e ecutors reported a of ths accrued ncome for ncome ta as they
coected t from tme to tme n the perod from February 23, 19 2, to December
31, 19 2, and n the years 19 3 to 19 6 ncusve, and pad the ncome ta thereon
and aso the State and oca ta es and camed deductons n the years of pay-
ment. The e ecutors never dstrbuted to anyone or sod, e changed, or other-
wse dsposed of the rght to receve the 150,791.79 of accrued ncome. The
returns of decedent and of hs estate were aways prepared on the cash bass. The
e ecutors fed a consent to compy wth secton 13 of the Revenue ct of 19 2,
but no consent was fed by them n ther capacty as trustees of s teen-
twenteths of the resduary estate or by the resduary egatees.
The queston before us s whether the consent fed by the e ecutors as such,
and by them ony, was suffcent to meet the requrements of secton 13 (g) of the
Revenue ct of 19 2 (56 Stat. 830). That secton enabed the estate .of persons
dyng durng a ta abe perod begnnng after December 31, 1933, and before
anuary 1, 19 3, by fng certan consents, to secure the benefts of secton 13
of the ct, whereby ncome accrued at the tme of death woud be ta ed when
receved as ncome of the estate or other person recevng t n accordance wth
secton 126 of the Interna Revenue Code, rather than be ncuded n the return
for decedent s ast ncome ta perod and ta ed as a part of the same as was
done under pror Revenue cts by secton 2(a) of the Code.
The Ta Court hed that the consent fed n the present case by the e ecutors
ony was nsuffcent to meet the requrements of secton 13 (g) of the 19 2 ct
and therefore determned that a the accruas to whch we have referred were
ta abe as part of the decedent s ncome for the fna perod precedng hs death,
n accordance wth the provsons of the Code at that date.
The most serous argument of the appeant s that the e ecutors who sgned
the consent have snce pad the ta upon a the accruas e stng at the tme
of th(- decedent s death as they reazed the cash payments represented by these
accrued tems. In these crcumstances, where as It deveoped the egatees and
trustees dd not themseves drecty receve the ta abe ncome, t s argued that
consents by them to pay ta es were unnecessary and cannot be regarded as re-
qured wthn the purpose of secton 13 (g) of the 19 2 ct. owever, t must
be noted that not ony were consents requred from the trustees and egatees by
the reguatons (T. R 111, secton 29.126- ) and a proper nterpretaton of
secton 13 (g) of the ct, but that ths requrement was |ustfed by suffcent
reason. These persons were contngenty abe to have ta rates apped retro-
actvey upon ther nterests n the estate athough they woud not have been
ndvduay abe for any ta pror to ths amendment. It coud not defntey
be sad that the trustees or egatees woud not subsequenty be abe for a ta f
secton 13 (g) were hed appcabe, snce the e ecutors mght have transferred
to the trustees and egatees the accrued rghts to the ncome as a means of
dstrbutng the estate, nstead of frst recevng the Income, and mght thus have
passed on the ta abty to the benefca owners. (See secton 126(a) (1) (C),
Interna Revenue Code: . R. Rept No. 2333, Seventy-seventh Congress, second
sesson, S3 (C. I. 19 2-2, 372, 35) ; Senate Rept. No. 1631. Seventy-seventh Con-
gress, second sesson, 100 (C. . 19 2-2, 50 , 579) . Indeed, the mere consent of the
e ecutors woud hardy seem consttutonay suffcent to bnd the resduary
egatees wthout the added consent of the atter where a ta made retroactve
by secton 13 (g) affected ther nterests. It Is possbe n the case of par-
tcuar egatees, who have a substanta amount of other persona ncome, that
the ta provsons thus apped woud ncrease ther ta burdens ndvduay
even though t mght take ess out of the estate as a whoe than under the
former aw. There was therefore speca reason for requrng consents from a
persons whose nterests mght be affected by an eecton to have these new
provsons of the Revenue ct of 19 2 appy. In any event, dmnuton of ta es
or parta e empton from ta es reazed through appcaton of ths ct was a
prvege afforded by Congress and a ta payer must brng hmsef wthn the
strct terms requred for the eecton n order to secure ts benefts. (Cf. Rey
Co. v. Commssoner, 311 U. S. 55 Ct. D. 1 09, C. . 19 0-2, 225 .
For the foregong reasons, the order of the Ta Court Is affrmed.
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91
29.131-1
SUPPL M NT C CR DITS G INST T
S CTION 131. T S OF FO IGN COUNTRI S ND
POSS SSIONS OF UNIT D ST T S
Secton 29.131-1: nayss of credt for 19 8-20-12930
ta es. I. T. 392
INT RN L R NU COD
The ta mposed by artce 97 of razan Decree Law No. 58 of
September 23,19 3 (a part of the razan Income Ta Law), whch
ta s based on gross Income e cept n the case of ncome from m-
movabe capta, fas wthn the Unted States concept of an ncome
ta and s aowabe as a credt aganst Unted States ncome ta
under secton 131(a) of the Interna Revenue Code, sub|ect to the
mtatons contaned n secton 131(b).
dvce s requested whether, n the case of a Unted States corpora-
ton not regstered n raz, the razan ta mposed by artce 97
of razan Decree Law No. 58 of September 23, 19 3, whch s a
part of the razan Income Ta Law, s aowabe as a credt aganst
Unted States ncome ta under secton 131 of the Interna Revenue
Code.
n ngsh transaton of artce 97 of razan Decree Law No.
58 , supra, pubshed by the razan Government Trade ureau,
provdes n part as foows:
rt. 97. Incomes receved sha be sub|ect to a deducton at the rate of 10
percent
(a) by ndvduas or corporate bodes resdent or domced abroad;

Par. 3. The ta referred to n ths artce sha be ncdent on gross ncome,
e cept f derved from mmovabe capta, n whch cnse the e penses referred
to n artce 10 may be deducted, aganst proof of same.
Secton 131 of the Interna Revenue Code provdes n part as foows:
(a) owance of Credt. If the ta payer chooses to have the benefts of
ths secton, the ta mposed by ths chapter Chapter 1 of the Code , e cept the
ta mposed under secton 102, sha be credted wth:
(1) Ctzens and domestc corporatons. In the case of a
domestc corporaton, the amount of any ncome ta es pad or
accrued durng the ta abe year to any foregn country
In the nterpretaton of the term ncome ta , the ureau has con-
sstenty adhered to a concept rather cosey reated to the ncome
ta mposed by the Unted States. The provsons of artce 97, ,u| n,
of the razan aw n queston are somewhat smar to secton
231(a) of the Interna Revenue Code, reatng to ta on nonresdent
foregn corporatons.
It s hed that the ta mposed by artce 97 of razan Decree
Law No. 58 of September 23, 19 3, whch ta s based on gross
ncome e cept n the case of ncome from mmovabe capta, fas
wthn the Unted States concept of an ncome ta and s aowabe
as a credt aganst Unted States ncome ta under secton 131(a)
of the Interna Revenue Code, sub|ect to the mtatons contaned
n secton 131(b).
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Regs. 10 , 23.11 92
SUPPL M NT D. R TURNS ND P YM NT OF T
S CTION 1 1. CONSOLID T D R TURNS
Reguatons 10 , Secton 23.11: Consodated 19 8-19-12923
returns for subsequent years. I. T. 3923
INT RN L R NU COD
ecton wth respect to fng separate Federa ncome ta returns
for the caendar year 19 8 by affated corporatons whch fed con-
sodated Federa ncome ta returns for the caendar year 19 7.
dvce s requested whether affated corporatons whch fed con-
sodated Federa ncome ta returns for the caendar year 19 7 may
eect to fe separate Federa ncome ta returns for the caendar year
19 8.
Secton 1 1 (a) of the Interna Revenue Code, as amended, provdes
n part as foows:
(a) Prvege to Fe Consodated Income and cess-Profts-Ta Re-
turns. The makng of consodated returns sha be upon the con-
dton that the affated group sha make both a consodated ncome-ta re-
turn and a consodated e cess-profts-ta return for the ta abe year, and that
a corporatons whch at any tme durng the ta abe year have been members
of the affated group makng a consodated ncome-ta return consent to a
the consodated ncome- and e cess-profts-ta reguatons prescrbed under
subsecton (b) pror to the ast day prescrbed by aw for the fng of such
return.
Secton 23.11(a) of Refatons 10 , as amended, reatng to con-
sodated ncome ta returns of affated corporatons, provdes n
part as foows:
(a) Consodated Returns Requred for Subsequent Tears.
If a consodated return s made under these reguatons for any ta abe year,
a consodated return must be made for each subsequent ta abe year durng
wheh the affated group remans n e stence uness (2) Chapter 1
of the Code to the e tent appcabe to corporatons, or these reguatons whch
have been consented to, have been amended and any such amendment s of a
character whch makes ess advantageous to affated groups as a cass the con-
tnned fng of consodated returns,
It s hed that the aw appcabe to the fng of consodated Fed-
era ncome ta returns has been so amended as to make ess advan-
tageous to affated groups as a cass the contnued fng of such re-
turns, wthn the meanng of secton 23.11(a) of Reguatons 10 , as
amended, for the caendar year 19 8. ccordngy, affated corpo-
ratons whch fed consodated Federa ncome ta returns for the
caendar year 19 7 may, notwthstandng the fng of such returns,
fe separate Federa ncome ta returns for the caendar year 19 8.
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93
5 19.162-1
SUPPL M NT . ST T S ND TRUSTS
S CTION 162. N T INCOM
Secton 19.162-1: Income of estates and
trusts.
19 8-17-12905
Ct. D. 1705
ncome ta nterna revenue code decson op court
1. Trust Income Porton of Net Income Pad or Permanenty
Set sde for Chartabe Purpose Capta Gans Per-
centage Taken Into ccount Meanng of Gross Income
as Used n Secton 162(a), Interna Revenue Code.
In the case of a trust agreement whch provded that 5 percent
of the net ncome of the trust, whch conssted argey of ong-term
capta gans, was to be pad or permanenty set asde for chartabe
purposes, the deducton of the amounts so pad or set asde s m-
ted to 5 percent of the ta abe ncome, . e., the ncome after appy-
ng to the capta gans (and capta osses) the percentages pre-
scrbed hy secton 117(b) of the Interna Revenue Code, pror to
the 19 2 amendment. The amount of ong-term capta gan not
taken Into account under secton 117 does not consttute gross ncome
of the trust under secton 22(a) of the Code. Gross ncome as
used n secton 162(a) of the Code means statutory gross Income and
not gross ncome In the ordnary accountng sense.
2. Decson Reversed.
Decson of The Ta Court of the Unted States (7 T. C. 573)
reversed.
3. Certorar Dened.
Petton for certorar dened November 2 , 19 7.
Unted States Crcut Court of ppeas for the Second Crcut
Commssoner of Interna Revenue, pettoner, v. Centra anover ank t Trust
Co., amn F. ndrus and Wam . Tayor, Trustees under greement dated
December 30, 1921, by ohn . ndrus, deceased (Trust No. 1), respondents
Petton by the Commssoner of Interna Revenue to revew a decson of The Ta Court
of the Unted States determnng that there had been an overpayment of ncome ta es
by the respondents for the year 19 1 Reversed
ugustus N. and, Crcut udge: The ta payers are trustees under a trust
agreement e ecuted by ohn . ndrus. snce deceased, under date of December
30, 1921. On March 15,19 2, they fed a Federa ncome ta return for the year
19 1, wth the Coector of Interna Revenue for the Second Dstrct of New
York.
The trust was created to contnue durng the ves of two desgnated persons
and durng ther ves the ncome of the trust was to be dstrbuted as provded
n the agreement. t the death of the survvor of these ndvduas the corpus
of the trust was to be dstrbuted. Ths perod durng whch the ncome was to
be dstrbuted Is referred to as the Prmary trust term.
The trust agreement provded, among other thngs, that the trustees were:
Frst: To coect and receve the dvdends, Interest, Income, rents, ssues and
profts on or arsng from the Trust estate (herenafter caed Income ) and
after payng therefrom a e penses of admnstraton and a tems whch are
hereafter provded to be pad out of Income or whch the trustees n ther dscre-
ton sha determne to pay from Income, to pay the net amount of sad Income
as foows, vz:
163 Fed. (2d) 208
efore L. and, Swan, and ugustus N. and, Crcut udges
uy 2 ,19 7
OPINION
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19.1G2-1
9
(a) uartery or at such other ntervas as sha be convenent n the admn-
straton of the Trust estate durng the Prmary trust term, the trustee sha pay
forty-fve percent ( 5 ) of such net ncome to Surdna Foundaton, Inc., a charta-
be corporaton, organzed and e stng under the aws of the State of New York,
and on the termnaton of sad Prmary trust term the trustees sha transfer,
convey, assgn and set over unto sad Surdna Foundaton, Inc., forty-fve percent
( 5 ) of a of the capta of the Trust estate as t sha then e st, for ts soe
and absoute use and beneft forever.
The baance of the ncome of ths trust was to be dstrbuted among the number
of benefcares whose Incomes were sub|ect to ncome ta .
The Surdna Foundaton, Inc., s a New York corporaton organzed for e cu-
sve chartabe purposes. Under the provsons of the trust agreement 5 percent
of the trust s net ncome for the year 19 1 was pad or permanenty set asde for
the Surdna Foundaton, Inc.
It s stpuated by counse for both sdes that durng the year 19 1 the ong-
term capta gan from assets hed more than 2 months was 87, 08.39. The
ong-term capta oss from assets hed more than 18 months, but not more than
2 months, was 2, 61.25. Income, other than that arsng from capta gans,
was 16,769. Deductons, other than contrbutons, totaed 19,22 .01. The tota
net ong-term capta gan was 8 ,9 5.1 . The net ncome of the trust pror
to deducton for contrbutons was 82, 90.52.
In returnng for ta aton the ncome receved n the year 19 1. the ta payer
reported chartabe contrbutons of 5 percent of 82, 90.52, namey, 37,120.7 ,
and camed that the amount pad or permanenty set asde was deductbe n
fu n computng ta abe net ncome of the trust for the year 19 1 under secton
162(a) of the Interna Revenue Code. The Commssoner contends that the
deducton of the amounts pad or permanenty set asde to a chartabe corpora-
ton s mted to 5 percent of the ta abe ncome, . e., the ncome after appyng
to the capta gans (and capta osses) the percentages prescrbed by secton
117(b) of the Interna Revenue Code.2 pror to the 19 2 mendment.
The Ta Court adopted the vew taken by the ta payer and from ts decson
the Commssoner as appeaed. We thnk the Ta Court erred n hodng that
the ta payer was entted under secton 162(a) to deduct the fu amount set
asde or pad for chartabe purposes. It s to be noted that secton 162(a)
aows as a deducton for chartabe contrbutons any part of the gross ncome,
wthout mtaton, whch pursuant to the terms of the deed creatng
the trust, s durng the ta abe year pad or permanenty set asde for the purposes
and In the manner specfed n secton 23(o)
Secton 22(a) of the Revenue ct n ts defnton of gross ncome, from
whch the deducton of chartabe contrbutons s to be made under secton
162(a),5 provdes as foows:
(a) Gekeba Defnton. Gross ncome ncudes gans, profts, and ncome
derved from saares, wages, or compensaton for persona servce , or
from saes, or deangs n property, whether rea or persona, growng
out of the ownershp or use of or nterest n such property.
1 Sec. 162. Net Income.
The net Income of the estate or trust sha he computed n the same manner and on the
same bass as n the case of an ndvdua, e cept that
(a) There sha he aowed as a deducton (In eu of the deducton for chartabe, etc.,
contrbutons authorzed by secton 23(o)) any part of the gross Income, wthout mta-
ton, whch pursuant to the terms of the w or deed creatne; the trust, s durng the ta -
abe year pad or permanenty set asde for the purposes nnd n the manner specfed n
secton 23(o), or s to be used e cusvey for regous, chartabe, scentfc, terary, or
educatona purposes, or for the preventon of cruety to chdren or anmas, or for the
estabshment, acquston, mantenance or operaton of a pubc cemetery not operated
for proft.
1 Sf.c. 117. (b) P Rr NT OR Taken Into ccount. In the case of a ta payer, other
than a corporaton, ony the foowng percentages of the gan or oss recognzed upon the
sae or e change of a capta asset sha be taken nto account n computng net ncome:
100 per centum f the capta nsset has been hed for not more than 18 months :
06 per centum If the capta asset has been hed for more than 18 months but
not for more than 2 months :
SO per centum f the capta asset has been hed for more than 2 months.
Whe secton 22(a) Is part of the Genera Provsons of the Interna Revenue Code
and secton 162(a) s Incuded n Suppement of the Code, t s cear that the defntons
In the Genera Provsons appy to Suppement , n the absence of specfc e ceptons,
snce 26 U. S. C. secton provdes :
Speca casses of ta payers.
The appcaton or the Genera Provsons nnd of Suppements to D, Incusve, to
each of the foowng speca casses of ta pnyers. sha be sub|ect to the e ceptons and
addtona provsons found n the Suppement appcabe to such cass, as foows :
(a) states and trusts and the benefcares thereof. Suppement .
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95
29.212-2
Gans as defned n secton 117(a) ( ) and (5) ncude ong-term capta gans
from the sae or e change of a capta asset hed for more than 18 months, f
and to the e tent such gan s taken nto account- n computng net ncome.
Itacs supped.
ccordngy the amount of ong-term capta gan not taken Into account under
secton 117 does not consttute gross ncome of the trust under secton 22(n).
nd, snce the deducton aowed by secton 102(a) s restrcted to payments
made out of gross ncome, the deducton here must be mted to that porton
of the chartabe gft whch was made out of statutory gross ncome.
The Ta Court n Its opnon, per aran, ., seems to have regarded the words
wthout mtaton In secton 162(a) as enttng the ta payer to the fu amount
of ts contrbutons derved from gans whether or not those gans were taken
Into account for ta purposes. We thnk t cear that the words wthout mta-
ton ony meant to remove from contrbutons of trust ncome the mtaton of
15 percent whch the statute aows as a deducton In the case of an ndvdua. In
other words, the term wthout mtaton has no bearng upon the probem
here.
The Ta Court aso seems to us to have been n error n rung that capta gans
are to be taken Into account for the purpose of determnng the gross ncome
from whch contrbutons and, correspondngy, deductons may be made to the
fu e tent they are earned for the genera purposes of the trust. For, as we
have aready sad, ong-term capta gan and ong-term capta oss under secton
117 ( ) and (5) ony mean gan or oss to the e tent that they are taken nto
account In computng net ncome. The prevous decsons n Grey v. Comms-
soner ( 1 . T. . 23 , aff d 118 Fed. (2d) 153) and Maoy v. Commssoner ( 5
. T. . 110 ), whch udge aran attempted to dstngush n hs opnon
woud seem to furnsh sound anaoges n deang wth other sectons of the
statute and to support our concuson that the deducton to be aowed to the
ta payer shoud be mted to 5 percent of the ta abe gross ncome, . e., the
ncome after appyng to the capta gans (and capta osses) the percentages
prescrbed by secton 117(b) of the Interna Revenue Code, and not 5 percent of
82, 90.52. The decson of the Ta Court In Green v. Commssoner (7 T. C.
263), aso supports our vew that gross ncome as used n secton 162(a)
means statutory gross ncome, and not gross ncome n the ordnary accountng
sense.
For the foregong reasons the decson of the Ta Court s reversed and the pro-
ceedng s remanded to t for the purpose of recomputng the ta n accordance
wth the vews e pressed n ths opnon.
SUPPL M NT . NONR SID NT LI N INDI IDU LS
S CTION 212. GROSS INCOM
Secton 29.212-2: cuson of earnngs of 19 8-1 -128
foregn shps from gross ncome. I. T. 3913
( so Secton 231, Secton 29.231-3.)
INT RN L R NU COD
Sngapore does not satsfy the equvaent e empton provsons of
sectons 212(b) and 231(d) of the Interna Revenue Code.
Secton 29.212-2: cuson of earnngs of 19 8-25-12979
foregn shps or arcraft from gross ncome. T. D. 5667
( so Secton 231, Secton 29.231-3.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 29.
INCOM T ; T L T RS GINNING FT R D C M R 31, 19 1
Reguatons 111 amended to conform to Pubc Law 51 ( ghteth
Congress) C. . 19 8-1, 237 , reatng to e cuson of earnngs of
foregn shps and arcraft from gross ncome.
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29.212-2
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
On ugust 19. 19 8, notce of proposed rue makng regardng
Pubc Law 51 ( ghteth Congress) C. . 19 8-1, 237 , approved
May , 19 8, was pubshed n the Federa Regster (13 F. R. 79 ).
No ob|ecton to the rues proposed havng been receved, the foowng
amendments are hereby adopted. Such amendments are necessary n
order to conform Reguatons 111 26 CF , Part 29 to Pubc Law
51 .
Paragraph 1. There s nserted mmedatey precedng secton
29.212-1 26 CFR 29.212-1 the foowng:
PU LIC L W 51 ( IG TI T CONGR SS), PPRO D M Y ,
19 8
e t enacted by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That (a) secton 212(b) of the
Interna Revenue Code (reatng to ncome of nonresdent aen nd-
vduas) s hereby amended to read as foows :
(b) cusons. The foowng tems sha not be ncuded n gross
Income or a nonresdent aen ndvdua and sha be e empt from ta -
aton under ths chapter:
(1) Shps unoer fobeon fao. arnngs derved from the oper-
aton of a shp or shps documented under the aws of a foregn
country whch grants an equvaent e empton to ctzens of the
Unted States and to corporatons organzed n the Unted States;
(2) kcbaft of FOR N R |OIStrt. arnngs derved from the
operaton of arcraft regstered under the aws of a foregn country
whch grants an equvaent e empton to ctzens of the Unted States
and to corporatons organzed n the Unted States;

Seo. 2. The amendments made by ths ct sha be appcabe wth
res ect to ta abe years begnnng after December 31, 19 5.
Par. 2. Secton 29.212-2 26 CFR 29.212-2 s amended:
( ) y nsertng n the headng after the words foregn shps
the words or arcraft, by nsertng mmedatey before the frst sen-
tence the subheadng (a) Shps under foregn fag and by strkng
out the word secton at the end of the frst paragraph and nsertng
n eu thereof the word subsecton.
( ) y nsertng at the end of such secton the foowng new
subsecton:
(6) rcraft of foregn regstry. For ta abe years begnnng after Decem-
ber 31. 19 ), so much of the ncome from sources wthn the Unted States of a
nonresdent aen Indvdua who at any tme wthn the ta abe year was engaged
n trade or busness wthn the Unted States as conssts of earnngs derved from
the operaton of arcraft regstered under the aws of a foregn country whch
grants an equvaent e empton to ctzens of the Unted States nonresdent n
such foregn country and to corporatons organzed n the Unted States, sha
not be ncuded n gross ncome. Foregn countres whch ether mpose no ncome
ta , or, n Imposng such ta , e empt from ta aton so much of the ncome of a
ctzen of the Unted States nonresdent n such foregn country and of a corpo-
raton organzed n the Unted States as conssts of earnngs derved from the
operaton of arcraft regstered under the aws of the Unted States are consd-
ered as grantng an equvaent e empton wthn the meanng of ths subsecton.
nonresdent aen ndvdua not engaged n trade or busness wthn the
Unted States at any tme wthn the ta abe year Is not requred to Incude
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29.21 -1
In gross Income such ncome from sources wthn the I nted States as s derved
from the operaton of arcraft, whether or not the foregn country under the aws
of whch such arcraft are regstered meets the equvaent e empton requrement
of the Interna Revenue Code.
Par. 3. There s nserted mmedatey precedng secton 29.231-1
26 CFR 29.231-1 the foowng:
PU LIC L W 51 ( IG TI T CONGR SS), PPRO D M Y ,
19 8

(b) Secton 231(d) of the Interna Revenue Code (reatng to ncome
of foregn corporatons) s hereby amended to read as foows:
(d) cusons. The foowng tems sha not be Incuded n gross
Income of a foregn corporaton and sha be e empt from ta aton
under ths chapter:
(1) Shps under foregn fao. arnngs derved from the opera-
ton of a shp or shps documented under the aws of a foregn
country whch grants an equvaent e empton to ctzens of the
Unted States and to corporatons organzed n the Unted States;
(2) rcraft of foregn regstry. nrnngs derved from the
operaton of arcraft regstered under the aws of a foregn country
whch grants an equvaent e empton to ctzens of the Unted
States and to corporatons organzed n the Unted States.
Sec. 2. The amendments made by ths ct sha be appcabe wth
respect to ta- abe years begnnng nfter December 31, 19 5.
Par. . Secton 29.231-3 26 CFR 29.231-3 s amended:
( ) y nsertng n the headng after the words foregn shps
the foowng:
or arcraft.
( ) y nsertng after the word documented appearng n the
frst and second paragraphs the foowng:
or arcraft regstered.
(C) y nsertng n the second paragraph after the words shp
or shps the foowng:
or arcraft.
(Ths Treasury Decson s ssued under the authorty of secton
62 of the Interna Revenue Code (53 Stat. 32; 26 U. S. C. 62).)
Geo. . Scoeneman,
Commssoner of Interna Revenue.
pproved November 15, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Ped wth the Dvson of the Federa Regster November 18, 19 8, 8: 50 a. m.)
S CTION 21 . CR DITS G INST N T INCOM
Secton 29.21 -1: Credts to nonresdent
aen ndvduas.
nterna revenue code
Credts for wfe and dependents where status of ta payer changes
durng ta abe year. (See I. T. 3926, page 8.)
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I 29.251- 1
98
SUPPL M NT I. FOR IGN CORPOR TIONS
S CTION 231. T ON FOR IGN CORPOR TIONS
Secton 29.231-3: cuson of earnngs of foregn
shps from gross ncome.
INT RN L R NU COD
Sngapore equvaent e empton provsons of secton 231(d) of
the Interna Revenue Code. (See I. T. 3913, page 95.)
Secton 29.231-3: cuson of earnngs of foregn
shps or arcraft from gross ncome.
INT RN L R NU COD
Reguatons 111 amended. (See T. D. 5667, page 95.)
SUPPL M NT . POSS SSIONS OF T UNIT D ST T S
S CTION 251. INCOM FROM SOURC S WIT IN
POSS SSIONS OF UNIT D ST T S
Secton 29.251- : Defnton. 19 8-15-12861
I. T. 391
INT RN L R NU COD
Mtary bases eased by the Unted States from a foregn country
for a term of years do not consttute possessons of the Unted
States wthn the meanng of secton 251 of the Interna Revenue
Code.
dvce s requested whether mtary bases eased by the Unted
States from a foregn country consttute possessons of the Unted
States wthn the meanng of secton 251 of the Interna Revenue Code,
reatng to ncome from sources wthn possessons of the Unted States.
It s contended that the status of eased mtary bases s anaogous
to that of the Panama Cana Zone whch s ocated n a foregn coun-
try, . e., the Repubc of Panama. The Panama Cana Zone s
specfcay ncuded n the defnton of the term possesson of the
Unted States n secton 29.251- of Reguatons 111.
rtce II of the conventon between the Unted States and the
Repubc of Panama for the constructon of a shp cana to connect
the waters of the tantc and Pacfc Oceans (ratfcatons e changed
and procamed on February 26, 190 , 33 Stat. 223 ), provdes as
foows:
The Repubc of Panama grants to the Unted States n perpetuty the use, oc-
cupaton and contro of a zone of and and and under water for the constructon,
mantenance, operaton, santaton and protecton of sad Cana of the wdth of
ten mes e tendng to the dstance of fve mes on each sde of the center ne
of the route of the Cana to be constructed; the sad zone begnnng n the Carb-
bean Sea three marne mes from mean ow water mark and e tendng to and
G
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90
29.251-
across the Isthmus of Panamn nto the Pacfc Ocean to a dstance of three
marne mes from mean ow water mark wth the provso that the cttes of
Panama and Coon and the harbors ad|acent to sad ctes, whch are ncuded
wthn the boundares of the zone above descrbed, sha not be ncuded wthn
ths grant. The Repubc of Panama further grants to the Unted States n
perpetuty the use, occupaton and contro of any other ands and waters out-
sde of the zone above descrbed whch may be necessary and convenent for the
constructon, mantenance, operaton, santaton and protecton of the sad Cana
or of any au ary canas or other works necessary and convenent for the con-
structon, mantenance, operaton, santaton and protecton of the sad enter-
prse.
The Repubc of Panama further grants n ke manner to the Unted States
n perpetuty a sands wthn the mts of the zone above descrbed and n
addton thereto the group of sma sands n the ay of Panama, named Perco,
Naos, Cuebra and Famenco.
rtce I of the above-mentoned conventon between the Unted
States and the Repubc of Panama provdes as foows:
s the prce or compensaton for the rghts, powers and prveges granted
n ths conventon by the Repubc of Panama to the Unted States, the Govern-
ment of the Unted States agrees to pay to the Repubc of Panama the sum of
ten mon doars (. 10,000,000) n god con of the Unted States on the e change
of the ratfcaton sc of ths conventon and aso an annua payment durng
the fe of ths conventon of two hundred and ffty thousand doars ( 250,000)
n ke god con, begnnng nne years after the date aforesad.
The provsons of ths rtce sha be n addton to a other benefts assured
to the Repubc of Panama under ths conventon.
ut no deay or dfference of opnon under ths rtce or any other pro-
vsons of ths treaty sha affect or nterrupt the fu operaton and effect of
ths conventon n a other respects.
rtce II of the treaty between the Unted States and the Repubc
of Panama, wth respect to whch ratfcatons were e changed and
recamaton was made on uy 27,1939 (53 Stat. 1807), provdes that,
3gnnng wth the 193 annuty payment, the annua amount of the
payments provded under rtce I of the conventon procamed
on February 26, 190 , sha be four hundred and thrty thousand ba-
boas ( / 30,000.00) or the equvaent thereof. In a suppementary
e change of notes, the baboa s defned as havng a god content equa
to that of the present Unted States doar. (See ack worth, voume
II, Dgest of Internatona Law, 809.)
The ease of the Newfoundand, ermuda, and other bases was pro-
vded for n an agreement (55 Stat. 1560), sgned March 27, 19 1,
between the Unted States, Great rtan, and Canada concernng the
defense of Newfoundand, n whch was ncorporated an e change of
notes ( nne I) dated September 2, 19 0, between the Unted States
and the rtsh Government, and forms of eases ( nne II) between
the Unted States and varous coona governments ncudng New-
foundand. ermuda, amaca, and others, these forms provdng,
nter aa, for the easng of bases n those rtsh coones to the Unted
States for the perod of 99 years.
From the foregong t w be observed that the Unted States has
the use, occupaton, and contro of the Cana Zone n perpetuty.
though t s true that the Unted States undertakes to compensate the
Repubc of Panama by means of an annuty, the terms of whch were
ater atered from those of the orgna treaty (conventon), the
covenant for the use, occupaton, and contro of the Cana Zone by the
Unted States s e pressy made ndependent of the covenant for the
payment of the annuty by the terms of the atter covenant.
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S 59.322-7
100
The eases under the terras of whch the bases n Newfoundand and
esewhere were acqured by the Unted States are mted to the term
of 99 years. Wthout dscussng other features whch dstngush the
conventon reatve to the Cana Zone from the agreement and eases
under whch the mtary bases n the rtsh coones were acqured,
the mtaton of such soveregnty as the Unted States acqured n
these bases to a stated perod of years s suffcent to dstngush the
Cana Zone from the eased mtary bases for the purposes of secton
251 of the Interna Revenue Code. It has, therefore, been the con-
sstent poston of the ureau that such eased mtary bases are not
possessons of the Unted States wthn the purvew o secton 251 of
the Code.
In Conne et a. v. ennya- rown Co., Inc., et a. (16 Fed. (2d)
92 ), the Unted States Crcut Court of ppeas for the Second Cr-
cut hed that, for the purposes of the Far Labor Standards ct of
1938 (52 Stat. 1060), the ermuda bases are possessons of the Unted
States. The decson went no further than as stated, and the appca-
ton of secton 251 of the Interna Revenue Code was not nvoved.
ence, that decson does not stand for the proposton that bases
eased by the Unted States from a foregn country for a term of years
consttute possessons of the Unted States wthn the meanng of sec-
ton 251 of the Code, and t does not |ustfy any ateraton n the
consstent poston of the ureau that such bases are parts of the
foregn country from whch they are eased and are not possessons of
the Unted States wthn the purvew of that secton.
SUPPL M NT O. O RP YM NTS
S CTION 322. R FUNDS ND CR DITS
Secton 29.322-7: Lmtatons upon the credt- 19 8-22-129 7
ng and refundng of ta es pad. T. D. 5657
( so Secton 19.322-7, Reguatons 103.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 19 ND
P RT 29
Reguatons 103 and Reguatons 111 amended to conform to Pubc
Law 828 ( ghteth Congress) page 322, ths uetn , approved
une 29, 10 8, reatng to the tme for camng refund wth respect
to war osses.
Treasury Department,
Offce of the Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 103 26 CFR, Part 19 and Regua-
tons 111 26 CFR, Part 29 to Pubc Law 828 ( ghteth Congress)
page 322. ths uetn , approved une 29,19 8, such reguatons are
amended as foows:
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101
29.322-7
Paragraph 1. There s nserted mmedatey precedng secton
19.322-1, Reguatons 103 26 CFR 19.322-1 , and mmedatey pre-
cedng secton 29.322-1, Reguatons 111 26 CFR 29.322-1 , the
foowng:
PU LIC L W 828 ( IG TI T CONGR SS), PPRO D UN
29, 19 8
T NSION OF TIM FOR CL IMING CR DIT OR R FUND WIT R SP CT TO
W R LOSS S
Resoved by the Senate and ouse of Representatves of the nted
States of merca n Congress assembed, That If a cam for credt or
refund under the nterna-revenue aws reates to an overpayment on
account of the deductbty by the ta payer of a oss n respect of prop-
erty consdered destroyed or sezed under secton 127(a) of the Interna
Revenue Code, reatng to war osses, for a ta abe year begnnng n
19 1 or 19 2, the three-year perod of mtaton prescrbed n secton
322(b) (1) of the Interna Revenue Code sha In no event e pre pror
to December 31, 19 9. In the case of such a cam fed on or before
December 31, 19 9, the amount of the credt or refund may e ceed the
porton of the ta pad wthn the perod provded n secton 322(b) (2)
or (3) of the Interna Revenue Code, whchever s appcabe, to the
e tent of the amount of the overpayment attrbutabe to the deductbty
of the oss descrbed n ths secton.
Par. 2. Secton 19.322-7, Reguatons 103, as amended by Treasury
Decson 56 5 page 1 , ths uetn , approved uy 20,19 8 20 CFR
19.322-7 , and secton 29.322-7. Reguatons 111, as amended by sad
Treasury Decson 56 5 26 CFR 29.322-7 , are further amended by
strkng out n the ast sentence of (a) of each such secton the
foowng:
Pubc Law 35C ( ghteth Congress), approved ugust , 19 7, e tendng to
December 31, 19 8,
and by nsertng n eu thereof the foowng:
Pubc Law 828 ( ghteth Congress), approved une 29, 19 8, e tendng to
December 31, 19 9,
(Ths Treasury Decson s ssued under the authorty contaned
n secton 62 of the Interna Revenue Code (53 Stat. 32; 26 U. S. C.
62).)
ecause the amendments made by ths Treasury Decson merey
change the date, from that specfed by pror aw to that now specfed
by Pubc Law 828 ( ghteth Congress), approved une 29, 19 8, on
whch the e tenson of tune for fng certan cams for credt or refund
wth respect to war osses e pres, t s hereby found that t s unneces-
sary to ssue ths Treasury Decson wth notce of pubc procedure
thereon under secton (a) of the dmnstratve Procedure ct.
approved une 11, 19 6, or sub|ect to the effectve date mtaton of
secton (c) of sad ct.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved October 1, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Ped wth the Dvson of the Federa Regster October 7, 19 8, 8 : 56 a. m.)
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Regs. 112, 35.722-1
102
SUPPL M NT T. INDI IDU LS WIT GROSS INCOM FROM C RT IN SOURC S
OF (3,000 OR L SS
S CTION 0 . C RT IN T P Y RS IN LIGI L
Secton 29. 0 -1: Ta payers to whom Suppe-
ment T s nappcabe.
INT RN L R NU COD
Ta payers who are nonresdent aens durng any part of the ta abe
year. (See I. T. 3926, page 8.)
C PT R 2. DDITION L T S
SU C PT R . C SS PROFITS T
P RT I
S CTION 710. IMPOSITION OF T
Reguatons 112, Secton 35.710-3: Unused
e cess profts credt ad|ustment.
( so Secton 30.710-3, Reguatons 109.)
INT RN L R NU COD
Reguatons under ct of uy 15. 19 7, reatng to net operatng
oss carry-overs and unused e cess profts credt carry-overs n the case
of certan successor raroad corporatons. (See T. D. 56 2, page 70.)
S CTION 722. G N R L R LI F CONSTRUCTI
R G S P RIOD N T INCOM
Reguatons 112, Secton 35.722-1: Genera 19 8-23-12958
rue. Mm. 6323
Organzaton change. cess Profts Ta Counc
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 2.5, D. C, October 22, 19 8.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
eads of Fed Dvsons of the Technca Staff, and Others
Concerned:
1. Mmeograph 6035 (C. . 19 6-2, 97) estabshed the cess
Profts Ta Counc as a fed group n the ureau of Interna Revenue
wth responsbty for fna ureau acton on ssues arsng under
secton 722 of the Interna Revenue Code. s so estabshed, the
Counc conssted of 15 members.
2. The authorzed membershp of the Counc s hereby ncreased
to 25, whch number sha ncude the charman and vce charman.
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103
Msc.
There aso s estabshed wthn the Counc a 5-member e ecutve com-
mttee, consstng of the charman, the vce charman, and 3 other
Counc members.
3. The e ecutve commttee sha e ercse, for the Commssoner,
fna authorty wthn the ureau of Interna Revenue n respect to a
ssues arsng under secton 722, ncudng procedure, nterpretaton,
genera pocy, and determnatons made wth respect to ndvdua
cases.
. Panes of one or more Counc members w make determnatons
wth respect to ndvdua cases, whch determnatons w be sub|ect
to revew by the e ecutve commttee. Counc members w partc-
pate n the estabshment of nterpretatve poces, to the e tent
deemed essenta by the e ecutve commttee, pror to the adopton of
such poces by the e ecutve commttee.
5. Pror nstructons, to the e tent nconsstent wth the foregong,
are superseded.
6. Correspondence regardng ths mmeograph shoud refer to ts
number and to the symbos PC.
Fred S. Martn,
ctng Commssoner.
Reguatons 112, Secton 35.722-1: Genera 19 8-23-12959
rue. Crcuar 2060
Organzaton change, cess Profts Ta Counc
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, October 25,10 t8.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
eads of Fed Dvsons of the Technca Staff, and Others
Concerned:
In accordance wth Mmeograph 6323 page 102, ths uetn ,
dated October 22, 19 8, Carence . McLaughn s desgnated vce
charman of the cess Profts Ta Counc and the foowng Counc
members are apponted members of the e ecutve commttee of the
Counc: enry . Merry, charman; Carence . McLaughn, vce
charman; ohn N. ready, enry . Donney, r., enry C. Lowen-
haupt.
Fred S. Martn,
ctng Commssoner.
C SS PROFITS T COUNCIL
19 8-16-12892
. P. C. 33
The Corporaton panted a new orange grove n 1035 whch (d
not reach the productve stage unt 19 1. ed, that the pantng
and subsequent cutvaton consttutes a commtment to a course of
acton under secton 722(b) ( ) whch was consummated n 19 1.
The Corporaton aso camed a commtment to a course of acton
under secton 722(b) ( ) because of natura growth, whch ncreased
productve capacty after December 31, 1939, n a ctrus grove
acqured n 1932 when the trees were 10 or more years od. ed,
that such fncts do not consttute a commtment to a course of acton
under secton 722(b) ( ).
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Msc.
10
1. The Corporaton was organzed n 1932 to engage n the bus-
acqured a tract of and panted to ,000 orange trees and 1,000 grape-
frut trees. The orange trees were appro matey 10 years od and
the grapefrut trees appro matey 12 years od at the tme of acqus-
ton. The ta payer deducted deprecaton on ths grove n ts ncome
ta returns for a years snce acquston, usng an estmated fe
from date of acquston of 35 years.
2. In 1935, the ta payer acqured an addtona tract of and and
panted thereon 2,000 young orange trees. Durng the entre base
perod ths tract was n a state of deveopment. In 19 1, a crop of
appro matey 60 bo es per 100 trees was harvested. For the year
19 1, the ta payer deducted deprecaton on ths grove, usng an est-
mated fe of 0 years from 19 1, the year n whch t was deemed to
have produced ts frst commerca crop.
3. The ta payer contends:
(a) That the pantng n 1935 and the subsequent cutvaton of
the 2,000 young orange trees whch dd not bear a commerca crop
of frut unt after December 31, 1939, consttuted a course of ac-
ton to whch the ta payer was commtted pror to anuary 1,
19 0, whch resuted n a change n capacty for producton con-
summated after December 31, 1939.
(6) That by the acquston n 1932 of a commercay producng
grove whch, because of contnued natura growth, had not reached
ts ma mum productve capacty pror to the end of the base
perod, t was commtted pror to anua y 1, 19 0, to a course of
acton resutng n a change n capacty for producton whch
was not consummated unt after December 31, 1939.
. Secton 722(b)( ) of the Interna Revenue Code provdes, n
ny change n the capacty for producton or operaton of the busness consum-
mated durng any ta abe year endng after December 31, 1939, as a resut of a
course of acton to whch the ta payer was commtted pror to anuary 1, 19 0,
sha be deemed to be a change on December 31, 1939, n the character
of the busness, .
5. ccordng to the foregong provson of the Code, the course of
acton to whch a ta payer was commtted pror to anuary 1, 19 0,
must be consummated durng a ta abe year endng after December
31, 1939, n order to gve rse to a quafyng change n the character
of the busness. ta payer does not quaFfy because of makng a
commtment aone but the change n capacty must be consummated
through some acton or event durng a ta abe year endng after
December 31, 1939. commtment made by pantng an orange
grove may be regarded as beng consummated at the tme the grove
reaches the productve stage.
6. Frut trees may be sad to reach the productve stage n the year
n whch the orchard reaches an ncome-producng state. The reach-
ng of the productve stage has ong been consdered an mportant
event n a number of the agrcutura ndustres for ncome ta pur-
poses. (See secton 29.23 (a)-11, Reguatons 111, and reguatons
pror thereto.) fter the productve stage has been reached, the ta -
payer may no onger eect to captaze deveopment costs. Smary,
the productve stage s rec gnzed as the tme when deprecaton de-
ductons are permtted. uetn F provdes, n part, as foows:
Upon ncorporaton, the ta payer
part:
G
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105
Msc.
In any event, It Is certan that there Is a gradua and utmate e hauston
of an orchard wthn a number of years after the productve stage has been
reached. e pendtures necessary to brng orchard trees to a producng
stage may be captazed and thereafter a far and reasonabe annua aowance
for deprecaton may be deducted n order to return to the owner free of ncome
ta aton the capta nvested |ust as In the case of an nvestment n other tangbe
property used n any other busness or trade.
7. Consstent wth ths pror practce, the reachng of the pro-
ductve stage by an orchard s recognzed as the consummaton of a
pror commtment for the purposes of secton 722. though the age
at whch frut trees frst produce commercay vares wth u number
of factors, ncudng the knd of frut grown, the area n whch grown,
the care and cuture of the trees, and the |udgment of the growers,
the effectve date usuay may be estabshed from the acton of the
ta payer n chargng deveopment costs to e penses or n commencng
deprecaton deductons n ts ncome ta returns. Generay, e -
perence shows that the productve stage for orange trees s reached
about s to eght years from date of pantng.
8. ny ncrease n productve capacty arsng out of natura growth
of the trees after the productve stage has been reached cannot be
regarded as the consummaton of a commtment. Natura growth s
nherent n the trees themseves and s not the resut of acton of the
owner, other than usua mantenance requred for that type of prop-
erty. Congress manfesty dd not ntend to ncude n secton 722
a natura phenomenon common to a growng thngs as an abnormaty
or a change n the character of a busness. In the ctrus frut n-
dustry today there are reatvey few groves n the Unted States
whch have reached ther ma mum productve capacty. Ths beng
so, even f natura growth were admtted to be a change n capacty
for producton, t woud not necessary ead to an ncrease n norma
ncome. Increases n producton for the entre ndustry tend to ower
prces and depress ncome. It has not been estabshed that a demand
necessary to absorb such addtona ndustry producton at the then
prevang prces e sted durng the base perod.
9. The pantng n 1935 of the 2,000 orange trees and ther subse-
quent care and cutvaton consttuted a course of acton to whch the
ta payer was commtted pror to anuary 1, 19 0. s a resut of
ths course of acton, a change n the ta payer s capacty for pro-
ducton was consummated durng 19 1, at whch tme the ta payer
consdered that the commercay productve stage had been reached
and camed a deducton for deprecaton. For purposes of recon-
structon, the consummaton of the commtment w be deemed to be
a change n the character of the busness on December 31, 1939, as
provded by the statute.
10. Insofar as the acquston of the grove n 1932 s concerned, t
s hed that ths dd not consttute a commtment to a course of acton
whch was consummated subsequent to December 31,1939. The grove
had reached the productve stage pror to the date of acquston and
there was, therefore, nothng to be consummated subsequenty.
Natura growth occurrng after the productve stage has been reached
s not a quafyng factor under the provsons of secton 722.
enry . Merry,
Charman, cess Profts Ta Counc.
uy 6, 19 8.
820823 9 8
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Msc.
106
19 8-23-12960
. P. C. 3
cess Profts Ta Counc organzaton and procedure
1. Introducton. The ncrease n membershp and the estabsh-
ment wthn the Counc of the e ecutve commttee, set forth n
Mmeograph 0323 page 102, ths uetn , necesstates changes n
Counc organzaton and procedure. ccordngy, . P. C. 1 (C. .
19 6-2, 10 ) s superseded as of ths date and the Counc s organza-
ton and procedure are restated n the paragraphs that foow.
2. Genera Organzaton. The cess Profts Ta Counc con-
ssts of not more than 25 members apponted by the Commssoner
of Interna Revenue. The Commssoner has desgnated fve mem-
bers, ncudng the charman and the vce charman, as the e ecutve
commttee of the Counc and, sub|ect to hs authorty, has vested n
that commttee fna |ursdcton wthn the ureau of Interna Rev-
enue of a ssues arsng under the provsons of secton 722 of the
Interna Revenue Code.
3. The Charman. The charman s the admnstratve head and
w drect the operatons of the Counc and of the e ecutve com-
mttee.
. The ce Charman. The vce charman w act for the char-
man n hs absence.
5. The ecutve Commttee. The prncpa functons of the
e ecutve commttee ncude: Issung nterpretatve rungs or memo-
randa; makng fna determnatons wth respect to ndvdua cases;
estabshng procedures for the consderaton of cases; drectng tech-
nca supervson of the secton 722 fed commttees; and assstng
the charman n drectng the operatons of the Counc.
6. The Counc. (a) The Counc members who are not aso
members of the e ecutve commttee w partcpate n the estabsh-
ment of nterpretatve poces, to the e tent deemed essenta by the
e ecutve commttee, pror to the adopton of such poces by the
e ecutve commttee. The e ecutve commttee w not ssue any n-
terpretatve rung or memorandum n the form of an . P. C. unt
each Counc member has been granted an opportunty to comment
thereon.
(b) ppcatons for reef under secton 722 w be assgned by
the charman to panes of one or more Counc members. Such panes
w revew the record, grant the appcant a reasonabe opportunty
to have an ora hearng n each unagreed case (and n each case where
the pane determnes that an agreement entered nto wth the secton
722 fed commttee shoud be modfed), and prepare a determnaton
settng forth the bass upon whch the case s to be dsposed of by
the Counc. Such determnaton w become fna upon approva
by the e ecutve commttee. The e ecutve commttee w not hod
hearngs n ndvdua cases nor w t consder any matera not
ncuded n the record upon whch the pane made ts determnaton
uness, after dscusson wth the pane, the commttee proposes to
modfy the determnaton made by the pane. In ths atter event,
the appcant w be granted an opportunty to be heard by a speca
pane representng the e ecutve commttee.
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107
Regs. 112, 35.736(a-3
7. The Technca Offce. The technca offce w assst the
e ecutve commttee.
8. The Conference Group. The members of the conference group
w assst the panes n those cases n whch an ora hearng may be
requred.
9. The Revew Group. The members of the revew group w
assst the panes n those cases whch do not nvove an ora hearng.
10. The Secton 722 Fed Commttees. The secton 722 fed com-
mttees estabshed bv Mmeograph 60 (C. . 19 6-2, 97) w oper-
ate under the technca supervson of the e ecutve commttee and
under the admnstratve contro of the respectve nterna revenue
agents n charge. The detaed procedures set forth n . P. C. 2
(C. . 19 6-2, 110) w reman n effect.
11. Conference and Practce Requrements. Consderaton of
appcatons for reef by Counc panes generay w be governed
by the appcabe provsons of Department Crcuar 230 (revsed May
29, 19 7), and the requrements set forth n the pamphet Confer-
ence and Practce Requrements, ureau of Interna Revenue (re-
vsed February, 19 2).
enry . Merry,
Charman, cess Profts Ta Counc.
October 22, 19 8.
S CTION 736(a). R LI F FOR INST LLM NT SIS
T P Y RS ND T P Y RS WIT INCOM FROM
LONG-T RM CONTR CTS: L CTION TO CCRU IN-
COM
Reguatons 112, Secton 35.736 (a)-3: Computa- 19 8-15-12883
ton of ncome on straght accrua bass. T. D. 56 3
( so Secton 30.736(a)-3, Reguatons 109.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 30 ND
P RT 35
Reguatons 109 and 112 amended Reef for Instament bass
ta payers.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 109 26 CFR, Part 30 and Reguatons 112 26 CFR,
Part 35 are amended as foows:
R GUL TIONS 109
Paragraph 1. Secton 30.736(a)-3, as nserted n Reguatons 109
by Treasury Decson 5257 C. . 19 3, 856 , approved pr 7, 19 3
26 CFR 30.736 (a)-3 , s amended as foows:
(a) The second sentence of the frst paragraph s changed by nsert-
ng mmedatey before the perod at the end thereof the foowng:
, e cept as provded n the ne t paragraph wth respect to bad debts
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Regs. 112, 35.736(a)-3 108
(6) The ast sentence of the frst paragraph s changed by strkng
out the foowng words:
or deductons (ncudng deductons for bad debts)
(c) The ast sentence of the second paragraph s changed by nsert-
ng mmedatey before the perod at the end thereof the foowng:
, but such mtaton sha appy n a other cases
R GUL TIONS 112
Par. 2. Secton 35.736(a)-3, as amended by Treasury Decson
5388 C. . 19 , 387 , approved uy 7, 19 26 CFR 35.736 (a)-3 ,
s further amended as foows:
(a) The second sentence of the frst paragraph s changed by nsert-
ng mmedatey before the perod at the end thereof the foowng:
, e cept as provded n the nest paragraph wth respect to bad debts
(b) The ast sentence of the frst paragraph s changed by strkng
out the foowng words:
or deductons (ncudng deductons for bad debts)
(c) The ast sentence of the second paragraph s changed by nsert-
ng mmedatey before the perod at the end thereof the foowng:
, but such mtaton sha appy n a other cases
(Ths Treasury Decson s ssued under the authorty of secton 62
of the Interna Revenue Code (53 Stat. 32; 26 U. S. C. 62) as made
appcabe by secton 729(a) of the Interna Revenue Code (5 Stat.
989: 26 U. S. C. 729(a)).)
ecause the amendments made by ths Treasury Decson merey
reeve ta payers from a mtaton appcabe under e stng regua-
tons, t s hereby found that t s unnecessary to ssue ths Treasury
Decson wth notce of pubc procedure thereon under secton (a)
of the dmnstratve Procedure ct, approved une 11, 19 6, or
sub|ect to the effectve date mtaton of secton (c) of sad ct.
G O. . SC O N M N,
Commssoner of Interna Revenue.
pproved uy 8,19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 1 , 19 8, 8: 32 a. m.)
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109
Regs. 116, 05.501
C PT R 9. MPLOYM NT T S
SU C PT R D. COLL CTION OF INCOM T T SOURC
ON W G S
Rues for reproducton of new Wthhodng Statement, Form -2
(Revsed uy 19 8). Crcuar 199 (( . . 19 7-2, 1 0) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, uy 30, 19 8.
Coectors of Interna Revenue and Others Concerned:
1. Form W-2 (Revsed uy 19 8) has been unoffcay approved
pendng pubcaton n the Federa Regster of reguatons for use of
a new ndvdua ncome ta return, Form 10 0 , for the year 19 8.
The revsed Form W-2 s to be used as a wthhodng ta statement
ony and cannot be used as an ndvdua ncome ta return. Offca
approva cannot be gven the form unt 30 days from pubcaton of
the new reguatons n the Federa Regster.
2. Many requests have been receved for reproducton of a Form
W-2 varvng sghty from the form now n use. These coud not be
approved wthout quafcaton because of the proposed ma|or revson
of the Form W-2.
3. Many of the empoyers whose forms are supped by prvate
prnters are wthout forms for use n preparng statements for sep-
arated empoyees because of the hestancy to prnt a form whch may
soon become obsoete. In vew of the pressng need to reproduce Form
W-2 n the form t s e pected to be used, requests for reproducton
w be approved contngent upon the possbty of changes that may
resut from pubcaton n the Federa Regster of the reguatons
for use of the new ncome ta return. Requests of those who wsh to
reproduce the form under such condtons w be approved, provdng
the foowng specfcatons are met:
(a) Coor and quaty of paper: The forms must be prnted on buff
paper of substantay the same weght and te ture and of quaty as
good as that used by the Government. The use of wa -coated paper
w not be permtted.
(b) Typography: The reproducton must be prnted n back nk,
usng type not smaer than the correspondng type on the offca form,
and, as neary as possbe, of the same font. mted rearrangement
of the face of the form w be permtted, but the space for the
name of the empoyee must be above that used for the name of the
empoyer.
(c) Data to be shown on Form W-2: Reproduced Forms W-2
must be desgned so as to provde for entry by empoyers of the same
S CTION 1625. R C IPTS
Reguatons 116, Secton 05.501: Recepts for
ta wthhed at source on wages.
19 8-18-12915
Crcuar 20 0
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Regs. 116, 05.501
110
data as to wages pad and ta wthhed as requred by the offca form.
separate showng of the ta wthhed from the empoyee under the
Federa Insurance Contrbutons ct, whch may be abbrevated as
O. . S. L, w be permtted f ceary ndcated as such. owever,
ony one amount of wages may be shown, the gross wages before any
payro deductons of any nature have been made. Permsson w
not be granted for reproductons whch woud permt empoyers to
show, on the orgna and trpcate copes, any payro deductons
other than those ndcated heren. There s no ob|ecton to the attach-
ment of a stub or e tenson to the dupcate porton of the form ony
to provde addtona nformaton not authorzed for reproducton on
the form tsef.
(d) ddtona copes smar to Form W-2b may be reproduced
for the use of empoyers. It w be permssbe to prepare forms, as
carbon mpressons of Form W-2, for use n connecton wth ta es
other than Federa ncome ta , provded such forms bear no menton
of the Interna Revenue Servce or the Unted States Treasury Depart-
ment. These forms or addtona copes must not be paced ahead of
Form W-2a n the assemby. Forms for devery to State or oca
ta ng authortes shoud be ceary abeed to ndcate the purpose
for whch they are ntended and shoud not bear any part of the desg-
naton Form W-2.
. (e) Dmensons: The offca sze of the form s 7 nches wde by
3y2 nches n depth, but the depth may vary from 3 2 to 3 nches.
(/) Carbonzed forms or spot carbons are not permssbe. Inter-
eaved carbon, f used, must be of good quaty to precude smudgng.
(g) The Government Prntng Offce symbo must be omtted from
reproduced forms.
( ) uthorzed reproducton: n approved form must bear the
notaton pp. . I. R. and the date of ts approva n sma type n
the bottom margn, eft-hand sde of the face of both the orgna and
the coector s copy, Form W-2a.
. facsme of Form W-2 (Revsed uy 19 8) s attached for
your nformaton and the nformaton of those who wsh to repro-
duce the form. Ths facsme shoud be made avaabe to any em-
poyers or prnters n your dstrct who wsh to reproduce the form.
5. Correspondence reatve to the contents of ths crcuar shoud
refer to ts number and to the symbos C: Co.
Geo. . Schoeneman,
C ommssoner.
Facsme of Form W-2 (Revsed uy 19 8)
The te t of Form W-2 (Revsed uy 19 8) s reproduced here-
wth. The form w be prnted on buff paper of 16-pound com-
merca weght and w otherwse be arranged and foded smar
to the earer forms. Indvduas contempatng the reproducton
of ths form are cautoned to e amne the offca form as soon as
t becomes avaabe, probaby on or about September 1, 19 8. Re-
producton must be on paper of substantay the same weght as
the offca form.
The pages of the form are reproduced n ths facsme n the fo-
owng order: front page, orgna copy; back page, orgna copy;
front page, empovee s copy; and front page, coector s copy.
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fmm W-2
(Rcvbw uy IMC)
0, .Tr M ury 1
WIT OLDING ST T M NT 19 8
Wage Pad and Income Ta Wthhed
ORIGIN L
Do Not Lose Ths Statement
MPLOY TO W OM P ID (Prnt nam , u addree. and Soca Securty Number)
Tota wages (before pay-ro deductons)
pad n 19 8
MPLOY R Y W OM P ID (Name, addme. and Soca Securty Identfcaton Number)
NOTIC TO MPLOY
Ths statement s mportant
It must be attached to your U. S.
ncome ta return for 19 8.
See nstructons on other sde
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INSTRUCTIONS FOR FILING U. S. INCOM T R TURN
Who Must Fe. If your ncome n 19 8 wm 600 01 more, you
must fe an ncome ta return ether on mpoyee s Optona Income
Ta Peturn (Form 10 0 ) or on Form 10 0. Copes o these forms may
bs obtaned from the Coector of Interna Revenue, your empoyer,
bank, or post offce.
snge person wth ess than 600 ncome shoud fe a return to
get a refund f ta was wthhed. marred person wth ncome
ess than her (or hs) own persona e empton(s) shoud aways fe
a |ont return wth husband or wfe to get the smaer ta or arger
refund for the coupe.
Fng en Form 10 0 . If your tota ncome was ess than 5,000
and conssted entrey of wages reported on Wthhodng Statements
(Forms W-2), or of such wages and not more than 100 tota of ether
wages, dvdends, and nterest, you may use mpoyee s Optona
Incorre Ta Return (Form 10 0 ). The Coector w compute the ta
and send you ether a check for any refund due you or a b for any
amount you owe. e w determne your ta from the tabe provded
by aw whch aows about 10 percent of your tota ncome for char-
tabe contrbutons, nterest, ta es, casuaty asses, medca e penses,
and msceaneou tems.
Fng en Form 10 0. If your ncome does not meet the tests gven
n the precedng paragraph, or you had ncome from any other source,
such as rents, annutes, etc., you must use Form 10 0 and compute
your own ta . so, t w generay be to your advantage to fe
Form 10 0 f your deductons amount to more than 10 percent of your
ncome, or f you cam traveng or rembursed e penses.
ent Returns of Marred Coupes. usband and wfe may use
Form 10 0 f ther combned ncome was ess than 5,000 and conssted
entrey of wages reported on Wthhodng Statements (Forms W-2),
or of such wages and not more than 100 tota of other wages, dv-
dends, and nterest.
To assure any benefts of the spt-ncome provsons, a marred
coupe shoud fe a |ont ncome ta return. |ont return on
Form 10 0 never resuts n mora ta than separate returns because
the ta s computed by the Coector on the combned ncomes or on
the separate ncomes, whchever resuts n the smaer ta or arge
refund for the coupe.
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113
Regs. 116, 05.501
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(R.v d uy 8) WIT OLDING ST T M NT 19 8
o. s. TT- nr Dnfnmmt m_ ,, 1 acema Ta Wthhed
MPLOY TO W OM P ID (hU mm, fa addzm, aad Soca Securty Number)
Tota wage (before pay-ro
pad n 19 8
Federa ncome ta wthhed, any
MPLOY R Y W OM P IS (Mam , addrew. and Soca Securty Identfcaton Number)
COLL CTOR S |
(TRIPLIC T ) III11I1I
To MPLOY R:
1. Prepare ths form n trpcate for each em-
poyee (a) from whom ta has been wthhed
durng the year or (b) whose wages for any
pay-ro perod e ceeded the amount of one
wthhodng e empton for such perod (even
though no ta was wthhed).
2. F n:
(a) the empoyee s name, address, and
Soca Securty number;
(b) the tota wages pad before any pay-ro
deductons;
(c) the amount of ta wthhed, f any; and
(d) your name, address, and S. S. dentf-
caton number.
3. Gve orgna and mpoyee s Copy to the
empoyee.
. Forward ths trpcate copy and a other trp-
cate copes, together wth your, yeary
Reconcaton Statement, Form W-3, to your
Coector of Interna Revenue wth your
Wthhodng Ta Return (Form W-) for the
fourth quarter of the caendar year (or
wth your fna return).
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115
Regs. 116, 05 501
Reguatons 116, Secton 05.501: Recepts for 19 8-19-1292
ta wthhed at source on wages. T. D. 5650
TITL 26 INT RN L R NU . C PT R I, SU C PT R D, P RT 05.
COLL CTION OF INCOM T T SOURC ON W G S
ppcaton of secton 05.501 of Reguatons 116 to Form W-2
(Revsed uy 19 8) (urng the caendar year 19 8.
Treasury Department,
Offce of Commssoner of Intern a Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Paragraph 1. Secton 05.501 of Reguatons 116, as amended by
Treasury Decson 5 92 C. . 19 6-1, 195 , approved anuary 30,
19 6 26 CFR 05.501 , provdes that empoyers and other persons
requred to deduct and wthhod Federa ncome ta sha furnsh to
empoyees a recept on Form W-2 for ta wthhed at the source on
wages. Form W-2 has been revsed and the revsed form s dentfed
as Form W-2 (Revsed uy 19 8). In vew of the date of such
revson of Form W-2, suc secton 05.501 w not be construed to
requre the use of Form W-2 (Revsed uy 19 8) pror to the 1st
day of the thrd month foowng the month n whch ths Treasury
Decson becomes effectve. Where an empoyer, wth the approva
of the Commssoner of Interna Revenue, has had prnted a substan-
ta suppy of Form W-2 for use for the caendar year 19 8,
permsson w be granted for hm to use such Form W-2 for ta es
deducted and wthhed durng the entre caendar year 19 8, provded
such Form W-2 s overstamped or otherwse changed to conform
substantay to Form W-2 (Revsed uy 19 8). ppcaton for
such permsson shoud be addressed to the Commssoner of Interna
Revenue, Washngton 25, D. C.
Par. 2. ecause the purpose of paragraph 1 s to carfy the re-
qurements of secton 05.501 wth respect to the use by empoyers
of Form W-2 for the caendar year 19 8, t s found that t s unnec-
essary to ssue ths Treasury Decson wth notce and pubc procedure
thereon under secton (a) and (b) of the dmnstratve Procedure
ct, approved une 11, 19 6, or sub|ect to the effectve date mtaton
of secton (c) of sad ct.
Par. 3. Ths Treasury Decson sha be effectve upon ts fng
for pubcaton n the Federa Regster.
(Ths Treasuy Decson s ssued under the authorty contaned
n secton 3791 of the Interna Revenue Code (53 Stat. 67; 26 U. S. C.
3791).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved ugust 25,19 8.
ohn S. Graham,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster ugust 30, 19 8, 8: 6 a. m.)
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Regs. 116, 05.501
116
Reguatons 116, Secton 05.501: Recepts for . 19 8-2 -12970
ta wthhed at source on wages. Crcuar 2061
Form W-2, Wthhodng Statement for 19 9. Rues for repro-
ducton.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, October 26,19 8.
Coectors of Interna Revenue and Others Concerned:
1. Form W-2 for 19 9 has been approved. It may be reproduced,
but ts reproducton must have offca approva. Requests for such
approva must be addressed to the Commssoner of Interna Reve-
nue, ttenton: C: Co: O, Washngton 25, D. C, and must ncude
the proposed form of the reproducton and a sampe of the paper to be
used. The foowng specfcatons must be met:
(a) Coor and qaty of paper: The forms must be prnted on
whte paper of substantay the same weght and te ture and of
quaty as good as that used by the Government. The use of wa -
coated paper w not be permtted.
(b) Typography: The reproducton must be prnted n back nk,
usng type not smaer than the correspondng type on the offca
form and, as neary as possbe, of the same font. mted rear-
rangement of the face of the form w be permtted, but the space
for the name of the empoyee must be above that used for the name
of the empoyer.
(c) Data to be shown on Form W-2: Reproduced Forms W-2
must be desgned so as to provde for entry by empoyers of the same
data as to wages pad and ta wthhed as requred by the offca
form. separate showng of the Federa od-age and survvors
nsurance ta (abbrevaton O. . S. L ) w be permtted f ceary
ndcated as such. owever, ony one amount of wages may be
shown, the gross wages before any payro deductons of any nature
have been made. Permsson w not be granted for reproductons
whch woud permt empoyers to show, on the orgna and trpcate
copes, any payro deductons other than those ndcated heren.
There s no ob|ecton to the attachment, to the dupcate porton of the
form ony, of a stub or e tenson to provde addtona nformaton not
authorzed for reproducton on the form tsef.
(d) ddtona copes smar to Form W-2b may be reproduced for
the use of empoyers. It w be permssbe to prepare forms, as
carbon mpressons of Form W-2, for use n connecton wth ta es
other than Federa ncome ta , provded such forms bear no menton
of the Interna Revenue Servce or the Unted States Treasury De-
partment. These forms or addtona copes must not be paced ahead
of Form W-2a n the assemby. Forms for devery to State or oca
ta ng authortes shoud be ceary abeed to ndcate the purpose for
whch they are ntended and shoud not bear any part of the desgna-
ton Form W-2.
(e) Dmensons: The offca sze of the form s 7 nches wde by
y2 nches n depth, but the depth may vary from Sy2 to 3 nches.
(/) Carbonzed forms or spot carbons are not permssbe. Inter-
eaved carbon, f used, must be of good quaty to precude smudgng.
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117
Regs. 116, 05.501
(g) The Government Prntng Offce symbo must be omtted from
reproduced forms.
(h) uthorzed reproducton: n approved form must bear the
notaton pp. . I. R. and the date of ts approva n sma type on
the bottom margn, eft-hand sde of the face of both the orgna and
the coector s copy, Form W-2a.
2. facsme of Form W-2 for 19 0 s attached for your nforma-
ton and the nformaton of those who wsh to reproduce the form.
Ths facsme shoud be made avaabe to any empoyers or prnters
n your dstrct who wsh to reproduce the form.
3. Correspondence reatve to the contents of ths crcuar shoud
refer to ts number and to the symbos C: Co.
Fred S. Martn,
ctng Commssoner.
Facsme of Form W-2 for 19 9
The te t of Form W-2 for 19 9 s reproduced herewth. The form
w be prnted on whte paper of 16-pound commerca weght and
w otherwse be arranged and foded smar to the earer forms.
Requests for approva to reproduce ths form must be addressed to
the Commssoner of Interna Revenue, ttenton: C: Co., Wash-
ngton 25, D. C.
The pages of the form are reproduced n ths facsme n the foow-
ng order: Front page, orgna copy; back page, orgna copy; front
page, empoyee s copy; front page, coector s copy; and front page,
empoyer s copy.
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INSTRUCTION FO FILING U. S. INCOM T R TURN
Who Mus Fe. If your ncome n 19 9 was 600 or more, you
must fe an ncome ta return ether on mpoyee s Optona Income
Ta Return (Form 10 0 ) or on Form 10 0. Copes of these forms may
be obtaned from the Coector of Interna Revenue, your empoyer,
bank, or post offce.
snge person wth ess than 600 ncome shoud fe a return to
get a refund f ta was wthhed. marred person wth ncome
ess than her (or hs) own persona e empton(s) shoud aways fe
a ont return wth husband or wfe to get the smaer ta or arger
refund for the coupe.
Fng on Form 10 . If your tota ncome was ess than 5,000
and conssted entrey of wages reported on Wthhodng Statements
(Forms W-2), or of such wages and not more than 100 tota of other
wages, dvdends, and nterest, you may use mpoyee s Optona
Income Ta Return (Form 10 0 ). The Coector w compute the ta
and send you ether a check for any refund due you or a b for any
amount you owe. e w determne your ta from the tabe provded
by aw whch aows about 10 percent of your tota ncome for char-
tabe contrbutons, nterest, ta es, casuaty osses, medca e penses,
and msceaneous tems.
Fng on Form 10 0. If your ncome does not meet the tests gven
In the precedng paragraph, or you had ncome from any other source,
nch as rents, annutes, etc., yon must use Form 10 0 and compute
your own ta . so, t w generay be to your advantage to fe
Form 10 0 f your deductons amount to more than 10 percent of your
ncome, or f yon cam traveng or rembursed e penses.
ont Returns of Marred Coupes. usband and wfe may use
Form 10 0 f ther combned ncome was ess than 5,000and conssted
entrey of wages reported on Wthhodng Statements (Forms W-2),
or of such wages and not more than 100 tota of other wages, dv-
dends, and Interest
To assure any benefts of the spt-ncome provsons, a marred
coupe shoud fe a |ont ncome ta return. |ont return on
Form 10 0 never resuts n more ta than separate returns because
the ta s computed by the Coector on the combned ncomes of on
the separate ncomes, whchever resuts n the smaer ta or arger
refund for the coupe.
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121
(Regs. 116, 05.601
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123
Regs. 116, 05.606
S CTION 1631. US OF GO RNM NT D POSIT RI S
IN CONN CTION WIT P YM NT OF T S
Reguatons 116, Secton 05.605: Use of 19 8-16-12890
Government depostares n connecton T. D. 56
wth payment of ta es.
TITL 26 INT RN L R NU . C PT R I, SD C PT R D, P RT 05.
COLL CTION OF INCOM T T SOURC ON W G S
Reguatons 116 amended wth respect to use of Government de-
postares n connecton wth payment of ta es.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
Parageaph 1. Secton 05.605 of Reguatons 116 26 CFR 05.605
s amended as foows:
( ) y strkng from the frst sentence wthn 10 days and n-
sertng n eu thereof wthn 15 days.
( ) y strkng out that porton of the thrd sentence whch fo-
ows the semcoon and nsertng n eu thereof the foowng:
provded, however, that for ta es wthhed durng the ast month of the quarter
the empoyer may ether ncude wth hs return drect remttance to the co-
ector for the amount of the ta es wthhed durng such ast month of the quarter
or attach to such return a recept evdencng the payment of the ta es wthhed
durng such ast month to a depostary on or before the ast day of the month
foowng the cose of the quarter.
Par. 2. Inasmuch as ths Treasury Decson berazes the requre-
ments as to the use of Government depostares n connecton wth
payment of ta es, t s found unnecessary to ssue ths Treasury De-
cson wth notce and pubc procedure thereon under secton (a)
and (b) of the dmnstratve Procedure ct, approved une 11,
19 6, or sub|ect to the effectve date mtaton under secton (c) of
sad ct.
Par. 3. Ths Treasury Decson sha be effectve upon ts fng for
pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
secton 3791 of the Interna Revenue Code (53 Stat. 67; 26 U. S. C.
8791).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved uy 1 , 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 19, 19 8, 8 : 50 a. m.)
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3792
12
Reguatons 116, Secton 05.605: Use of Gov- 19 8-17-12906
emnent depostares n connecton wth pay- Mm. 6288
ment of ta es.
Depostary recepts amendment of Reguatons 116
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, uy 19,I9 f.
Coectors of Interna Revenue and Others Concerned:
1. Treasury Decson 56 (page 123, ths uetn) was approved by
the ctng Secretary of the Treasury on uy 1 , 19 8. and became
effectve upon ts fng on uy 19, 19 8, for pubcaton n the
Federa Regster. It amends Reguatons 116 to permt empoyers
to depost n authorzed depostares wthn 15 days after the cose
of each caendar month, the amount of ncome ta es wthhed from
wages. Ths s n eu of the 10-day perod heretofore estabshed.
2. Treasury Decson 56 aso provdes that wth respect to ta es
wthhed durng the ast month of the quarter, the empoyer may ether
ncude wth hs return drect remttance to the coector for the
amount of the ta es wthhed durng such ast month of the quarter,
or attach to such return a recept evdencng the payment of the ta es
wthhed durng such ast month to a depostary on or before the ast
day of the month foowng the cose of the quarter.
3. It s beeved that empoyers, and the depostares and fnanca
agents authorzed by the Secretary of the Treasury, w be nterested
n ths berazaton of the depostary recept procedure. Therefore,
coectors are requested to afford wde pubcty at ths tme reatve
to such berazed procedure and to ncude a short mmeographed
statement on the sub|ect wth the ne t wthhodng ta forms to be
maed.
. Instructon 12 of Crcuar WT Revsed 19 8 w be amended
at an eary date.
5. Correspondence reatve to the provsons of ths mmeograph
shoud refer to ts number and to the symbos C: Co.
Geo. . Schoeneman,
C ommssoner.
C PT R 38. MISC LL N OUS PRO ISIONS
S CTION 8792. P NS S OF D T CTION ND
PUNIS M NT OF FR UDS
19 8-22-12953
T. D. 5661
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 55.
DMINISTR TI PRO ISIONS COMMON TO RIOUS T S
R W rds for nformaton endng to the detecton and punsh-
ment of persons voatng nterna revenue aws.
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125
8792
Treasury Department,
Offce or Commssoner of Interna Revenue,
Washngton 5, D. C.
To Coectors of Interna Revenue and Others Concerned:
Under and by vrtue of the provsons of secton 3792 of the Interna
Revenue Code, the Commssoner of Interna Revenue, wth the ap-
prova of the Secretary of the Treasury, does hereby offer for n-
formaton that sha ead to the detecton and punshment of persons
guty of voatng the nterna revenue aws, or connvng at the same,
such reward as the Commssoner of Interna Revenue, wth the ap-
prova of the Secretary of the Treasury, sha deem sutabe. ny
person furnshng such nformaton sha be egbe for reward under
ths Treasury Decson uness he was an offcer or empoyee of the
Department of the Treasury at the tme he came nto possesson of
hs nformaton or at the tme he dvuged t.
The rewards hereby offered are mted n ther aggregate to the
sum approprated therefor and sha be pad ony n cases not other-
wse provded for by aw. The amount pad as a reward under the
provsons of ths Treasury Decson s determned from the vaue of
the nformaton furnshed. Payment of rewards w be made as
prompty as the crcumstances of the case permt.
Informaton reatve to voatons of the nterna revenue aws,
furnshed by persons desrng to cam rewards under the provsons
of ths Treasury Decson, may be submtted n wrtng to the Com-
mssoner of Interna Revenue, Washngton 25, D. C, or to the Offce
of the Integence Unt, the Technca Staff, the nterna revenue
agent n charge or the coector of nterna revenue, n the ocaty n
whch the nformant resdes, or t may be gven n person to the
Offce of the Chef of the Integence Unt n Washngton, D. O,
or to any of the above-mentoned fed offces.
If the nformaton s gven n person, ether oray or n wrtng,
the name and offca tte of the person to whom t s gven shoud
be ascertaned, as these data, together wth the date on whch the
nformaton was gven, must be ncuded n the forma cam for
reward when fed.
n nformant who ntends to cam a reward shoud notfy the
person to whom he gves hs nformaton of such ntenton, and shoud
fe forma cam therefor as soon thereafter as practcabe. Cams
for reward under the provsons hereof sha be made on Form 211,
whch may be obtaned from coectors of nterna revenue or from
the ureau at Washngton 25, D. C. Such cams for reward shoud
be e ecuted before a notary pubc or other offcer duy authorzed by
aw to admnster oaths, and shoud be transmtted to the Com-
mssoner of Interna Revenue, Washngton 25, D. C, for the attenton
of the Chef Counse.
Treasury Decson 5379 C. . 19 , 79 , approved une 22, 19
26 CFR 55.1 , s hereby revoked.
(Ths Treasury Decson s ssued under the authorty contaned n
secton 3791 and secton 3792 of the Interna Revenue Code (53 Stat.
67; 26 U. S. C. 3791,3792).)
ecause ths Treasury Decson reates ony to the ureau procedure
and practce n the offer of rewards, and because the changes made
by ths Treasury Decson merey remove mtatons on the reward
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1 29.3797-2 126
offered under e stng reguatons, t s hereby found that t s un-
necessary to ssue ths Treasury Decson wth notce of pubc pro-
cedure thereon under secton (a) of the dmnstratve Procedure
ct, approved une 11,19 6, or sub|ect to the effectve date mtaton
of secton (c) of sad ct.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved October 8,19 8.
Thomas . Lynch,
ctmg Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 13, 19 8, 8:50 a. m.)
S CTION 3797. D FINITIONS
Secton 29.3797-2: ssocaton. 19 8-2 -12971
( so Secton 29.3797- .) I. T. 3930
INT RN L R NU COD ND R NU CT OF 1932
Status for Federa ncome ta purposes of |ont operatng agree-
ments commony entered nto between coowners of o and gas prop-
ertes or easehods.
I. T. 27 9 (C. . III-1, 99 (193 )) and I. T. 2785 (C. . III-1,
96 (193 )) modfed.
dvce s requested wth respect to the status for Federa ncome
ta purposes of |ont operatng agreements commony entered nto
between coowners of o and gas propertes or easehods.
n e amnaton has been made of the provsons of typca operat-
ng agreements between partes havng rghts to e pot a partcuar
property, severa ad|acent propertes, or a of the propertes comprs-
ng an o and gas fed. Operators agreements (whether between
coowners of a ease on a snge tract of and or between persons sep-
aratey ownng e potaton rghts on ad|onng tracts n the same
o fed), though they dffer n deta, generay contan smar essen-
ta provsons. Sometmes, where more than one tract s nvoved,
there s an e change of undvded nterests by the owners of the work-
ng nterests n the severa tracts so that a owners have ke undvded
nterests n each tract covered by the agreement. n operator, who
need not be, but generay s, a coowner, or becomes one at the tme the
contract s e ecuted, s desgnated to take charge of the deveopment
and operaton of the property or propertes covered by the agreement.
In genera, such agreements contan the foowng typca features:
(1) The costs of deveopment and e penses of operaton are to
be prorated among the partes n accordance wth ther respectve
nterests.
(2) Dvson of the o proceeds s usuay accompshed by pay-
ment of the purchase prce by the ppe-ne company or other purchaser
drecty to the severa partes n accordance wth ther respectve
shares as ndcated by dvson orders sgned bythem. Generay, any
party may take hs share of the o n knd. Where that rght e sts,
any authorty gven the operator to market the o may be revoked
upon proper notce. Sometmes, however, the operator s authorzed
wthout quafcaton to market the product.
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127
29.3797-2
(3) The operator s requred to carry adequate nsurance and to
make an accountng.
( ) Operatng agreements reman n force unt the mnera s
e hausted or, n the case of unt operatng agreements, for the term
of the ease or eases or renewas thereof. Sometmes an e press
provson s made for wthdrawa of one of the partes by assgnment
of hs rghts to the others.
(5) The partes have votng power proportonate to ther nterests
to choose and advse the operator (n cases n whch ony one ease s
nvoved, broad powers are commony vested n the operator named
n the agreement), to change the operator, to determne drng and
operatng pans, to audt and pass on the operator s accountng, and
to pass on transactons for dsposa of surpus equpment.
(6) ny party may se or encumber hs entre nterest, but may not
subdvde or se wthout gvng the others preferenta opton (n
the case of agreements coverng snge eases, the contract may not
contan e press provsons to that effect).
(7) The abtes of the partes are to be separate and not |ont.
Such agreements, n the absence of provsons to the contrary, create
mnng partnershps whch dffer from genera partnershps prn-
cpay n that (1) they can arse ony between |ont operators, (2)
they e tend to and are termnated by e hauston of the mnera de-
post, (3) the ma|orty n nterest contros poces, and ( ) the death
of a partcpant or the transfer of hs nterest does not nterrupt the
reaton the her or transferee becomng a partcpant. (See Ms
and Wngham, Law of O and Gas (1926), chapter I ; Thorn-
ton, O and Gas ( th edton, 1925), voume 1, chapter ; Summers,
O and Gas (1938), voume , chapter 2 .)
Mnng operatons carred on through the medum of a trust or a
|ont stock company, both of whch are generay recognzed as cor-
poratons under secton 3797 of the Interna Revenue Code, are not
consdered heren. Nor s t ntended n ths rung to e pore the
ncome ta status of any forms of operatng agreements other than
the above-descrbed forms of operatng agreements commony used
n the ndustry.
The defntons of the terms partnershp and corporaton n
secton 3797 of the Interna Revenue Code and correspondng pro-
vsons of pror revenue aws n effect cassfy any organzaton carry-
ng on busness, fnanca operatons, or ventures for the |ont proft
of the assocates as ether a partnershp or a corporaton, dependng
upon whch of the two t more neary resembes. It thus appears that
those group organzatons whch attan the corporate attrbutes of
centrazed management and contnuty of fe are assocatons ta abe
as corporatons, but those whch do not have such attrbutes are com-
prehended by the term partnershp. (See secton 29.3797-2, Regu-
atons 111.) Ths rue s based upon the proposton that other cor-
porate attrbutes, arsng soey from the concept of separate person-
aty or entty n the corporaton, are generay recognzed as unat-
tanabe by assocatons and, therefore, mmatera to cassfcaton as
a corporaton, snce the statutory defnton of the term corporaton
was manfesty ntended to broaden that term to ncude assocatons
servng a substantay smar functon. Consequenty, ony con-
tnuty of fe and centrazaton of contro of group actvtes, the
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29.3797 -2
12S
attrbutes of the corporate form of organzaton whch may be com-
mony attaned wthout ncorporaton, are regarded as matera.
Pertnent court decsons support the above-mentoned rue n a
essenta partcuars. (See urk-Waggoner O ssocaton v. op-
kns, 269 U. S. 110, T. D. 3790, C. . -, 1 7 (1926); Morrssey et a.,
Trustees, v. Commssoner, 296 U. S. 3 , Ct. D. 106 , C. . -1, 26
(1936); evermg v. Coeman-GUbert ssocates, 296 U. S. 369, Ct. D.
1067, C. . -1, 261 (1936); Swanson et a., Trustees v. Comms-
soner, 296 U. S. 362, Ct. D. 1065, C. . -1, 270 (1936); everno
v. Combs et a. Trustees, 296 U. S. 365, Ct. D. 1066, C. . -1, 27--
(1936); ert, Trustee, v. everng, 92 Fed. (2d) 91; Commssoner
v. North mercan ond Trust et a., 122 Fed. (2d) 5 5, certorar
dened, 31 U. S. 701; Commssoner v. Fortney O Co. et a. and
Commssoner v. Townne O Co., 125 Fed. (2d) 995; Commssoner
v. Nebo O Co., Trust, 126 Fed. (2d) 1 8, certorar dened, 317 U. S.
636; Wabash O c Gas ssocaton v. Commssoner, 160 Fed. (2d)
658, certorar dened, 331 U. S. 8 :5.) Read together, the cted opn-
ons ndqate that n order to cassfy an organzaton as an assocaton
ta abe as a corporaton (1) there must be assocates, (2) the ob|ect
of the organzaton must be |ont proft, (3) there must be contnuty
of fe, and ( ) there must be centrazed contro of group affars.
Inasmuch as the frst two requstes are generay recognzed as ee-
ments common to a forms of busness organzatons, t seems cear
that they form the essenta test of assocated, as dstngushed from
ndvdua, enterprse but manfesty do not serve to dstngush be-
tween varous forms of busness organzatons. (See Commssoner
v. . . Lews Co. et a., 301 U. S. 385, Ct. D. 1231, C. . 1937-1,
232, whch n effect hods there can be no assocaton wthout asso-
cates.) It foows that under the statutory defntons n queston
a forms of unncorporated busness organzatons for |ont proft are
partnershps for ncome ta purposes e cept those organzatons whch,
by attanng the contnuty of fe and centrazaton of management
characterstc of the corporate form of organzaton, are by defnton
assocatons cassfabe as corporatons.
ppyng the stated prncpes to the agreements n queston and
t seems cear that contro s centrazed n the ma|orty nterest or n
t he operator named to act for a. so, as the fe of such agreements
s not nterrupted by the death of a partcpant nor by the transfer
of an nterest, the organzatons commony created by such agreements
have contnuty of fe. Furthermore, snce the agreements are between
at east two persons (the test that there must De assocates thereby
beng met), tne remanng queston s whether the ob|ectve s |ont
proft.
Manfesty, profts arse not from mere e tracton or from the proc-
essng of mnera, but from the sae thereof. ccordngy, t seems
cear that f the |ont ob|ectve s mted to deveopment and the e -
tracton and processng of mnera (at |ont cost and e pense to be
met by contrbutons of the respectve partcpants) for dvson n
knd or for sae for the accounts of the severa partcpants ndvd-
uay, the test of a |ont venture for |ont proft s not met. n organ-
zaton created by such an agreement does not quafy as a corporaton
tr
hch such agreements create,
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129
29.3797-2
as defned n secton 3797(a) (8) of the Interna Revenue Code. s
such agreements commony aow the partcpants to take ther shares
of the mnera n knd (or provde for the sae of the shares of the
respectve partcpants for tner ndvdua accounts under revocabe
agency powers), the sae of the mnera, even though made by the
operator, s a sae by or on behaf of the ndvdua partcpants.
In such cases there s no |ont proft contempated or reazed by the
assocates. That beng true, such organzatons may be cassfed for
Federa ncome ta purposes as |ont ventures or partnershps ony
n a quafed sense. Under I. T. 27 9 (C. . III-1, 99 (193 )) and
I. T. 2785 (C. . III-1,96 (193 )), such |ont operators are requred
to fe quafed partnershp returns showng ony tems of gross n-
come and deducton. If such a quafed partnershp return were not
requred, t woud be necessary for each of the |ont owners to submt
the same nformaton by schedues attached to ther ndvdua returns.
For the reasons stated, n the case of operators agreements n
whch the partcpants reserve the rght to ther shares of the o
n pace (or the equvaent, . e., the rght personay to se or drect
the sae thereof tor ther beneft, or permt the operator to do so
for them for the tme beng), t s hed that the partcpants, through
the partnershp thus created, ndvduay own depetabe economc
nterests n the o and gas n pace and must report the proceeds
therefrom as ther ncome. On the contrary, where agreements r-
revocaby vest the operator n hs representatve capacty wth the
authorty to e tract and se the mnera, there are created for n-
come ta purposes assocatons ta abe as corporatons, whch asso-
catons are the owners of the depetabe economc nterests n the
o and gas n pace and of the ncome derved from operatons.
In vew of the foregong, I. T. 27 9, supra, and I. T. 2785, supra,
are modfed to accord wth the concusons reached heren. The
ureau, under those rungs, has consstenty treated a such oper-
atng agreements as creatng quafed partnershps, rather than asso-
catons, wth the resut that the partcpants theren have been ta ed
as ndvduas. Under authorty contaned n secton 3791(b) of
the Interna Revenue Code, ths rung w be apped ony to ta abe
years begnnng on or after anuary 1,19 9. ccordngy, n the case
of a |ont operatng agreement whch creates an organzaton cassf-
abe as an assocaton under the prncpes contaned heren, an amend-
ment pror to anuary 1, 19 9, to create an organzaton not so cass-
fabe hereunder w avod recassfcaton and treatment of such
organzaton as an assocaton under the Interna Revenue Code.
Inasmuch as ths rung pertans ony to organzatons created by
those agreements commony referred to as |ont operatng agree-
ments, the nonretroactve appcaton of ths rung does not reate
to other forms of group organzatons.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved October 18, 19 8.
ohn S. Graham,
ctng Secretary of the Treasure/.

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29.3797-
130
Secton 29.3797-2: ssocaton. 19 8-26-12996
( so Secton 29.3797- .) I. T. 3933
INT RN L R NU COD
Modfcaton of I. T. 8930 (page 126, ths uetn) to e tend the
tme for amendment of o and gas ont operatng agreements to uy
1, 19 9, and to make that rung appcabe ony to ta abe years
begnnng on or after uy 1, 19 9.
It appears that many of the o and gas |ont operatng agreements
whch create organzatons cassfabe as assocatons under the prn-
cpes contaned n I. T. 3930 (page 126, ths uetn) nvove a arge
number of persons, and that amendment of these agreements, as con-
tempated by I. T. 3930, w requre substantay more tme than s
aowed by that rung. ccordngy, under authorty contaned n
secton 3791 (b) of the Interna Revenue Code, n the case of a |ont
operatng agreement whch creates an organzaton cassfabe as an
assocaton under I. T. 3930, an amendment pror to uy 1, 19 9, to
create an organzaton not so cassfabe w avod recassfcaton and
treatment of such organzaton as an assocaton under the Interna
Revenue Code. In addton, I. T. 3930 w be apped ony to ta abe
years begnnng on or after uy 1,19 9.
I. T. 3930, supra, s hereby modfed.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved December 17, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
Secton 29.3797- : Partnershps.
INT RN L R NU COD ND R NU CT OF 1982
ont operatng agreements wth respect to o and gas propertes.
I. T. 27 9 (C. . III-1, 99 (193 )) and I. T. 2785 (C. . III-1,
96 (193 )) modfed. (See I. T. 3930, page 126.)
Secton 29.3797 1: Partnershps.
INT RN L R NU COD
ont operatng agreements wth respect to o and gas propertes.
I. T. 3930 (page 126, ths uetn) modfed. (See I. T. 3933, above.)
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131 5 181. rt. 131-8
INCOM T RULINGS. P RT II
R NU CT OF 1938 ND PRIOR R NU CTS
SU TITL . G N R L PRO ISIONS
P RT . R TURNS ND P YM NT OF T
S CTION 51. INDI IDU L R TURNS
rtce 61-1: Indvdua returns.
R NU CT OF 1938 ND TRIOR R NU CTS
Communty ncome of husbands and wves domced n the Php-
pne Isands. I. T. 1297 (C. . 1-1, 235 (1922)) revoked and I. T.
3173 (C. . 1938-1,160) modfed. (See I. T. 3916, page 51.)
SU TITL C SUPPL M NT L PRO ISIONS
SUPPL M NT C CR DITS G INST T
S CTION 131. T S OF FOR IGN COUNTRI S ND
POSS SSIONS OF T UNIT D ST T S
rtce 131-8: Lmtatons on credt for 19 8-22-129 8
foregn ta es. G. C. M. 25723
R NU CT OF 193
Computaton of the amount of the credt to be aowed to a ctzen
of the Unted States under secton 131(a) (1) of the Revenue ct
of 193 , as mted by secton 131(b) of that ct, n respect of
Income ta pad to the Phppne Isands.
G. C. M. 21 32 (C. . 1939-2, 23 ) modfed.
Reconsderaton has been gven to G. C. M. 21 32 (C. . 1939-2,
23 ) n the ght of the decsons n everng v. Ne (139 Fed. (2d)
865) and /. . De ter et u . v. Commssoner, nfra.
G. C. M. 21 32, supra, nvoved the queston whether the entre
amount of ncome ta es pad to the Phppne Government, or ony
a part thereof, shoud be consdered for the purpose of the credt to
be aowed a Unted States ctzen under secton 131(a) of the
Revenue ct of 193 . Income ta es had been pad to the Phppnes
on ncome whch ncuded the fu amount of net capta gans, but
such gans were taken nto account for Federa ncome ta purposes
ony to the e tent of 30 percent, as provded by secton 117(a) of
the Revenue ct of 193 . It was hed that ony the proporton of
the Phppne ta whch was aocabe to the amount ncuded n
ncome for Federa ncome ta purposes woud be aowed as a
credt. That concuson was premsed on the reasonng of the court n
ubbard v. Unted States (17 Fed. Supp. 93, Ct. D. 122 , C. .
1937-1, 259, certorar dened, 300 U. S. 366) whch dened a ta payer
aowance of credt aganst Federa ncome ta abty for the
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131, rt. 131-8
132
proporton of rtsh ta pad by a nonresdent Unted States ctzen
on saary earned n Great rtan for the reason that such saary
was e cuded from the ta payer s gross ncome n determnng hs
Unted States ncome ta abty.
The reasonng whch prompted the concusons n G. C. M. 21 32,
supra, and n the ubbard opnon was that the prmary purpose
of the foregn ta credt provson was to prevent doube ta aton of
ncome, and that doube ta aton was not a consderaton where the
foregn ta camed as a credt had been pad on ncome e cuded
from the conputaton of ncome for Federa ncome ta purposes.
Statng t dfferenty, t was reasoned that snce the purpose of the
foregn ta credt provson was to prevent ncome ta ed n a foregn
country from beng ta ed a second tme by ths country, such pro-
vson woud have no appcaton and no credt woud be aowabe
n a case n whch the foregn ta was mposed upon ncome e cuded
from computaton of ncome for Federa ncome ta purposes.
In /. . De ter et u . v. Commssoner ( 7 . T. . 285), wth
respect to whch nonacquescence (C. . 19 2-2, 2 ) has been wth-
drawn and acquescence (page 1, ths uetn) substtuted, the ta -
payer had a neggbe amount of ncome from sources wthn the
Unted States. In fact, the ta payer sustaned a oss from sources
wthn the Unted States whch e ceeded hs ncome from such
sources. Neary a of hs ncome was derved from sources wthn
the Phppnes. The ta payer s net ncome was greater as deter-
mned by the Phppne revenue aw than under the revenue aw of
the Unted States, wth the resut that the ncome ta pad to the
Phppnes was greater than that camed by the Unted States. It
was hed that the credt for ncome ta pad to a foregn government
or possesson of the Unted States, as provded n secton 131(a) of
the Revenue ct of 1936, was mted ony by secton 131(b) thereof.
It was assumed, arguendo, that gross ncome means, n the case of
ncome from sources outsde the Unted States, the same ncome as
that taken nto consderaton n determnng gross ncome under the
revenue aw of the Unted States. The Unted States oard of Ta
ppeas (now The Ta Court of the Unted States) sad, however,
that the ony effect of such assumpton woud be to reduce the factors
n the mtng fracton provded for by secton 131(b), and ponted
out that snce there was no net ncome from sources wthn the Unted
States, the ta payer s net ncome from sources wthn the Phppnes
was not ess than, and was n fact greater than, hs entre net ncome,
and that the mtng fracton, apped n accordance wth secton
131(b), woud yed more than 100 percent of the ta aganst whch
the ta pad to the Phppnes was camed as a credt, wth the resut
that the entre ta so pad woud be aowabe as a credt, the m-
taton n such case beng neffectve. The oard dsmssed the con-
tenton of the Commssoner wth the comment that he had tres-
passed nto the ream of egsaton n deveopng the formua he
apped n determnng the defcency. The reference was to the
formua deveoped by G. C. M. 21 32, supra.
In everng v. Ne, supra, whch aso nvoved the queston of a-
owance of credt for ta es pad to the Phppnes and s otherwse
squarey n pont, the Unted States Crcut Court of ppeas for the
Fourth Crcut reached the same resut as that reached n the De ter
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133
901, rt. 901-
case, supra, by smar reasonng and nterpretaton. It consdered
the anguage of the statute unambguous and sad that the Comms-
soner s nterpretaton woud read nto the statute a provson for an
addtona proraton that s not there.
G. C. M. 21 32, supra, has been carefuy reconsdered, and ths of-
fce s now of the opnon that secton 131(a) of the Revenue ct of
193 shoud be mted n ts appcaton ony as e pressy provded
n secton 131(b) of that ct. ven though t s admttedy dffcut
to reconce the aowance of credt for foregn ta es pad on ncome
whch s not sub|ect to Federa ncome ta aton wth the unquestoned
prmary purpose (the avodance of doube ta aton) of the secton,
the aowance of credt s not so unreasonabe n ts consequences as
necessary to requre, n the nterpretaton of the statutory anguage,
the resut reached n G. C. M. 21 32, supra. Secton 131(a) aows
a credt for ta es pad, and however reasonabe and consonant wth
purpose t mght be to mt such credt to ta es pad upon ncome
that s sub|ect to Federa ncome ta aton, t s not beeved that
such a mtaton can be apped n the absence of ambguty or doubt
concernng the meanng of the e press statutory anguage.
In vew of the foregong, G. C. M. 21 32, supra, s hereby modfed,
. e.| n reaton to the computaton of the foregn ta credt under
secton 131 of the Revenue ct of 193 , and the decson n ubbard
v. Unted States, supra, w no onger be reed upon as a precedent
n the computaton of such foregn ta credt.
The poston taken heren s not nconsstent wth I. T. 229 (C. .
-2, 62 (1926)), whch rung was ssued under the Revenue ct of
1926. The reasonng contaned n that rung woud not be appcabe
under ater Revenue cts.
Chares Ophant,
Chef Counse, ureau of Interna Revenue.
TITL I G N R L PRO ISIONS
S CTION 901. D FINITIONS
rtce 901-2: ssocaton.
R NU CT OF 1932
ont operatng agreements wth respect to o and gas propertes.
I. T. 27 9 (C. . III-1, 99 (193 )) and I. T. 2785 (C. . III-1, 96
(193 )) modfed. (See I. T. 8930, page 126.)
rtce 901- : Partnershps.
R NU CT OF 1932
ont operatng agreements wth respect to o and gas propertes.
I. T. 27 9 (C. . III-1, 99 (193 )) and I. T. 2785 (C. . III-1, 96
(193 )) modfed. (See I. T. 3930, page 126.)
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MPLOYM NT T RULINGS
INT RN L R NU COD
C PT R 9, SU C PT R . F D R L INSUR NC CONTRI UTIONS
CT
Secton 1 21: Refunds, credts, and abatements.
Reguatons 106, Secton 02.70 : Refund or
credt of overpayments whch are not ad|ust-
abe ; abatement of overassessments.
Refund or credt of overpayments, changes effected by Pubc Law
92, ghteth Congress. (See T. D. 56G5, beow.)
Secton 1 26: Defntons. 19 8-2 -12973
Reguatons 106, Secton 02.203: mpoyment after T. D. 5665
December 31, 1939.
( so Secton 1 21; Reguatons 106, Sectons 02.206,
02.226, 02.70 ; aso Subchapter C (Federa Un-
empoyment Ta ct), Sectons 1601 and 1607;
Reguatons 107, Sectons 03.203, 03.206, 03.226,
03.602.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R D, P RTS
02 ND 03
Reguatons 106 and 107 amended to conform to the provsons
of Pubc Law 92 ( ghteth Congress) C. . 19 8-1, 235 ,
enacted pr 20,19 8, reatng to certan vendors of newspapers and
magaznes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
On uy 22,19 8, notce of proposed rue makng, regardng amend-
ments to the empoyment ta reguatons wth respect to certan serv-
ces performed by vendors of newspapers and magaznes, made neces-
sary by Pubc Law 92 ( ghteth Congress) C. . 19 8-1, 235 ,
enacted pr 20,19 8, was pubshed n the Federa Regster (13 F. R.
191). No ob|ecton to the rues proposed havng been receved, the
amendments set forth beow are hereby adopted. The amendments
are made n order to conform Reguatons 106 26 CFR, Part 02 ,
reatng to the empoyees ta and the empoyers ta under the Federa
Insurance Contrbutons ct (Subchapter , Chapter 9, Interna
Revenue Code), to sectons 1 and 3 of Pubc Law 92 ( ghteth Con-
(135)
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Regs. 106, 02.203
136
gress), and Reguatons 107 26 CFR, Part 03 , reatng to the e cse
ta on empoyers under the Federa Unempoyment Ta ct (Sub-
chapter C, Chapter 9, Interna Revenue Code), to sectons 2 and 3 of
such Pubc Law 92. Such reguatons are amended as foows:
R GUL TIONS 106 26 CFR, P RT 02
Paragraph 1. Immedatey precedng the capton Secton 3797
(a) and (b) of the Interna Revenue Code as set forth precedng
secton 02.201 26 CFR 02.201 , the foowng s nserted:
S CTION 1 OF PU LIC L W 92 ( IG TI T CONGR SS),
N CT D PRIL 20, 19 8
That (a) secton 1 26(b) (15) of the Interna Revenue
Code, as amended, s hereby amended to read as foows:
(15) ( ) Servce performed by an Indvdua under the age of
eghteen In the devery or dstrbuton of newspapers or shoppng
news, not ncudng devery or dstrbuton to any pont for subse-
quent devery or dstrbuton :
( ) Servce performed by an ndvdua n, and at the tme of,
the sae of newspapers or magaznes to utmate consumers, under
an arrangement under whch the newspapers or magaznes are to
be sod by hm at a f ed prce hs compensaton beng based on the
retenton of the e cess of such prce over the amount at whch the
newspapers or magaznes are charged to hm, whether or not he s
guaranteed a mnmum amount of compensaton for such servce,
or s entted to be credted wth the unsod newspapers or magaznes
turned back; or .
(b) The amendment made by subsecton (n) to secton
1 26(b) (15) of the Interna Revenue Code sha be appcabe wth
respect to servces performed after December 31,1939.
Par. 2. Secton 02.203, as amended by Treasury Decson 5519
C. . 19 6-2, 139 , approved une 1 , 19 6 26 CFR 02.203 , s
further amended by strkng out the perod at the end of the frst
sentence thereof and nsertng n eu thereof a comma and the foow-
ng: and as further amended, effectve anuary 1, 19 0, by secton 1
of Pubc Law 92 ( ghteth Congress), reatng to certan vendors
of newspapers and magaznes.
Par. 3. Secton 02.206, as amended by Treasury Decson 5519
26 CFR 02.206 . s further amended by strkng out the perod at
the end of the frst sentence thereof and nsertng n eu thereof a
comma and the foowng: and as further amended, effectve anuary
1, 19 0, by secton 1 of Pubc Law 92 ( ghteth Congress), reatng
to certan vendors of newspapers and magaznes.
Par. . Immedatey precedng secton 02.226 26 CFR 02.226 ,
the foowng s nserted:
S CTION 1 OF PU LIC L W 92 ( IG TI T CONGR SS),
CT D PRIL 20, 19 8
That (a) secton 1 26(b) (15) of the Interna Revenue
Code, as amended, s hereby amended to read as foows:
(15) ( ) Servce performed by an ndvdua under the age of
eghteen In the devery or dstrbuton of newspapers or shoppng
news, not ncudng devery or dstrbuton to any pont for subse-
quent devery or dstrbuton;
( ) Servce performed by an ndvdua n, and at the tme of,
the sae of newspapers or magaznes to utmate consumers, under
an arrangement under whch the newspapers or magaznes are to
be sod by hm at a f ed prce hs compensaton beng based on the
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137
Regs. 106, 02.203
retenton of the e cess of such prce over the amount at whch the
newspapers or magaznes are charged to hm, whether or not he s
guaranteed a mnmum amount of compensaton for such servce, or
s entted to be credted wth the unsod newspapers or magaznes
turned back; or .
(b) The amendment made by subsecton (a) to secton
1 20(b) (15) of the Interna Revenue Code sha be appcabe wth respect
to servces performed after December 31,1939.
Par. 5. Secton 02.226 26 CFR 02.226 s amended to read as
foows:
Sec. 02.226. Devery and Dstrbuton op Newspapers, Shoppng News, and
Magaznes. (a) In genera. Subparagraph ( ) of secton 1 26(b) (15) of the
ct, as amended by secton 1 of Pubc Law 92 ( ghteth Congress), enacted
pr 20, 19 8, e cepts certan servces performed by an empoyee under the age
of 18 n the devery or dstrbuton of newspapers or shoppng news. Ths
e cepton, whch s deat wth n paragraph (6) beow, contnues wthout change
the e cepton contaned n secton 1 26(b) (15), as added by secton 606 of the
Soca Securty ct mendments of 1939. Subparagraph ( ) of secton 1 26(b)
(15), added by secton 1 of Pubc Law 92, e cepts certan servces n the wae
of newspapers and magaznes wthout regard to the age of the ndvdua per-
formng the servces. Such e cepton s deat wth n paragraph (c) beow.
The e ceptons n subparagraph ( ) and subparagraph ( ) are both appcabe
wth respect to servces performed after December 31, 1039.
(6) Servces of ndvduas under age 18. Servces performed by an empoyee
under the age of 18 n the devery or dstrbuton of newspapers or shoppng
news, not ncudng devery or dstrbuton (as, for e ampe, by a regona
dstrbutor) to any pont for subsequent devery or dstrbuton, are e cepted.
Thus, the servces performed by an empoyee under the age of 18 n makng
house-to-house devery or sae of newspapers or shoppng news, ncudng hand-
bs and other smar types of advertsng matera, are e cepted. The servces
are e cepted rrespectve of the form or method of compensaton. Incdenta
servces by the empoyee who makes the house-to-house devery, such as servces
n assembng newspapers, are consdered to be wthn the e cepton. The e cep-
ton contnues ony durng the tme that the empoyee s under the age of 18.
(c) Servces of ndvduas of any age. Servces performed by an empoyee
In, and at the tme of, the sae of newspapers or magaznes to utmate consumers
under nn arrangement under whch the newspapers or magaznes are to be sod
by hm at a f ed prce, hs compensaton b ng based on the retenton of the
e cess of such prce over the amount at whch the newspapers or magaznes are
charged to hm, are e cepted. The servces are e cepted whether or not the
empoyee s guaranteed a mnmum amount of compensaton for such servces,
or s entted to be credted wth the unsod newspapers or magaznes turned back.
Moreover, the servces are e cepted wthout regard to the age of the empoyee.
Servces performed other than at the tme of sae to the utmate consumer are
not wthn the e cepton. Thus, the servces of a regona dstrbutor whch are
antecedent to but not mmedatey part of the sae to the utmate consumer are
not wthn the e cepton. owever, ncdenta servces by the empoyee who
makes the sae to the utmate consumer, such as servces In assembng news-
papers or n takng newspapers or magaznes to the pace of sae, are consdered
to be wthn the e cepton.
Par. 6. Immedatey precedng secton 02.70 26 CFR 02.70 ,
the foowng s nserted:
S CTION 3 OF PU LIC L W 92 ( IG TI T CONGR SS),
N CT D PRIL 20, 19 8
If any amount pad pror to the date of the enactment of ths ct
consttutes an overpayment of ta soey by reason of an amendment
made by ths ct. no refund or credt sha be made or aowed wth
respect to the amount of such overpayment.
Par. 7. Secton 02.70 . as amended by Treasury Decson 5519
26 CFR 02.70 , s further amended by nsertng at the end of such
secton, the foowng:
82(1823 0 10
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Regs. 106, 02.203
138
() Prohbton of refund or credt. No refund or credt Is aowabe wth
respect to any amount pad pror to pr 20, 19 8, the date of the enactment of
Pubc Law 92 ( ghteth Congress) (reatng to the e cepton of certan aerv-
Ices performed by vendors of newspapers and magaznes), whch consttutes an
overpayment of ta soey by reason of an amendment made by such aw. (For
provsons reatng to servces e cepted from empoyment by Pubc Law 92
( ghteth Congress), see secton 02.226(c) 26 CFR 02.226(c) .)
Par. 8. Immedatey precedng the capton Secton 3797 (a) and
(b) of the Interna Revenue Code as set forth precedng secton
03.201 26 CFR 03.201 . the foowng s nserted:
S CTION 2 OF PU LIC L W 92 ( IG TI T CONGR SS),
N CT D PRIL 20, 19 8
(a) Secton 1607(c) (15) of the Interna Revenue Code, as amended,
s hereby amended to read as foows:
(15) ( ) Servce performed by an ndvdua under the age
of eghteen n the devery or dstrbuton of newspapers or shop-
png news, not ncudng devery or dstrbuton to any pont
for subsequent devery or dstrbuton;
( ) Servce performed by an ndvdua n, and at the tme
of, the sae of newspapers or magaznes to utmate consumers,
under an arrangement under whch the newspapers or magaznes
are to be sod by hm at a f ed prce, hs compensaton beng based on
the retenton of the e cess of such prce over the amount at whch
the newspapers or magaznes are charged to hm, whether or not
he s guaranteed a mnmum amount of compensaton for such serv-
ce, or s entted to be credted wth the unsod newspapers or maga-
znes turned back; .
(b) The amendment made by subsecton (a) sha be appcabe wth
respect to servces performed after December 31,1939, and, as to servces
performed before uy 1,19 6, sha be apped as f such amendment had
been a part of secton 1607(c) (15) of the Interna Revenue Code as
added to such Code by secton 61 of the Soca Securty ct mend-
ments of 1939.
Par. 9. Secton 03.203, as amended by Treasury Decson 5566
C. . 19 7-2, 1 8 , approved une 23, 19 7 26 CFR 03.203 , s
( ) y strkng out n the frst sentence thereof the words and as
further amended and nsertng n eu thereof and as amended.
( ) y strkng out the perod at the end of the frst sentence
thereof and nsertng n eu thereof a comma and the foowng: and
as further amended, effectve anuary 1, 19 0, by secton 2 of Pubc
Law 92 ( ghteth Congress), reatng to certan vendors of news-
papers and magaznes.
Par. 10. Secton 03.206, as amended by Treasury Decson 5566
26 CFR 03.206 , s further amended as foows:
( ) y strkng out n the frst sentence thereof the words and as
further amended and nsertng n eu thereof and as amended.
( ) y strkng out the perod at the end of the frst sentence
thereof and nsertng n eu thereof a comma and the foowng:
and as further amended, effectve anuary 1, 19 0, by secton 2 of
Pubc Law 92 ( ghteth Congress), reatng to certan vendors of
newspapers and magaznes.
Par. 11. Immedatey precedng secton 03.226 26 CFR 03.226 ,
the foowng s nserted:
R GUL TIONS 107 26 CFR, P RT 03
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139
Regs. 106, 02.203
S CTION 2 OP PU LIC L W 92 ( IG TI T CONGR SS),
N CT D PRIL 20, 19 8
(a) Secton 1607(c) (15) of the Interna Revenue Code, as amended,
Is hereby amended to read as foows:
(15) ( ) Servce performed by an Indvdua under the age of
eghteen n the devery or dstrbuton of newspapers or shoppng
news, not Incudng devery or dstrbuton to any pont for sub-
sequent devery or dstrbuton ;
( ) Servce performed by an ndvdua n, and at the tme of,
the sae of newspapers or magaznes to utmate consumers, under
an arrangement under whch the newspapers or magaznes are to
be sod by hm at a f ed prce, bs compensaton beng based on the
retenton of the e cess of such prce over the amount at whch
the newspapers or magaznes nre charged to hm, whether or not he
s guaranteed a mnmum amount of compensaton for such servce,
or s entted to be credted wth the unsod newspapers or magaznes
turned back; .
(b) The amendment made by subsecton (a) sha be appcabe wth
respect to servces performed after December 31, 1939, and, as to servces
performed before uy 1,19 6, sha be apped as f such amendment had
been a part of secton 1607(c) (15) of the Interna Revenue Code as added
to such code by secton 61 of the Soca Securty ct mendments of
1939.
Pah. 12. Secton 03.226 26 CFR 03.226 s amended to read as
foows:
Sec. 03.226. Devery and Dstrbuton of Newspapers, Shoppng News,
and Magaznes. (a) In genera. Subparagraph ( ) of secton 1607(c) (15) of
the ct, as amended by secton 2 of Pubc Law 92 ( ghteth Congress), enacted
pr 20, 19 8, e cepts certan servces performed by an empoyee under the age
of 18 n the devery or dstrbuton of newspapers or shoppng news. Ths e -
cepton, whch s deat wth In paragraph (6) beow, contnues wthout change
the e cepton contaned n secton 1607(c) (15), as added by secton 61 of the
Soca Securty ct mendments of 1939. Subparagraph ( ) of secton 1607(c)
(15), added by secton 2 of Pubc Law 92, e cepts certan servces In the sae
of newspapers and magaznes wthout regard to the age of the ndvdua per-
formng the servces. Such e cepton s deat wth In paragraph (o) beow.
The e ceptons n subparagraph ( ) and subparagraph ( ) are both appcabe
wth respect to servces performed after December 31,1939.
(6) Servces of ndvduas under age 18. Servces performed by an empoyee
under the a|re of 18 n the devery or dstrbuton of newspapers or shoppng
news, not ncudng devery or dstrbuton (as, for e ampe, by a regona ds-
trbutor) to any pont for subsequent devery or dstrbuton, are e cepted.
Thus, the servces performed by an empoyee under the age of 18 n makng house-
to-house devery or sae of newspapers or shoppng news, ncudng handbs and
other smar types of advertsng matera, are e cepted. The servces are
e cepted rrespectve of the form or method of compensaton. Incdenta serv-
ces by the empoyee who makes the hou.se-to-house devery, such as servces n
assembng newspapers, are consdered to be wthn the e cepton. The e cep-
ton contnues ony durng the tme that the empoyee s under the age of 18.
(o) Servces of ndvduas of any age. Servces performed by an empoyee
n, and at the tme of, the sae of newspapers or magaznes to utmate consumers
under an arrangement under whch the newspapers or magaznes are to be sod
by hm at a f ed prce, hs compensaton beng based on the retenton of the
e cess of such prce over the amount at whch the newspapers or magaznes
are charged to hm, are e cepted. The servces are e cepted whether or not
the empoyee Is guaranteed a mnmum amount of compensaton for such servces,
or s entted to be credted wth the unsod newspapers or magaznes turned
back. Moreover, the servces are e cepted wthout regard to the age of the
empoyee. Servces performed other than at the tme of sae to the utmate
consumer are not wthn the e cepton. Thus, the servces of a regona ds-
trbutor whch are antecedent to but not mmedatey part of the sae to the
utmate consumer are not wthn the e cepton. owever, ncdenta servces
by the empoyee who makes the sae to the utmate consumer, such as servces
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Regs. 106, 02.20
1 0
n assembng newspapers or n takng newspapers or magaznes to the pace of
sae, are consdered to be wthn the e cepton.
Pab. 13. Immedatey precedng secton 08.602 26 CF 03.602 ,
the foowng s nserted:
S CTION 8 OF PU LIC L W 92 ( IG TI T CONGR SS),
N CT D PRIL 20, 19 8
If any amount pad pror to the date of the enactment of ths ct
consttutes an overpayment of ta soey by reason of an amendment
made by ths ct, no refund or credt sha be made or aowed wth
respect to the amount of such overpayment.
Par. 1 . Secton 03.002, as amended by Treasury Decson 5519
26 CFR 03.602 , s further amended by nsertng after paragraph
(k) of such secton, the foowng new paragraph:
( ) Prohbton of refund or credt. No refund or credt s aowabe wth
respect to any amount pad pror to pr 20, 19 8, the date of the enactment of
Pubc Law 92 ( ghteth Congress) (reatng to the e cepton of certan serv-
ces performed by vendors of newspapers and magaznes), whch consttutes an
overpayment of ta soey by reason of an amendment made by such aw. (For
provsons reatng to servces e cepted from empoyment by Pubc Law 92
( ghteth Congress), see secton 03.226(c) 26 CFR 03.226(c) .)
(Ths Treasury Decson s ssued under the authorty contaned
n sectons 1 29 and 1609 of the Interna Revenue Code (53 Stat. 178,
188; 26 U. S. C. 1 29, 1609) and sectons 1, 2, and 3 of Pubc Law
92 ( ghteth Congress), enacted pr 20, 19 8.)
Fred S. Martn,
ctng Commssoner of Interna Revenue.
pproved November 1,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 8, 19 8, 9: 05 a. m.)
Secton 1 26: Defntons. 19 8-20-12931
Reguatons 106, Secton 02.20 : Who are T.D. 5653
empoyees.
( so Subchapter C (Federa Unempoyment
Ta ct), Secton 1607; Reguatons 107,
Secton 03.20 ; aso Soca Securty ct, Sec-
tons 811 and 907; Reguatons 91 and 90,
rtces 8 and 205.)
TITL 26 INT RN L R NU . C PT R I, SU C PT R D, P RTS 00, 01,
02, ND 03
Reguatons 106 and 107, Reguatons 90 and 91, and such Regua-
tons 90 and 91 as made appcabe to the Interna Revenue Code,
nmended to Insert theren the pertnent provsons of Pubc Law
0 2 ( ghteth Congress), enacted une 1 ,19 S pace 317, ths ue-
tn , reatng to the empoyer-empoyee reatonshp.
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1 1
Regs. 106, 02.20
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. G.
7 o Coectors of Interna Revenue and Others Concerned:
On November 27, 19 7, notce of proposed rue makng, regardng
amendments to the empoyment and soca securty ta reguatons
wth respect to the empoyer-empoyee reatonshp, was pubshed n
the Federa Regster (12 F. R. 79(56). In vew of the enactment of Pub-
c Law 6 2 ( ghteth Congress), on une 1 ,19 8 page 317, ths u-
etn , the proposed amendments contaned n the aforementoned no-
tce of proposed rue makng w not be adopted. The amendments set
forth beow are made n order to nsert the pertnent provsons of
sectons 1 and 2 of Pubc Law 0 2 ( ghteth Congress), n Regua-
tons 106 26 CFR, Part 02 , reatng to the empoyees ta and the
empoyers ta under the Federa Insurance Contrbutons ct (Sub-
chapter , Chapter 9, Interna Revenue Code); n Reguatons 107
26 CFR, Part 03 , reatng to the e cse ta on empoyers under the
Federa Unempoyment Ta ct (Subchapter C. Chapter 9, Interna
Revenue Code); n Reguatons 90 26 CFR Part 00 , reatng to the
e cse ta on empoyers under Tte I of the Soca Securty ct; n
such Reguatons 90 as made appcabe to the Interna Revenue Code
by Treasury Decson 885 C. . 1939-1 (Part 1), 396 26 CFR. Cum.
.Supp., p. 5876 ; n Reguatons 91 26 CFR, Part 01 , reatng to the
empoyees ta and the empoyers ta under Tte III of the Soca
Securty ct; and n such Reguatons 91 as made appcabe to the
Interna Revenue Code by such Treasury Decson 885. Such regu-
atons are amended as foows:
R GUL TIONS 106 26 CFR, P RT 02
Paragraph 1. Immedatey precedng the capton Secton 3797 (a)
and (b) of the Interna Revenue Code as set forth precedng
secton 02.201 of Reguatons 106 26 CFR 02.201 , the foowng s
nserted:
S CTION 1 OF PU LIC L W 6 2 ( IG TI T CONGR SS),
N CT D UN 1 , 19 8
That (a) secton 1 26(d) of the Interna Revenue Code are
amended by nsertng before the perod at the end of each the foowng:
, but such term does not ncude (1) any ndvdua who, under the usua
common-aw rues appcabe n determnng the empoyer-empoyee rea-
tonshp, has the status of an ndependent contractor or (2) any nd-
vdua (e cept an offcer of a corporaton) who s not an empoyee under
such common-aw rues .
(b) The amendments made by subsecton (a) sha have the same
effect as f ncuded n the Interna Revenue Code on February 10, 1039,
the date of ts enactment.
Par. 2. Immedatey precedng secton 02.20 of Reguatons 106
26 CFR 02.20 , the foowng s nserted:
S CTION 1 26(d) OF T CT
MPLOY
The term empoyee Incudes an offcer of a corporaton, but such
term does not ncude (1) any ndvdua who, under the usua common-
aw rues appcabe n determnng the empoyer-empoyee reatonshp,
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Regs. 106, 02.20
1 2
has the status of an Independent contractor or (2) any Indvdua (e cept
an offcer of a corporaton) who Is not an empoyee under such common-
aw rues. (Sec. 1 26(d), I. R. C, as amended, effectve an. 1, 19 0, by
sec. 606, Soca Securty ct mendments of 1939, and as amended, effec-
tve an. 1,19 0, by sec. 1, P. L. 6 2, 80th Cong., enacted une 1 ,19 8.)
R GUL TIONS 107 (26 CFR, P RT 08
Par. 3. Immedatey precedng the capton Secton 3797 (a) and
(b) of the Interna Revenue Code as set forth precedng secton
03.201 of Reguatons 107 26 CFR 03.201 , the foowng s nserted:
S CTION 1 OF PU LIC L W 6 2 ( IG TI T CONGR SS),
N CT D UN 1 , 19 8
That (a) secton 1607(1) of the Interna Revenue Code
are amended by nsertng before the perod at the end of each the
foowng: , but such term does not ncude (1) any ndvdua who,
under the usua common-aw rues appcabe n determnng the em-
poyer-empoyee reatonshp, has the status of an ndependent con-
tractor or (2) any Indvdua (e cept an offcer of a corporaton) who
s not an empoyee under such common-aw rues .
(b) The amendments made by subsecton (a) sha have the same
effect as f ncuded In the Interna Revenue Code-on February 10,
1939, the date of Its enactment.
Par. . Immedatey precedng secton 03.20 of Reguatons 107
26 CFR 03.20 , the foowng s nserted:
S CTION 1607(1) OF T CT
MPLOY
The term empoyee Incudes an offcer of a corporaton, but such
term does not ncude (1) any ndvdua who, under the usua common-
aw rues appcabe In determnng the empoyer-empoyee reatonshp,
has the status of an ndependent contractor or (2) any ndvdua
(e cept an offcer of a corporaton) who Is not an empoyee under such
common-aw rues. (Sec. 1607(1), I. R. C, as amended, effectve an.
1, 19 0, by sec. 61 , Soca Securty ct mendments of 1939, and as
amended, effectve an. 1, 19 0, by sec. 1, P. L. 6 2, 80th Cong., enacted
une 1 , 19 8.)
R GUL TIONS 90 26 CFR. P RT 00
Par. 5. Immedatey precedng the capton Secton 907 of the
ct as set forth precedng artce 1 of Reguatons 90 26 CFR 00.1 ,
the foowng s nserted:
S CTION 2 OF PU LIC L W 6 2 ( IG TI T CONGR SS),
N CT D UN 1 , 19 8
(a) Secton 1101(a)(6) of the Soca Securty ct s amended by
nsertng before the perod at the end thereof the foowng: , but
such term does not ncude (1) any ndrdua who, under the usua
common-aw rues appcabe n determnng the empoyer-empoyee
reatonshp, has the status of an ndependent contractor or (2) any
ndvdua (e cept an offcer of a corporaton) who s not an empoyee
under such common-aw rues .
(b) The amendment made by subsecton (a) sha have the same
effect as f ncuded In the Soca Securty ct on ugust 1 , 1935, the
date of Its enactment,

Par. 6. Immedatey precedng artce 205 of Reguatons 90 26
CFR 00.205 , the fo owng s nserted:
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1 3
Regs. 106, 02.20
S CTION 1101(a)(6) OF T CT
empoyes;
The term empoyee Incudes an offcer of a corporaton, but such term
does not Incude (1) any Indvdua who, under the usua common-aw
rues appcabe In determnng the empoyer-empoyee reatonshp,
has the status of an ndependent contractor or (2) any ndvdua (e -
cept an offcer of a corporaton) who s not an empoyee under such
common-aw rues. (Sec. 1101(a) (6), Soca Securty ct, as amended,
effectve an. 1, 1036, by sec. 2, P. L. 6 2, 80th Cong., enacted une 1 ,
19 8.)
R GUL TIONS 90 ONLY S M D PPLIC L TO T INT RN L R NU
COD 26 CFR, P RT 00
Par. 7. Immedatey precedng the capton Secton 907 of the
ct as set forth precedng artce 1 of Reguatons 90 26 CFR
00.1 , ony as made appcabe to the Interna Revenue Code, the
foowng s nserted:
S CTION 1 OF PU LIC L W 6 2 ( IG TI T CONGR SS),
N CT D UN 1 , 19 8
That (a) secton 1607() of the Interna Revenue Code are
amended by nsertng before the perod at the end of each the foow-
ng: , but such term does not ncude (1) any ndvdua who, under
the usua common-aw rues appcabe In determnng the empoyer-
empoyee reatonshp, has the status of an ndependent contractor or
(2) any ndvdua (e cept an offcer of a corporaton) who s not an
empoyee under such common-aw rues .
(b) The amendments made by subsecton (a) sha have the same
effect as f ncuded n the Interna Revenue Code on February 10, 1989,
the date of ts enactment.
Par. 8. Immedatey precedng artce 205 of Reguatons 90 26
CFR 00.205 , ony as made appcabe to the Interna Revenue Code,
the foowng s nserted:
S CTION 1607(h) OF T F D R L UN MPLOYM NT T CT,
S N CT D F RU RY 10, 1939
MPLOY
The term empoyee ncudes an offcer of a corporaton, but such
term does not ncude (1) any ndvdua who, under the usua common-
aw rues appcabe n determnng the empoyer-empoyee reatonshp,
has the status of an ndependent contractor or (2) any ndvdua (e -
cept an offcer of a corporaton) who s not an empoyee under such
common-aw rues. (Sec. 1607(h), I. R. C, effectve durng the caendar
year 1939, as amended, effectve an. 1, 1989, by sec. 1, P. L. 0 2, 80th
Cong., enacted une 1 , 19 8.)
R GUL TIONS 91 26 CFR, P RT 01
Par. 9. Immedatey precedng the capton Secton 811 of the
ct as set forth precedng artce 1 of Reguatons 91 26 CFR 01.1 ,
the foowng s nserted:
S CTION 2 OF PU LIC L W 6 2 ( IG TI T CONGR SS),
N CT D UN 1 , 19 8
(a) Secton 1101(a)(6) of the Soca Securty ct s amended by
nsertng before the perod at the end thereof the foowng: , but such
term does not ncude (1) any ndvdua who, under the usua common-
aw rues appcabe n determnng the empoyer-empoyee reatonshp,
has the status of an ndependent contractor or (2) any ndvdua (e -
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Rags. 106, 02.20
1
cept an offcer of a corporaton) who s not an empoye under such
common-aw rues .
(b) The amendment made by subsecton (a) sha have the same
effect as If Incuded In the Soca Securty ct on ugust 1 , 1936, the
date of ts enactment, .

Pah. 10. Immedatey precedng artce 3 of Reguatons 91 26 CFR
01.8 , the foowng s nserted:
S CTION 1101(a) (6) OP T CT
MPLOY
The term empoyee Incudes an offcer of a corporaton, but such
term does not ncude (1) any ndvdua who, under the usua common-
aw rues appcabe In determnng the empoyer-empoyee reatonshp,
has the status of an Independent contractor or (2) any ndvdua (e -
cept an offcer of a corporaton) who s not an empoyee under such
common-aw rues. (Sec. 1101(a) (6), Soca Securty ct, as amended,
effectve an. 1, 1937, by sec. 2, P. L. 6 2, 80th Cong., enacted une 1 ,
19 8.)
R GUL TIONS 91 ONLY S M D PPLIC L TO T INT RN L R NU
COD 26 CFR, P RT 01
Par. 11. Immedatey precedng the capton Secton 811 of the
ct as set forth precedng artce 1 of Reguatons 91 26 CFR 01.1 ,
ony as made appcabe to the Interna Revenue Code, the foowng
s nserted:
S CTION 1 OF PU LIC L W 6 2 ( IG TI T CONGR SS),
N CT D UN 1 , 19 8
That (a) secton 1 26(d) of the Interna Revenue Code are
amended by Insertng before the perod at the end of each the foowng:
, but such term does not ncude (1) any ndvdua who, under the
usua common-aw rues appcabe n determnng the empoyer-em-
poyee reatonshp, has the status of an ndependent contractor or
(2) any Indvdua (e cept an offcer of a corporaton) who s not an
empoyee under such common-aw rues .
(b) The amendments made by subsecton (a) sha have the same
effect as f ncuded n the Interna Revenue Code on February 10,
1939, the date of ts enactment.
Par. 12. Immedatey precedng artce 3 of Reguatons 91 26
CFR 01.3 , ony as made appcabe to the Interna Revenue Code, the
foowng s nserted:
S CTION 1 26(c) OF T INT RN L R NU COD , S
N CT D F RU RY 10, 1939
MPLOY
The term empoyee ncudes an offcer of a corporaton, but such
term does not ncude (1) any ndvdua who, under the usua com-
mon-aw rues appcabe n determnng the empoyer-empoyee reaton-
shp, has the status of an ndependent contractor or (2) any Indvdua
(e cept an offcer of a corporaton) who s not an empoyee under such
common-aw rues. (Sec. 1 26(c), I. R. O, effectve after March 31,
1939, and pror to an. 1, 19 0, as amended, effectve pr 1, 1939, by
sec. 1, P. L. 6 2, 80th Cong., enacted une 1 ,19 8.)
ecause ths Treasury Decson merey nserts the pertnent pro-
vsons of sectons 1 and 2 of Pubc Law 6 2 ( ghteth Congress),
enacted une 1 , 19 8, n the approprate paces n the appcabe
reguatons, t s hereby found that t s unnecessary to ssue ths
Treasury Decson wth notce and pubc procedure thereon under
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1 5
Regs. 106, 02 205
secton (a) of the dmnstratve Procedure ct, approved une 11,
19 6, or sub|ect to the effectve date mtaton of secton (c) of sad
ct.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 1 29, 1609, and 3791 of the Interna Revenue Code (53 Stat.
178,188, 67; 26 U. 8. C. 1 29, 1609, 3791), sectons 808 and 908 of the
Soca Securty ct ( 9 Stat, 638, 6 3 ; 2 U. S. C. 1008, 1108), and
sectons 1 and 2 of Pubc Law 6 2 ( ghteth Congress), enacted
une 1 , 19 8.)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved September 7,19 8.
. . Foey, r.,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster September 18,19 8, 8 : 9 a. m.)
Secton 1 26: Defntons. 19 8-16-12893
Reguatons 106, Secton 02.205: Who are Mm. 628
empoyers.
( so Subchapter C (Federa Unempoyment Ta ct),
Secton 1607; Reguatons 107, Secton 03.205.)
Status of certan muscans for purposes of the Federa empoy-
ment ta es and of the ncome ta wthhodng under secton 1622 of
the .Interna Revenue Code.
Mmeograph 6187 C. . 19 7-2,177 suppemented.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, uy 7,19 8.
To Coectors of Interna Revenue, Interna Revenue gents n
Charge, and Others Concerned:
1. The purpose of ths mmeograph s to state the poston of the
ureau wth respect to the status, for purposes of the Federa empoy-
ment ta es and the ncome ta wthhodng under secton 1622 of
the Interna Revenue Code, of certan muscans, and to suppement
Mmeograph 6187 C. . 19 7-2.177 .
2. It s the poston of the ureau that where an orchestra eader
hods hmsef out as beng avaabe to furnsh musc to purchasers
thereof, has the rght to seect, hre, dscharge, and f the compensa-
ton of the members of hs orchestra, has prmary contro over the
operatons of hs orchestra, arranges detas reatng to engagements
and furnshes the musc, arrangements, and such other equpment as
may be necessary, and negotates the condtons ncudng the fnan-
ca terms for the engagements, such eader s the empoyer of the
members of hs orchestra for empoyment ta and ncome ta wth-
hodng purposes. The fact that the eader s sub|ect to the rues and
reguatons of hs unon, that the personne of hs orchestra may
change from engagement to engagement, that the orchestra operates
ocay rather than natonay, or that the eader and purchaser have
entered nto a contract the terms of whch do not refect the actua
crcumstances surroundng the performance of the servces s not
suffcent to negatve the status of the eader as an ndependent
contractor.
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Regs. 106, 02.206
1 6
3. The ureau has had occason to consder the status of muscans
who have been assembed at the nstance of the purchaser. In nstances
of ths character a nght cub, restaurant, hote owner, or some person
desrng musc for hs estabshment hres an ndvdua muscan
(usuay desgnated a unon contractor) and nstructs hm to obtan a
specfed number of muscans and a specfed nstrumentaton. e
aso nstructs such ndvdua as to the prce he w pay each muscan.
The ndvdua muscan then assembes the other muscans n accord-
ance wth the purchaser s nstructons and the purchaser may accept
them or ndcate any change n the personne or nstrumentaton he de-
sres wth or wthout an audton. The ndvdua muscan who as-
sembed the others may or may not be desgnated the eader by the
purchaser. Ths type of orchestra s organzed at the e press drecton
of the purchaser who determnes the personne comprsng t, who the
eader w be, the amount of remuneraton he w pay each member,
and retans fu contro over the orchestra. In stuatons of ths char-
acter the poston of the ureau s that the purchaser s the empoyer
of the muscans for empoyment ta and ncome ta wthhodng
purposes.
. nother type of orchestra consdered by the ureau s that whch
operates on a cooperatve or partnershp bass. In orchestras of ths
type a of the members have a voce n the membershp thereof the
engagements to be accepted, the dvson of the remuneraton receved
for the engagements entered nto, and a matters pertanng to the
operaton of the orchestra. Ths type of orchestra usuay operates
under a desgnated name and by common consent one of ts members
s desgnated the eader and usuay negotates the contracts for the
servces of the orchestra. From the proceeds derved for ts servces,
a e penses are frst deducted and the remander s dstrbuted n the
manner determned by the members. In stuatons of ths type t s the
poston of the ureau that generay members of such an orchestra are
nether the empoyees of the purchaser nor of the eader. Such or-
chestra must be prepared to furnsh evdence of a true cooperatve
or partnershp arrangement, n substance as we as n form, wthn
the meanng of secton 3797(a) (2) of the Interna Revenue Code.
5. If doubt e sts n any case as to the appcabty of the above
poston, the facts shoud be presented to the ureau wth a request for
a rung.
6. Inqures reatve to the ncome ta wthhodng shoud refer to
the number of ths mmeograph and shoud be addressed to ths offce
for the attenton of IT: P: TR. Correspondence otherwse reatng
to the contents of ths mmeograph shoud refer to the number hereof
and to the symbos mT: RR.
Geo. . Schoeneman,
Commssoner.
Secton 1 26: Defntons.
Reguatons 106, Secton 02.206: cepted servces
n genera.
Servces performed by newspaper and magazne vendors, changes
effected by Pubc Law 92, ghteth Congress. (See T. D. 5665,
page 135.)
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1 7
Regs. 106, 02.213
Secton 1 26: Defntons. 19 8-26-12995
Reguatons 106, Secton 02.213: Unted States Mm. G336
and nstrumentates thereof.
( so Subchapter C (Federa Unempoyment Ta
ct), Secton 1607; eguatons 107, Secton 03.213;
and Soca Securty ct, Sectons 811 and 907; Regu-
atons 91 and 90, rtces 11 and 206(5)-(6).)
Status of producton credt assocatons for empoyment ta
purposes.
Mmeograph 5003 (C. . 19 0-1, 203) modfed.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, December 0, 191(8.
Coectors of Interna Revenue and Others Concerned:
1. In S. S. T. 61 (C. . 1937-1, 09) t was hed, n part, that pro-
ducton credt assocatons, under the supervson of the Farm Credt
dmnstraton, are nstrumentates of the Unted States wthn the
meanng of Ttes III and I of the Soca Securty ct. Servces
performed by ndvduas n the empoy of such assocatons are e -
cepted from empoyment by sectons 811(b) (6) and 907(c) (5) of
Ttes III and I , respectvey, and nether the assocatons nor
ther empoyees are sub|ect to the provsons of the ct. Such rung
was made appcabe aso under the Federa Insurance Contrbutons
ct and the Federa Unempoyment Ta ct.
2. Secton 63 of the Farm Credt ct of 1933 provdes, n part, that
producton credt assocatons organzed thereunder, and ther ob-
gatons, sha be deemed to be nstrumentates of the Unted States
and as such sha be e empt both as to prncpa and nterest from a
ta aton mposed by the Unted States or by any State, terrtora, or
oca ta ng authorty. The e empton provded theren does not
appy wth respect to any producton credt assocaton or ts property
or ncome after the stock hed n t by the producton credt corporaton
has been retred.
3. The ureau has been nformed that numerous producton credt
assocatons are retrng the stock hed by the producton credt cor-
poratons. It s the opnon of the ureau that when such an assoca-
ton fuy retres a the stock owned by the producton credt corpora-
ton, the rung pubshed as S. S. T. 61 s nappcabe on and after
the date of retrement of such stock and servces performed n the
empoy of such an assocaton on and after that date consttute em-
poyment for Federa empoyment ta purposes.
. Paragraphs 23 and 2 of Mmeograph 5003 (C. . 19 0-1, 203)
are modfed to accord wth the rung contaned heren.
5. Correspondence reatng to ths mmeograph shoud refer to the
number thereof and to the symbos mT: R .
Geo. . Schoeneman,
Commssoner.
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Regs. 106, 02.602
1 8
Secton 1 26: Defntons.
Reguatons 106, Secton 02.226: Devery and
dstrbuton of newspapers, shoppng news,
and magaznes.
Servces performed by ndvduas under age 18, changes effected by
Pubc Law 9a, ghteth Congress. (See T. D. 5665, page 135.)
Secton 1 30: Other aws appcabe. 19 8-23-12961
Reguatons 106, Secton 02.602: When to Mn. 631
report wages.
Preparaton of returns, Form SS-a, wth respect to seamen em-
poyed by Unted States Martme Commsson and prvate shppng
operators.
(Suppementng Mmeograph 6112.)
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25. D. October 1,19 8.
Coectors of Interna Revenue and Others Concerned:
1. Mmeograph 6112, dated February 18, 19 7, requres that the
returns, Form SS-a, for ta abe perods begnnng anuary 1, 19 7.
wth respect to seamen empoyed by the Unted States Martme Com-
msson and by prvate shppng operators be prepared n conformty
wth the nstructons prescrbed on Form SS-a and wth the app-
cabe reguatons. Such procedure requres that the ta es mposed
by the Federa Insurance Contrbutons ct be reported and pad by
the empoyer for each quarter n whch the wages of seamen are actu-
ay or constructvey pad, ncudng a advances, sops, aotments,
the far vaue of board and odgng, etc., pad n such quarter. ny
errors of omsson or commsson made n a return for the quarter n
whch the wages are so pad shoud be ad|usted on a subsequent or sup-
pementa return, and the necessary wage correcton nformaton n
connecton wth such ad|ustments shoud be furnshed n the same
manner as n the case of other errors.
2. Dffcutes have been encountered by shppng operators n as-
certanng the amounts of wages pad to seamen whe they are on a
voyage. ccordngy, Mmeograph 6112 s hereby suppemented to
the e tent that shppng operators w be deemed to nave comped
wth the appcabe requrements f they defer the computaton and
reportng of wages and ta es under the Federa Insurance Contrbu-
tons ct wth respect to wages pad to a seaman durng a voyage unt
the quarter n whch the voyage termnates. Ths procedure permts
the empoyer to defer the reportng of seamen s wages unt fu wage
data are ascertanabe and shoud enabe the empoyer to report the
correct amount of wages pad to each seaman n eacn quarter, as ds-
tngushed from a tentatve sum for each seaman whch s sub|ect to
subsequent correcton. Under ths procedure ta abe wages pad dur-
ng the voyage are requred to be reported for each quarter n whch
the wages are actuay or constructvey pad, ncudng a advances,
sops, aotments, the far vaue of board and odgng, etc., pad n such
quarter.
3. The procedure to be foowed by the shppng operator w
ncude the foowng:
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1 9
Regs. 106, 02.609
(a) The usua entres, n Schedue of hs current quartery return
on Form SS-a, wth respect to wages pad n the quarter to shore
empoyees.
(b) The computaton, at the end of each voyage whch has ter-
mnated n the current quarter, of the wages pad to each seaman n
each quarter of such voyage.
(c) The determnaton (under the 3,000 mtaton appcabe to
wages pad by the shppng operator to each empoyee n each caendar
year) of the amount of remuneraton whch consttutes each seaman s
ta abe wages.
(d) Deducton of empoyees ta wth respect to the ta abe wages,
(e) ntry n Schedue of the shppng operator s return of Form
SS-a for the current caendar quarter of wages pad n the current
caendar quarter to seamen whose voyages ended n such quarter. Such
wages shoud be reported n the same manner, and on the same Sched-
ue , as the wages of shore empoyees (mentoned n subparagraph
3(a), above) are reported.
(/) The stng, ether on Forms SS-c or on suppementa returns
on Form SS-a, of wages pad pror to the current caendar quarter
to seamen whose voyages ended n such quarter.
(ff) If such stng (n (/), above) s on Forms SS-c, the amounts
of empoyers ta and empoyees ta wth respect to the wages so
sted shoud be entered as ta ad|ustments on the shppng operator s
current return on Form SS-a, and the Forms SS-c shoud be fed
therewth.
( ) If such stng (n (/), above) s on suppementa returns on
Form SS-a, each such form shoud be marked Suppementa, and
the wages pad n each quarter of the voyage (e cept the quarter n
whch the voyage ends) shoud be sted on a separate suppementa
return. ach suppementa return shoud be fed, and the ta es re-
ported thereon shoud be pad, on or before the ast day of the frst
caendar month foowng the quarter n whch the voyage ends.
. Forms, and such assstance n the preparaton thereof as may
be desred, may be obtaned upon request at offces of coectors of
nterna revenue.
5. Correspondence reatng to ths mmeograph shoud refer to ts
number and to the symbos mT: RR.
Geo. . Schoeneman,
Commssoner.
Secton 1 30: Other aws appcabe. 19 8-22-129 9
Reguatons 106, Secton 02.609: Records. Mm. 6310
Inspecton of returns, Form SS-a, under the Federa Insurance
Contrbutons ct by State Unempoyment Compensaton Comms-
sons.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. C, September 27, 19 8.
Coectors of Interna Revenue and Others Concerned:
1. The Treasury Department has gven further consderaton to ts
poston that permsson to nspect returns on Form SS-a under the
Federa Insurance Contrbutons ct may not be granted to offcas
of State unempoyment compensaton commssons.
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Regs. 107, 03.203
150
2. Permsson to e amne such returns generay s desred to as-
certan whether a empoyers are regstered wth the unempoyment
compensaton commssons. In the nterest of coser coordnaton
between the ureau of Interna Revenue and the State agences, t s
determned that returns on Form SS-a fed under the Federa In-
surance Contrbutons ct sha be open to nspecton by an offca
of any State havng a aw certfed to the Secretary of the Treasury
by the Soca Securty dmnstraton as havng been approved n
accordance wth secton 1603 of the Interna Revenue Code, as
amended, upon wrtten appcaton sgned by the governor of such
State under the sea of the State, desgnatng the offcer to make the
nspecton and showng that such nspecton s soey for purposes
of admnsterng such State unempoyment compensaton aw.
3. appcatons for permsson to nspect these returns sha be
addressed to the Commssoner of Interna Revenue and sha desg-
nate the perod covered by the returns to be nspected. Separate ap-
pcaton must be made as prescrbed above each tme an nspecton
of returns on Form SS-a s desred by the State.
. Inspecton of the returns, after permsson has been granted, may
be made n the offce of the coector of nterna revenue havng custody
of the returns but ony n the presence of an nterna revenue offcer
desgnated by the coector for that purpose and durng the norma
hours of busness of such offce. The nspecton of the returns sha
be arranged for a tme mutuay agreeabe to the coector of nterna
revenue and the representatve of the State agency. The permsson
granted for the nspecton e tends ony to the ta porton of Form
SS-a, whch s retaned by the coectors.
5. Correspondence n regard to the contents of ths mmeograph
shoud refer to ts number and to the symbos mT: RR.
Geo. . Schoeneman,
Commssoner.
pproved September 27, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
C PT R 9, SU C PT R C F D R L UN MPLOYM NT T CT
Secton 1601: Refunds, credts, and abatements.
Reguatons 107, Secton 03.602: Refund or credt
of overpayments; abatement of overassessments.
Refund or credt of overpayments, changes effected by Pubc Law
92, ghteth Congress. (See T. D. 5665, page 135.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.203: mpoyment
after December 31,1939.
Servces performed by newspaper and magazne vendors, changes
effected by Pubc Law 92, ghteth Congress. (See T. D. 5665,
page 135.)
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151 Regs. 91, 90, rts. U, 206(5)-(6)
Secton 1607: Defntons.
Reguatons 107, Secton 03.20 : Who are empoyees.
mpoyer-empoyee reatonshp, effect of Pubc Law 6 2 ( ght-
eth Congress), reguatons amended. (See T. D. 5653, page 1 0.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.205: Who are
empoyers.
Status of muscans. (See Mm. 628 , page 1 5.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.206: cepted servces
n genera.
Servces performed by newspaper and magazne vendors, changes
effected by Pubc Law 92, ghteth Congress. (See T. D. 5665,
page 135.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.213: Unted States and
nstrumentates thereof.
Status of producton credt assocatons for empoyment ta pur-
poses. (See Mm. 6336, page 1 7.)
Secton 1607: Defntons.
Reguatons 107, Secton 03.226: Devery and
dstrbuton of newspapers, shoppng news,
and magaznes.
Servces performed by ndvduas under age 18, changes effected
by Pubc Law 92, ghteth Congress. (See T. D. 5665, page 135.)
T S UND R SOCI L S CURITY CT
TITL III -T S WIT R SP CT TO MPLOYM NT
Secton 811: Defntons.
Reguatons 91, rtce 3: Who are empoyees.
mpoyer-empoyee reatonshp, effect of Pubc Law 6 2 ( ght-
eth Congress), reguatons amended. (See T. D. 5653, page 1 0.)
Sectons 811 and 907: Defntons.
Reguatons 91 and 90, rtces 11 and 206(5)-(6):
Government empoyees.
Status of producton credt assocatons for empoyment ta pur-
poses. (See Mm. 6336, page 1 7.)
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Regs. 90, rt. 205 152
TITL I . T ON MPLOY RS OF IG T OR MOR
Secton 907: Defntons.
Reguatons 90, rtce 205: mpoyed ndvduas.
mpoyer-empoyee reatonshp, effect of Pubc Law 6 2 ( ght-
eth Congress), reguatons amended. (See T. D. 5653, page 1 0.)
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MISC LL N OUS T RULINGS
ST T T
INT RN L R NU COD
Reguatons 105, Secton 81.2 : Property sub- 19 8-22-12950
|ect to power of appontment by decedent. T. D. 5658
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 81.
R GUL TIONS R L TING TO ST T T
Reguatons 105 amended to conform to sectons 1 and 2 of Pubc
Law 365 ( ghteth Congress) page 317, ths uetn , reatng to
powers of appontment.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 85, D. 0.
To Coectors of Inferna Revenue and Others Concerned:
In order to conform Reguatons 105 2G CFR, Part 81 to sectons
1 and 2 of Pubc Law 635 ( ghteth Congress, second sesson)
page 317, ths uetn , approved une 12,19 8, such reguatons are
amended as foows:
Paragraph 1. There s nserted mmedatey foowng Pubc Law
112 ( ghteth Congress, frst sesson) C. . 19 7-2, 33 , whch
was nserted n such reguatons by Treasury Decson 5577 C. .
19 7-2, 208 , approved September 30, 19 7, and before secton 302(f)
of the Revenue ct of 19-26 (as orgnay enacted) as set forth pre-
cedng secton 81.2 . the foowng:
PU LIC L W 635 ( IG TI T CONGR SS, S COND S SSION),
PPRO D UN 12, 10 8
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed. That secton 03(d) C3) of
the Revenue ct of 19 2 (reatng to the reease of certan powers of
appontment) s hereby amended by strkng out uy 1, 19 8 wherever
It appears and nsertng n eu thereof uy 1, 19 9 .
Sec. 2. For the purposes of sectons 03 of the Revenue
ct of 19 2, a power to appont created by a w e ecuted on or before
October 21, 19 2, sha be consdered a power created on or before such
date f the person e ecutng such w des before uy 1, 19 9, wthout
havng repubshed such w, by codc or otherwse, after October 21,
19 2.
Par. 2. Secton 81.2 (Z ), added by Treasury Decson 5239 C. .
19 3, 1081 , approved March 10. 19 3. as amended by Treasury Dec-
son 5577, approved September 30, 19 7 L26 CFR 81.2 (b) , s further
amended as foows:
820828 19 n (153)
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Regs 105, 81.2
15
( ) y strkng out une 30, 19 8, wherever t appears and n-
sertng n eu thereof une 30, 19 9.
( ) y strkng from the frst sentence of subparagraph (3) (as
amended by Pubc Law 112 ( ghteth Congress), approved une 25,
19 7) and nsertng n eu thereof the foowng: (as amended by
Pubc Law 635 ( ghteth Congress), approved une 12, 19 8).
(C) y strkng out uy 1. 19 8 wherever t appears and nsert-
ng n eu thereof uy 1, 19 9.
(D) y nsertng n (o)(3) mmedatey precedng the second
paragraph begnnng wth the words In the case of a power created
on or before October 21,19 2 the foowng:
Secton 2 of Pubc Law 635, approved une 12, 19 8, provdes that for the
pur se of secton 03 of the Revenue ct of 10 2, a power to appont created by
a w e ecuted on or before October 21. 19 2, sha be consdered a power created
on or before such date f the person e ecutng such w des before uy 1, 19 9,
wthout havng repubshed such w, by codc or otherwse, after October 21,
19 2. Ths provson appes as f made effectve by secton 03 of the Revenue
ct of 19 2, and the appcaton of the ta wth res ect to a power to appont so
created s therefore sub|ect to the e ceptons stated n secton 03(d) of such ct.
ecause the purpose of ths Treasury Decson s merey to conform
the reguatons to the provsons of sectons 1 and 2 of Pubc Law 635
( ghteth Congress, second sesson), whch afford reef to persons
possessed of powers of appontment created on or before October 21,
19 2 (ncudng powers created by a w e ecuted on or before such
date and not repubshed thereafter), t s found that t s unnecessary
to ssue ths Treasury Decson wth notce and pubc procedure there-
on under secton (a) of the dmnstratve Procedure ct, approved
une 11,19 6, or sub|ect to the effectve date mtaton of secton (c)
of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pubca-
ton n the Federa Regster.
(Ths Treasury Decson s ssued under authorty contaned n
secton 3791 of the Interna Revenue Code (53 Stat. 67; 26 U. S. C
3791) and sectons 1 and 2 of Pubc Law 635 ( ghteth Congress,
second sesson), approved une 12, 19 8.)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved October 1, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 7, 10 S, 8: 56 a. m.)
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155 Regs. 108, 86.1, 86.2
GIFT T
INT RN L R NU COD
Reguatons 108, Sectons 86.1 and 86.2. 19 8-22-12951
T. D.5659
TITL 26 INT RN L R NU . C PT R I, SU C PT R , P RT 86.
GIFT T UND R C PT R OP T INT RN L R NU COD , S
M ND D
Reguatons 108 amended to conform to sectons 1 and 2 of Pubc
Law 635 ( ghteth Congress) page 317, ths uetn , reatng to
powers of appontment.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. 0.
To Coectors of Interna Revenue and Others Concerned:
In order to conform Reguatons 108 26 CFR, Part 86 to sectons
1 and 2 of Pubc Law 635 ( ghteth Congress, second sesson) page
317, ths uetn , approved une 12, 19 8, such reguatons are
amended as foows:
Paragraph 1. There s nserted mmedatey foowng Pubc Law
112 ( ghteth Congress, frst sesson) C. . 19 7-2, 33 , whch
was nserted by Treasury Decson 5606 C. . 19 8-1,129 , approved
March ,19 8, and mmedatey precedng secton 86.1, the foowng:
PU LIC L W 635 ( IG TI T CONGR SS, S COND S SSION),
PPRO D UN 12, 18 8
Resoved ;/ the Senate and ouse of Representatves of the Unted
States of mrca n Conyrcss assembed, That secton 52(c) of
the Revenue ct of 19 2 s hereby amended to read as foows:
(c) Reease efore uy 1, 19 0.
(1) reease of a power to appont before uy 1, 19 9, sha
not be deemed a transfer of property by the Indvdua possessng
such power.
(2) Ths subsecton sha appy to a caendar years pror to
19 9 and to that part of the caendar year 10 9 pror to uy 1,19 9.
Sbc. 2. For the purposes of sectons 2 of the Revenue ct
of 19 2, a power to appont created by a w e ecuted on or before October
21, 19 2, sha be consdered a power created on or before such date f
the person e ecutng such w des before uy 1, f 9, wthout havng
repubshed such w, by codc or otherwse, after October 21, 19 2.
Par. 2. Secton 86.1, as amended by Treasury Decson 5606, ap-
proved March , 19 8 26 CFR 86.1 , s further amended by strkng
from the second sentence uy 1. 19 8 and nsertng n eu thereof
uy 1,19 9.
Par. 3. Secton 86.2(6), as amended by Treasury Decson 5606
20 CFR 86.2 (b) , s further amended as foows:
( ) y strkng out uy 1, 19 8 wherever t appears and n-
sertng n eu thereof uy 1,19 9.
( ) y strkng out as amended by Pubc Law 112 ( ghteth
Congress), approved une 25,19 7 wherever t appears and nsertng
n eu thereof the foowng: as amended by Pubc Law 635
( ghteth Congress), approved une 12,19 8.
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Regs. 108, 86.2
156
(C) y nsertng mmedatey foowng the second sentence of the
frst paragraph thereof the foowng:
Secton 2 of Pubc Law 635, approved une 12,19 8, provdes that for the purpose
of secton 52 of the Revenue ct of 19 2, a power to appont created by a w
e ecuted on or before October 21, 19 2, sha be consdered a power created on or
before such date f the person e ecutng such w des before uy I, 19 9.
wthout havng repubshed such w, by codc or otherwse, after October 21,
19 2. Ths provson appes as If made effectve by secton 52 of the Revenue
ct of 19 2, and the appcaton of the ta wth respect to a power to appont so
created s therefore sub|ect to the e ceptons stated n secton 52 (b) and (c)
of such ct.
ecause the purpose of ths Treasury Decson s merey to conform
the reguatons to the provsons of sectons 1 and 2 of Pubc Law 635
( ghteth Congress, second sesson), whch afford reef to persons
possessed of powers of appontment created on or before October 21,
19 2 (ncudng powers created by a w e ecuted on or before such
date and not repubshed thereafter) t s found that t s unnecessary
to ssue ths Treasury Decson wth notce and pubc procedure
thereon under secton (a) of the dmnstratve Procedure ct,
approved une 11, 19 6, or sub|ect to the effectve date mtaton of
secton (c) of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pub-
caton n the Federa Regster.
(Ths Treasury Decson s ssued under authorty contaned n
sectons 1029 and 3791 of the Interna Revenue Code (53 Stat. 157, 67;
26 U. S. C. 1029, 3791) and sectons 1 and 2 of Pubc Law 635
( ghteth Congress, second sesson), approved une 12, 19 8.)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved October 1,19 8.
Thomas . Ltnch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster October 7, 19 8, 8 : 55 a. n.)
S CTION 1000. IMPOSITION OF T
Reguatons 108, Secton 86.2: Transfers 19 8-20-12932
reached. . T. 21
Where a |ont Federa Income ta return Is fed by husband and
wfe, payment by one spouse of the entre Income ta abty does
not resut n a ta abe gft.
dvce s requested whether, f husband and wfe fe a |ont Federa
ncome ta return, payment by ether spouse of the entre ncome ta
abty resuts n a transfer sub|ect to gft ta .
It s hed that where a |ont Federa ncome ta return s fed by
husband and wfe the payment of the entre ncome ta abty by
ether spouse does not resut n a transfer whch s sub|ect to gft ta .
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157
Regs. 71 (1932)
ST MP T S
INT RN L R NU COD
SC DUL -, TITL III OF T R NU CT OF 1926, S M ND D
Reguatons 71 (1932). 19 8-21-12039
Ct. D. 1708
ST MP T S R NU CT OP 1926, S M ND D D CISION OF COURT
1. Corporate Securtes Unsecured Instruments Debentures.
n automobe fnance company, to obtan funds n ts current
busness, n 1935 ssued to 8 corporatons 8 unsecured nstruments
rangng n face amounts from 100,000 to 1,000,000, some of whch
were payabe to the order of the named hoder, and some payabe
to bearer, and whch provded for 3 percent nterest and for
maturty from four and one-haf to fve years from date of ssue.
The Instruments were prnted on tnted papers wth engraved
borders and were ssued n seres form, but they were not ssued
wth nterest coupons nor In regstered form. ed: The nstru-
ments obvousy were not merey ordnary promssory notes ev-
dencng debts arsng n the ordnary course of busness. Ther
terms, appearance, and method of sae to a comparatvey few n-
vestors who were requred to state at east ther then present
ntenton to hod them for Investment purposes wthout transfer
to others combned to put them n a cass apart from ordnary com-
merca promssory notes and nto the category of debentures as that
term s used n the statute n ts settng wth bonds and certfcates
of ndebtedness to desgnate a type of corporate securtes whch does
not Incude promssory notes. The nstruments are therefore sub-
|ect to documentary stamp ta under the provsons of Schedue -,
Tte III of the Revenue ct of 1926, as amended.
2. Certorar Dened.
Petton for certorar dened October 27, 19 7.
Unted States Crcut Court of ppeas for the Second Crcut
Genera Motors cceptance Corporaton, pantff-appeee, v. oseph T. gans,
Coector of Interna Revenue for the Thrd Dstrct of New York, defendant-
appeant
161 Fed. (2d) 593
ppea by the defendant from a |udgment of the Dstrct Court for the Southern Dstrct
of New York In a sut to recover stamp ta es pad Reversed
efore Swan, Chase, and Frank, Crcut udges
May 1 , 19 7
opnon
Chase, Crcut udge: The pantff n 1935 borrowed 25,000,000 from 8
corporatons and devered to them 8 unsecured nstruments rangng n face
amounts from 100,000 to 1,000,000. In some of these nstruments t promsed
to pay the amount stated theren to the named hoder, and In the others to bearer.
Interest was payabe on a of them at desgnated paces at Intervas of 6 months
at 3 percent, and the prncpa was payabe on varous maturty dates none
of whch were ess than four and one-haf, nor more than fve, years from the
date of ssue.
The Comssoner of Interna Revenue assessed a stamp ta on these nstru-
ments, whch amounted n the aggregate to 25,000, on the ground that they
were ta abe pursuant to the provsons of Schedue - of Tte III of the
Revenue ct of 1926, as amended by secton 721 (a) of the Revenue ct of 1932
whch s found In Tte 26 U. S. C. . secton 1801. The pantff pad the ta
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Regs. 71 (1932)
158
under protest to the defendant who was the coector of Interna revenue for
the Thrd Dstrct of New York and, after a cam for refund had been duy
fed and re|ected, brought ths sut In the Dstrct Court for the Southern Dstrct
of New York to recover t. Tra was had by court wthout a |ury upon stpuated
facts. From a |udgment for the pantff to recover the fu amount pad wth
nterest, the defendant has appeaed.
The appeee Is a New York corporaton whose ony busness Is to provde
fnanca assstance to deaers In the products of the Genera Motors Corporatou
and to ther reta customers. Its board of drectors passed a resouton o:
December 17, 193 , authorzng Its offcers to borrow from not more than 10
Investors appro matey 30,000,000 on ts promssory notes provded that coud
be done at rates and on terms whch were In the |udgment of the offcers to the
nterests of the corporaton. It was aso resoved that pror to the sae of
such promssory notes the offcers of the corporaton sha obtan the authorzed
statement In wrtng of each purchaser to the effect that ts purchase s for
nvestment account and not wth the vew of dstrbuton to the pubc.
The nstruments prevousy mentoned were sod pursuant to the provsons of
the resouton, and sub|ect to the opnon of counse for the nvestors that the
purchase of them, or ther resae, woud not voate the Securtes and change
ct of 1933 or any rue or reguaton promugated thereunder.
These so-caed notes under dscusson were unsecured nstruments prnted on
tnted papers wth engraved borders. They were ssued n seres form desgnated
to and each bore a sera number, but they were not ssued wth nterest
coupons nor n regstered form. The sera numbers served to dentfy them
and the sae of each was entered upon the appeee s books. They a bore
the corporate sea of the appeee and were redeemabe pror to the maturty
date on 60 days notce at a premum of one quarter of 1 percent for each 6
months the term was shortened. ach note provded that the appeee woud
not, so ong as t was outstandng, at any tme pedge or otherwse sub|ect
to a en any of ts property or assets wthout thereby e pressy securng the
due and punctua payment of ths note equay and rataby wth any and a
obgatons and Indebtedness secured by such pedge or other en, wth the
provso that ths restrcton shoud not appy to any fnancng by the Corporaton
n connecton wth the e port or marketng of goods n foregn countres other
than the Domnon of Canada and In sad connecton the Corporaton reserves
the rght, In accordance wth customary and estabshed bankng practce, to
depost or otherwse to sub|ect to a en recevabes for coecton or as a bass
for the Issuance of bankers acceptances or n ad of other smar borrowng
arrangements. The appeee further agreed n each note that the authentca-
ton, theren requred by means of the sgnature of ts Comptroer, or of some
person actng In hs behaf shoud not be performed uness the Corporaton at
the tme of such authentcaton owns recevabes, nstament payment obga-
tons, cash or cash on depost to ts order, pedged or unpedged, n the aggregate
to an amount at east equa to the tota of a ts obgatons outstandng,
secured or unsecured, ncudng the notes and obgatons then beng authentcated
and ssued, e cudng any recevabe or Instament obgaton t owned or hed
whch had been n defaut for onger than 60 days. There were aso provsons
for acceeraton of payment of prncpa n the event of defaut for 30 days
n any payment of nterest; or of the Insovency, bankruptcy, or reorganzaton
of the appeee; or of the nsttuton of proceedngs In bankruptcy or reorganza-
ton ; or of an assgnment for the beneft of credtors or the appontment of a
recever of a or substantay a of the appeee s property.
Insofar as now pertnent, Schedue -, Tte III of the Revenue ct of 1026
puts under the coverage of the stamp ta a bonds, debentures, or
certfcates of ndebtedness ssued by any corporaton, and a Instruments how-
ever termed, ssued by any corporaton wth Interest coupons or n regstered
form, known generay as corporate securtes,
We accept wthout dscusson the appeee s vew that the nstruments were
nether ta abe as bonds under the above statute and artce 12 of Treasury
Reguatons 71 reatng to nstruments havng the essenta features of proms-
sory notes but ssued In seres under a trust ndenture nor as certfcates of n-
debtedness wthn artce 19 of the same reguatons. ut they obvousy were
not merey ordnary promssory notes evdencng debts arsng u the ordnary
course of busness. The stamp ta on promssory notes was repeaed n the
Revenue ct of 192 and was not subsequenty reenacted. The appeee uses that
fact as the bass of Its argument that these notes are not ta abe. If t were
enough for decson to determne whether the term promssory notes was a far
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159
Regs. 71 (1932)
genera descrpton of these Instruments there mght be force to ths contenton.
ut a short reference to the egsatve hstory of the present statute w, we
thnk, adequatey dspose of that. In Schedue of the Revenue ct of 1898, a
stamp ta was mposed on desgnated Instruments whch Incuded bonds, deben-
tures, and certfcates of ndebtedness. In the 1917 ct n another paragraph
In the same schedue, a ta , but at a ower rate, was aso paced upon other
Instruments whch-ncuded Inand bs of e change, drafts, certfcates of depost
drawng Interest, orders for the payment of any sum of money not at sght or on
demand, and any promssory note e cept bank notes ssued for crcuaton.
Ths statute was amended severa tmes before the ta on promssory notes
was repeaed as above stated, but promssory notes were never ncuded n the
paragraph ta ng bonds, debentures, and certfcates of ndebtedness. Ths
treatment of promssory notes ndcates that what was repeaed when the ta
on such notes was emnated was ta aton whch covered the notes used cus-
tomary n day to day commerca transactons of a short tme credt character
and not nstruments, whether caed notes or somethng ese, by whch a corpo-
raton obtaned capta for a substanta perod of tme from nvestors for gen-
era use n ts busness |ust as It mght by the sae of ts bonds, debenture s or
smar securtes. The ta on debentures was not repeaed and f debentures
are ssued and sod t s cear that they are none the ess ta abe because they
are caed promssory notes. (See Danve udng ss n v. Pckerng, 20
Fed. 117 C. . II-2 (1923), 337 . and Goodyear Tre and Rubber Co. v. Unted
States, 273 U. S. 100 T. D. 3992, C. . I-1, 332 (1927) .) Ths appeee as the
ssung corporaton, may wthn reasonaby accurate descrptve mts ca the
nstruments t ssues what t peases, but t cannot escape ta aton merey by ts
choce of a abe.
We thnk these nstruments are debentures wthn the meanng of that term
n the statute. Treasury Reguatons 71 promugated n connecton wth the
statute do not e pressy defne the word debenture and by mpcaton ts
meanng was consdered by the Treasury to be too we understood to requre
such defnton. It s a term n genera use and n Lough, Corporaton Fnance,
o. I (191 ) t s sad that, In aw any Instrument whch formay acknow-
edges a debt and promses payment, Incudng any wrtten bond secured or
unsecured, s a debenture. In fnance, however, the term has come to e restrcted
to a bond whch s not secured by a en upon any specfc property. In other
words, It s for a practca purposes, smpy an unsecured promssory note
runnng for a number of years.
In 1 ouver s Law Dctonary (Rawe s Thrd Revson) a debenture s
defned at page 78 as any nstrument (other than a coverng or trust deed)
whch ether creates or agrees to create a debt In favor of one person or corpo-
raton or severa persons or corporatons, or acknowedges such a debt.
In Crowe s Dctonary of usness and Fnance (1923) a debenture s de-
scrbed as certfcate of debt ssued by a corporaton. Uness secured by a
mortgage, t s smpy a promse to pay, or n other words, a promssory note.
Smar defntons from smar sources may be added to the above but enough
have been quoted, we thnk, to make t cear that these notes were we wthn
the cass of nvestment nstruments commony caed debentures and that the
nsstence of the Treasury upon ta ng them under the above statute was correct.
Ther terms, appearance, and method of sae to a comparatvey few nvestors
who were requred to state at east ther then present ntenton to hod them
for Investment purposes wthout transfer to others combned to put them n a
cass apart from ordnary commerca promssory notes and nto the category
of debentures as that term s used n the statute n ts settng wth bonds, and
certfcates of ndebtedness, to desgnate a type of corporate securtes whch
does not ncude ordnary promssory notes.
Yet the appeee argues that the synta of the statute Itsef precudes such a
resut as we have reached and It s thought that there s some support for ts
argument n artce 12 of Treasury Reguatons 71. The argument s that the
statutory phrase ssued by any corporaton wth nterest coupons or n regstered
form quafes a the precedng words n the secton and not merey a nstru-
ments however termed, known generay as corporate securtes. If
ths contenton were sound the decson beow shoud be affrmed despte our hod-
ng that these notes were debentures for they woud not be ta abe debentures
wthn the statute because they were ssued nether wth nterest coupons nor
n regstered form. The support for the argument afforded by secton 12 of
Treasury Reguatons 71 s sad to be found In the foowng quotaton from that
artce. Instruments contanng the essenta features of a promssory note.
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Regs. 71 (19 1), 113.55
160
but Issued In seres, secured by a trust ndenture, ether In regstered form or
wth coupons, for optona regstraton n cases of bearer bonds, for
authentcaton by the trustee and In some nstances for redempton before
maturty, or smar provsons, are bonds wthn the meanng of the statute,
whether caed .bonds, debentures, or notes.
Thus It Is urged that promssory notes whch are propery cassfed as
debentures for ta purposes are ta abe ony when they bear nterest coupons
or are ssued In regstered form and so are bonds wthn the above quotaton
from Treasury Reguatons 71, secton 12. We do not agree. onds, debentures,
or certfcates of ndebtedness, whether or not ssued n regstered form or
wth coupons attached, had been ta ed n Schedue n the paragraph of the
statute entted onds of Indebtedness before the words and a
Instruments, however termed, ssued by any corporaton, wth nterest eou ons
or n regstered form, known generay as corporate securtes were
added by amendment n the Revenue ct of 1918. It seems obvous that ths
change was not to restrct prevang ta aton but was to add to what was aready
ta abe a other nstruments generay known as corporate securtes provded
those to whch ta aton was e tended were ssued wth nterest coupons or n
regstered form.
udgment reversed.
S CTIONS 1801 ND 3 81, S M ND D. CORPOR T S CURITI S-
TR NSF R OF ONDS
Reguatons 71 (19 1), Secton 113.55: Issues 19 8-21-129 0
sub|ect to ta . M. T. 32
( so Secton 113.63.)
The decson n Genera Motors cceptance Corporaton v. ggns
(161 Fed. (2d) 593; certorar dened, 332 U. S. 810; page 157, tbs
uetn), nvovng the stamp ta mposed on the ssuance of corpo-
rate securtes, w be upped prospectvey ony from the date of
the decson, sub|ect, however, to the mtaton stated beow wth
respect to refunds. Therefore, an nstrument comng wthn the
purvew of the decson but ssued on or pror to May 1 , 19 7, the
date of the decson, w not be sub|ect to the orgna ssue ta
mposed by secton 1801 of the Interna Revenue Code. owever,
the ssuance of such an nstrument after May 1 , 19 7. w be sub|ect
to the ta mposed by that secton. The transfer after May 1 , 19 7,
of an nstrument comng wthn the purvew of the decson w be
sub|ect to the transfer ta mposed by secton 3 81 of the Code,
regardess of the date of Issuance of the nstrument
dvce s requested whether the decson of the Crcut Court of
ppeas for the Second Crcut n Genera Motors cceptance Corpo-
raton v. ggns (161 Fed. (2d) 593, certorar dened, 332 U. S.
810; page 157, ths uetn), nvovng the stamp ta ed mposed on the
ssuance of corporate securtes, w be apped retroactvey.
The ureau has for a consderabe perod of tme hed that an
nstrument termed note, not n regstered form and ssued wthout
nterest coupons, s not sub|ect to the stamp ta upon ssuance or
transfer. ecause of ths ong and unform hodng of the ureau
and the consequent reance of corporatons on these rungs, t has
been concuded that, under the authorty contaned n secton 3791 (b)
of the Interna Revenue Code, the decson n Genera Motors c-
ceptance Corporaton v. ggns, mpra, w not be apped retro-
actvey, e cept that any ta whch has been pad on the ssuance or
transfer of nstruments fang wthn the scope of the decson w not
be refunded.
ccordngy, sub|ect to the mtaton stated above wth respect
to refunds, the ssuance on or pror to May 1 ,19 7, of an nstrument
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161
Regs. 9, rte. 25, 8
comng wthn the purvew of the court decson w not be sub|ect to
the ta mposed by secton 1801 of the Code. owever, the ssuance
after May 1 , 19 7, of an nstrument comng wthn the purvew of
the decson w be sub|ect to the ta mposed by that secton.
The transfer after May 1 . 19 7, of an nstrument comng wthn
the purvew of the decson w be sub|ect to the transfer ta mposed
by secton 3 81 of the Code, regardess of the date of ssuance of the
nstrument.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved.
Thomas . Lynch,
ctng Secretary of the Treasury.
T S ON OL OM RG RIN , TC.
Reguatons 9, rtces 25 and 3. 19 8-22-12952
T. D.5660
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 310.
T S ON OL OM RG RIN , DULT R T D UTT R, ND PROC SS OR
R NO T D UTT R
Returns of manufacturers of and whoesae deaers In oeomar-
garne, Reguatons 9 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. 0.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 9 (revsed pr, 1936) Part 310, tte 26, Code of
Federa Reguatons , but onv as prescrbed and made appcabe to
the Interna Revenue Code by Treasury Decson 886 C. . 1939-1
(Part 1), 396 , approved February 11, 1989 note, part 310, tte 26,
Code of Federa Reguatons, Cum. Sup. , are amended as foows:
Paragraph 1. rtce 25 secton 310.25, tte 26, Code of Federa
Reguatons s amended as foows:
( ) y changng paragraphs ( ) and (/) to read as foows:
( ) Dsposa durng frst month of fsca year or month of commencng bus-
ness. Dsposas to (1) whoesaers and (2) retaers and consumers made n
the frst month of each fsca year, or the month of commencng busness, as the
case may be, sha be reported on suppementa sheets. Form 216a, as foows:
(1) To whoesaers. Dsposas to whoesaers sha be sted under a headng.
Wthdrawn ta -pad, whoesae deaers, wth the entres grouped n aphabet-
ca order of (1) the names of States and (2) the names of consgnees In each
State group. State names shoud be n capta etters centered on the page at the
head of each group, and a ne eft above and beow each State subheadng. The
State name shoud be omtted In enterng the severa ndvdua addresses snce
t w appear at the head of the group. Where a whoesaer operates at more
than one pace of busness (whether or not wthn the same State), a separate
entry sha be made for each pace of busness of such whoesaer to whch
consgnments are made durng the month. The aggregate quantty of oeomar-
garne consgned durng the month to each whoesaer at each pace of busness
sha be reported as provded for by the form.
(2) To retaers and consumers.- Faowng the stng of dsposas to whoe-
sae deaers the dsposas to-retaers and consumers sha be sted under a head-
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Regs. 9, rts. 25, 3
162
ng. Wthdrawn ta -pad, retaers and consumers, In the same manner as spec-
fed n subparagraph (1) wth respect to whoesaers.
(/) Dsposas durng oth-cr months. Dsposas to whoesaers, retaers, and
consumers n each month other than the frst month of the fsca year, or the
month of commencng busness, .sha be reported on suppementa sheets. Form
216a, as foows:
(1) To consgnees sted on pror returns of same fsca year. The tota quan-
tty of oeomargarne dsposed of durng the mouth to a persons, en:
whoesaers, retaers, and consumers, sted on returns for pror months of the
same fsca year, sha be reported as a snge amount desgnated as Dsposed
of to consgnees sted on returns for prevous months of the same fsca year.
(2) To other consgnees. Dsposas to whoesaers not sted on any return for
a pror month of the same fsca year sha be reported n deta n the manner
prescrbed In subparagraph (e)(1). Smary, dsposas to retaers and con-
sumers not sted on any return for a pror month of the same fsca year sha
be reported n deta n the same manner as prescrbed n subparagraph (e) (2).
( ) y strkng out paragraph ( ).
(C) y amendng paragraph ( ) by changng the frst sentence to
read as foows:
(f) Chan store entres. Sub|ect to the provsons of paragraphs ( ) and (/).
dsposas to chan stores sha be reported n aphabetca order of the names o
(1) the ctes or towns n whch the stores are ocated and (2) the streets on
whch stuated.
(D) y amendng paragraph (1) by strkng out the frst two sen-
tences and substtutng the foowng sentence n eu thereof:
(1) Returned goods. Under a headng, Returned goods, there sha be shown
n aphabetca order (1) the name and address of each consgnor and (2)
the tota quantty receved durng the month from hm.
( ) y amendng paragraph (m) as foows:
(I) y changng (e) n the frst sentence to (e) (1).
() y changng (/) n the second sentence to (e) (2).
Par. 2. rtce 3 secton 310. 3, Tte 26, Code of Federa Regu-
atons s amended as foows:
( ) y changng paragraph (d) to read as foows:
(d) Recepts. (1) Durng frst month of fsca year or month of commencng
busness. Under the headng. Oeomargarne receved from manufacturers and
whoesae deaers, page 1, Forrn 217, each entry sha show (1) the name and
address of each consgnor and (2) the tota quantty receved durng the month
from hm. Regardess of the number of consgnments receved durng the month
from the same consgnor, ony a snge entry showng the aggregate of a such
consgnments sha be made.
(2) Durng other months. Oeomargarne receved from manufacturers and
whoesae deaers In each month other than the frst month of each fsca year,
or the month of commencng busness, as the case may be, sha be reported on
Form 217 as foows:
() From consgnors sted on returns for prevous months of same fsca
year. The tota quantty of oeomargarne receved from a manufacturers
and whoesae deaers sted on returns for pror months of the same fsca
year sha be reported as a snge amount desgnated as Receved from
consgnors sted on returns for prevous months of the same fsca year.1
(II) From other consgnors. Oeomargarne receved from manufacturers
and whoesae deaers not sted on a return for a pror month of the same
fsca year sha be reported In deta n the manner prescrbed n subpara-
graph (d)(1).
( ) y changng paragraphs (g) and ( ) to read as foows:
(g) Dsposas durng frst month of fsca year or month of commencng bus-
ness. Dsposas to (1) whoesaers and (2) retaers and consumers n the frst
month of each fsca year, or the month of commencng busness, sha be reported
n fu deta on suppementa sheets, Form 217a, as foows:
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163
Regs. 9, rts. 25, 3
(1) To whoesaers. Dsposas to whoesaers sha be sted under a headng,
Dsposas to whoesae deaers, wth the entres grouped n aphabetca order
of (1) the names of States and (2) the names of consgnees n each State group.
State names shoud be n capta etters centered on the page at the head of each
group, and a ne eft above and beow each State subheadng. The State name
shoud be omtted n enterng the severa Indvdua addresses snce t w appear
at the head of the group. Where a whoesaer operates at more than one pace
of busness (whether or not wthn the same State), a separate entry sha be
made for each pace of busness of such whoesaer to whch consgnments are
made durng the month. The aggregate quantty of oeomargarne consgned
durng the month to each whoesaer at each |ace of busness sha be reported
as provded for by the form.
(2) To retaers and consumers. Foowng the stng of dsposas to whoe-
sae deaers the dsposas to retaers and consumers sha be sted under a
headng, Dsposas to retaers and consumers, n the same manner as specfed
n subparagraph (1) wth respect to whoesaers.
(ft) Dsposas durng other months. Dsposas to whoesaers, retaers, and
consumers n each month other than the frst month of the fsca year, or the
month of commencng busness, sha be reported on suppementa sheets, Form
217a, as foows:
(1) To consgnees sted on pror returns of same fsca year. The tota
quantty of oeomargarne dsposed of durng the month to a persons, ncudng
whoesaers, retaers, and consumers, sted on returns for pror months of the
same fsca year, sha be reported as a snge amount desgnated as Dsposed of
to consgnees sted on returns for prevous months of the same fsca year.
(2) To other consgnees. Dsposas to whoesaers not sted on any return
for a pror month of the same fsca year sha be reported In deta n the manner
prescrbed n subparagraph (g)(1). Smary, dsposas to retaers and con-
sumers not sted on any return for a pror month of the same fsca year sha be
reported In deta In the same manner as prescrbed In subparagraph (g) (2).
(D) y amendng paragraph (k) by changng the frst sentence
thereof to read as foows:
(fc) Chan store entres. Sub|ect to the provsons of paragraphs (g) and (ft),
dsposas to chan stores sha be reported n aphabetca order of the names of
(1) the ctes or towns n whch the stores are ocated and (2) the streets on
whch stuated.
( ) y amendng paragraph (1) by changng the capton and frst
sentence thereof to read as foows:
(1) Goods returned or otherwse dsposed of. Under a headng, Returned to
shpper, there sha be shown n aphabetca order (1) the name and address of
each consgnor and (2) the tota quantty receved durng the month from hm.
(Ths Treasury Decson s ssued under the authorty contaned n
secton 3791 of the Interna Revenue Code (53 Stat. 67; 26 U. S. C.
3791).)
ecause the purpose of ths Treasury Decson s to reeve restrc-
ton, t s found that t s unnecessary to ssue such Treasury Decson
wth notce and pubc procedure thereon under secton (a) of the
dmnstratve Procedure ct, approved une 11, 19 6, or sub|ect to
the effectve date mtaton of secton t(c) of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pubca-
ton n the Federa Regster.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved October 7, 19 8.
Thomas . Lynch,
otng Secretary of the Treasury.
(Ped wth the Dvson of the Federa Regster October 12,19 8, 8: 57 a. m.)
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Regs. 88 (19 1), 319.30 16
M C IN GUNS ND C RT IN OT R FIR RMS
Reguatons 88 (19 1), Secton 319.30. 19 8-15-12878
T. D. 5632
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 819.
T S R L TING TO M C IN GUNS ND C RT IN OT R FIR RMS
Ta -e empt transfer of frearms Reguatons 88 amended
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 6, D. C.
To Dstrct Supervsors and Others Concerned:
The frst sentence of the frst paragraph of secton 819.30 of Regu-
atons 88 (19 1 edton) 20 CFR, Part 319 s hereby amended to
read as foows:
Whore a transfer s camed to be e empt from ta under secton 2721(a)
(see secton 319.29) an appcaton for e empton must be mmedatey e ecuted
by the transferor n trpcate on Form 5 (Frearms), and the orgna forwarded
to the Commssoner of Interna Revenue, Washngton, D. C, the dupcate
retaned by the transferor, and the trpcate furnshed to the transferee.
(Ths Treasury Decson s ssued under the authorty contaned
n sectons 2732 and 3791 of the Interna Revenue Code (53 Stat, 29 .
67; 26 U.S.C. 2732,3791).)
ecause the purpose of ths Treasury Decson s merey to make a
mnor noncontroversa change of procedure of no partcuar pubc
nterest and mposng no apprecabe addtona burden, t s found that
t s unnecessary to ssue such Treasury Decson under secton (a)
of the dmnstratve Procedure ct, approved une 11, 19 6, or sub-
|ect to the effectve date mtaton of secton (c) of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pubca-
ton n the Federa Regster.
G O. . SC O N M N,
Commssoner of Interna Revenue.
pproved une 25. 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 2, 19 8, 8 : 56 a. m.)
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165
Regs. 8 (19 1), f 101.32, etc
T S ON DMISSIONS, DU S, ND INITI TION F S
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 101.
T S ON DMISSIONS, DU S, ND INITI TION F S
Orgna return to be fed wth coector and dupcate retaned
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 6, D. C.
To Coects of Interna Revenue and Others Concerned:
Reguatons 3 (19-11 edton) 20 CFR, Part 101 , reatng to the
ta es on admssons, dues, and ntaton fees under the provsons of
the Interna Revenue Code, are hereby amended as foows:
Paragraph 1. Secton 101.32, as amended by Treasury Decson
6385 C. . 19 , 637 , approved une 30, 19 26 CFR 101.32 , s
further amended by addng at the end thereof a paragraph readng
as foows:
(0) Dupcate returns. Sub|ect bo far as appcabe to the condtons pre-
scrbed as to other records requred by ths secton each person requred to
keep such other records sha aso retan n hs records the dupcate returns
requred by secton 101.83 26 CFR 101.33 .
Par. 2. Secton 101.33 26 CFR 101.33 s hereby amended as
foows:
( ) y aterng the frst paragraph thereof as foows:
(1) y strkng from the frst sentence the word make and n-
sertng n eu thereof the word prepare.
() y nsertng n the second sentence mmedatey foowng the
() y nsertng n the thrd sentence mmedatey foowng the
frst word thereof the word orgna.
(v) y nsertng mmedatey precedng the ast sentence the
foowng:
The dupcate return sha be retaned as provded by secton 101.32(c) 20 CFR
101.32(c) .
( ) y aterng the second paragraph as foows:
() y strkng from the thrd sentence the word trpcate and
nsertng n eu thereof the word dupcate.
() y strkng from the ast sentence the word copes and the
words and dupcate and nsertng n eu of the word copes the
word copy.
Par. 3. Secton 101.38 26 CFR 101.38 s amended by addng at the
end thereof a sentence as foows:
Lkewse to be kept as part of the records are the dupente returns requred by
ecton 101.39 26 CFR 101.39 .
Par. . Secton 101.39 26 CFR 101.39 s amended by aterng the
frst paragraph thereof as foows:
INT RN L R NU COD
eguatonb 8 (19 1), Sectons 101.32, 101.33,
101.38, and 101.39.
19 8-25-12981
T. D.5673
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Regs. 3 (19 1), 101.2 166
( ) y nsertng n the second sentence mmedatey foowng the
frst word thereof the word orgna.
( ) y nsertng n the thrd sentence mmedatey foowng the
frst word thereof the word orgna.
(C) y nsertng mmedatey precedng the ast sentence the
foowng:
The dupcate return sha be retaned as provded by secton 101.38 26 CFR
101.38 .
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n secton 3791 of the Interna Revenue Code (53 Stat. 67; 26
U. S. C. 3791).)
ecause ths Treasury Decson makes ony a mnor procedura
change n net effect reducng the burden of persons sub|ect to the regu-
atons, t s found that t s unnecessary to ssue such Treasury De-
cson under secton (a) of the dmnstratve Procedure ct, ap-
proved une 11, 19 C, or sub|ect to the effectve date mtaton of
secton (c) of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pubca-
ton n the Federa Regster.
Geo. . Schoeneman,
Commssoner of Intema Revenue.
pproved November 23, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 29,19 8, 8 : 55 a. m.)
DMISSIONS T
S CTION 1700(a) ND 1650, S M ND D. T ON DMISSIONS
Reguatons 3 (19 1), Secton 101.2: Meanng 19 8-15-12867
of dmssons. M.T.29
ppcaton of the ta on admssons Imposed by secton 1700(a)
of the Interna Revenue Code to charges made n connecton wth the
operaton of a skatng rnk.
dvce s requested whether the ta on admssons s appcabe to
amounts pad bv patrons of a skatng rnk, ncudng amounts pad
for the renta of skates and for the use of checkng factes.
Sectons 1700(a) and 1650 of the Interna Revenue Code, as amended,
mpose a ta of 1 cent for each 5 cents or ma|or fracton thereof of
the amount pad for admsson to any pace, ncudng admsson by
season tcket or subscrpton, e cept that no ta attaches to an adms-
son charge of ess than 10 cents for a chd under 12 years of age.
In accordance wth the provsons of secton 101.2 of Reguatons 3
(19 1 edton), t s hed that where a specfed charge s made to a
persons who enter upon the skatng surface, whether they use ther
own skates or skates furnshed by the rnk, such charge s consdered
an admsson charge and sub|ect to the ta . The ta appes n such
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167
Regs. 3 (19 1), 101.3
case even though the charge s desgnated as a charge for the use
of the skatng surface or as a charge for the renta of skates and for
the use. of checkng factes.
It s further hed, however, that where separate charges are made
for the use of the skatng surface, for the renta of skates, and for
the use of checkng factes, and the persons who use ther own skates
are admtted to the skatng surface upon payment of the charge made
for such use wthout beng requred to pay the charges made for the
renta of skates and for the use of checkng factes, the ta appes
ony to the charge made for the use of the skatng surface and does
not appy to the separate charges made for the renta of skates and
for the use of the checkng factes.
Reguatons 3 (19 1), Secton 101.3: Meanng 19 8-16-1289
of the term pace. M. T. 30
ppcaton of the ta on admssons mposed by secton 1700(a)
of the Interna Revenue Code to charges for amusements such as
pony rdes, mnature autos, mnature trans, ferrs whees, whps,
and merry-go-rounds.
Sectons 1700(a) and 1650 of the Interna Revenue Code, as
amended, mpose a ta of 1 cent for each 5 cents or ma|or fracton
thereof of the amount pad for admsson to any pace, ncudng
admsson by season tcket or subscrpton, e cept that no ta attaches
to a charge of ess than 10 cents for the admsson of a chd under
12 years of age. The ta s to be pad by the person payng for such
admsson.
Whe the term pace as used n secton 1700(a) of the Code s
not defned n the aw, secton 101.3 of Reguatons 3 (19 1 dton)
states n substance that the basc dea such term conveys s a defnte
encosure or ocaton. The phrase to any pace, therefore, does
not narrow the meanng of the word admsson e cept to the e tent
that t mpes that the admsson s to a defnte encosure or ocaton.
It s hed that pony and mnature auto courses whch are confned
to restrcted areas or defnte encosures consttute paces wthn the
meanng of secton 1700(a) of the Code. owever, f ony persons
who rde a pony or a mnature auto are requred to pay a charge, a
other persons feeng admtted to the encosures or courses free of
charge, the amounts pad by the rders are not consdered amounts
pad for admsson to an encosure or a pace and are not sub|ect to
the ta . owever, f a persons who enter such areas or encosures
are requred to pay the charge regardess of whether they rde a pony
or a mnature auto, the amount pad represents a charge for admsson
to a pace and s sub|ect to the ta .
It s further hed that charges made to persons who rde amusement
devces such as ferrs whees whps, merry-go-rounds, and mnature
trans represent amounts pad for admsson to a pace or defnte
ocaton wthn the meanng of the Code, and, accordngy, are sub|ect
to the ta .
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Regs. 3 (19 1), 101.1
168
S CTION 1700(e), S M ND D
Reguatons 3 (19 1), Secton 101.1 : Scope 19 8-1 -128 5
of ta . Ct. D. 1700
( so Secton 101.13.)
DMISSIONS T INT RN L R NU COD D CISION OF COURT
1. Dance a Checkroom Servce.
dance ha operated by ta payer, where t charged admsson
for dancng prveges and n connecton therewth sod refresh-
ments, s a roof garden, cabaret, or other smar pace furnshng
a pubc performance for proft wthn the meanng of secton
1700(e) of the Interna Revenue Code. Proceeds from the operaton
of a checkroom n connecton wth such ha are sub|ect to the ad-
mssons ta .
2. adty of Reguatons.
Secton 101.1 of Reguatons 3 Is a far nterpretaton of the
statute and s vad.
In the Unted States Crcut Coukt of ppeas for the Seventh Crcut
vaon musement Corp., pantff-appeant, v. The Unted States of merca,
defendant-appeee
ppea from the Dstrct Court of the Unted States for the Western Dstrct of Wsconsn
anuary 28, 19 8
OPINION
Mnton, Crcut udge: Ths case presents two questons: whether the pantff-
appeant s dance ha Is a roof garden, cabaret, or other smar pace furnsh-
ng a pubc performance for proft wthn the meanng of secton 1700(e)(1)
of the Interna Revenue Code, and secondy, whether the checkroom servce for
whch the pantff receves a charge Is a servce sub|ect to the ta . Ony the
ta on the checkroom servce Is nvoved here. The ta was pad, and the pan-
tff sued to recover. The dstrct court concuded that the pantff s dance
ba and the checkroom servce were wthn the statute and that the ta was
propery assessed and gave |udgment accordngy. From ths |udgment, the
pantff has appeaed.
The pantff operates a pubc dance ha n La Crosse, Ws., for whch an
admsson charge s pad by the pubc patrons. The pantff aso charges for
the checkroom servce. Musc s furnshed by an orchestra provded by the
pantff, to whch musc the patrons dance. No other form of entertanment
s provded by the pantff. No meas or sandwches are served. In a room
ad|acent to and openng off the dance foor the pantff operates for the beneft
of ts dance patrons a bar where beer, soft drnks, and confectons are sod.
Near the bar, at the end of the dance ha, the pantff provdes booths, and at
another ocaton there are tabes and chars at whch the dance patrons may
he seated and served refreshments from the bar. When not used as a dance
ha, the ha Is sometmes rented by the pantff to Indvduas or groups for
bo ng and wrestng matches and other forms of entertanment
The statute nvoved reads as foows:
S C. 1700. T .

(e) Ta on Cabarets, Roof Gardens, tc.
ta equvaent to 5 per centum of a amounts pad for admsson, refresh-
ment, servce, or merchandse, at any roof garden, cabaret, or other smar
pace furnshng a pubc performance for proft, by or for any patron or guest
who s entted to be present durng any porton of such performance. The
term roof garden, cabaret, or other smar pace sha ncude any room n
any hote, restaurant, ha, or other pubc pace where musc and dancng
1 Rate.
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1G9
Regs. 3 (19 1), 101.1
prveges or any other entertanment, e cept Instrumenta or mechanca musc
aone, are afforded the patrons n connecton wth the servng or seng of
food, refreshment, or merchandse. performance sha he regarded as beng
furnshed for proft for purposes of ths secton even though the charge made
for admsson, refreshment, servce, or merchandse s not ncreased by reason
of the furnshng of such performance. No ta sha be appcabe under sub-
secton (a)(1) on account of an amount pad wth respect to whch ta s
mposed under ths subsecton.
It seems cear to us thut the pantff s dance ha comes wthn the defnton
of a roof garden, cabaret, or other smar pace as provded n the statute.
The defnton, to quote the statute, Is as foows:
The term roof garden, cabaret, or other smar pace sha ncude any
ha where musc and dancng prveges are of-
fered the patrons n connecton wth the servng or seng of refresh-
ment .
The pantff argues that ths defnton appes to a stuaton In whch a
dancng prvege Is a mere Incdent to the charge for food or refreshments.
Wt ths we are unabe to agree. We can see no ustfcaton for so torturng
the pan meanng of the phrase n connecton wth t does not connote that
those thngs connected are aso n the reatonshp of prmary and subsdary.
n estabshment chargng admsson for dancng prveges and where re-
freshments are sod In connecton therewth s a roof garden, cabaret, or other
smar pace. The pantff s dance ha meets these specfcatons.
Was the operaton of the dance ha under these crcumstances a pubc
performance for proft We thnk that t was. ha n whch musc for
dancng s furnshed to any one of the pubc who s abe and wng to pay
the admsson fee s an estabshment furnshng a pubc performance for
proft. The fact that the pubc partcpates n the performance by dancng
to the musc furnshed by the pantff does not make t any the ess a per-
formance ; the performance Is certany open to the pubc, and the pantff
operates the dance ha for proft. pparenty, one who pays hs admsson
may st around and watch the dancng wthout partcpatng theren and be
served refreshments. In any event, there s here a pubc performance for proft.
If ths dance ha, whch charges an admsson and n connecton wth whch
refreshments are served, s a roof garden, cabaret, or other smar pace
operated for proft, and we thnk that t s, then the proceeds from the operaton
of the checkroom are sub|ect to the ta , snce pad for a servce at such pace.
Ths constructon seems to be n accordance wth the reguatons promugated
by the Interna Revenue Iureau nterpretng ths statute.
The provson of the statute under consderaton became effectve n Its present
form October 21, 19 2. (56 Stat. 981 (19 2), 20 U. S. C. sec. 1700(e) (1) (Supp.
19 8).) It Is not free from ambguty. Snce the statute s ambguous n ts
defnton of a roof garden, cabaret, or other smar pace and does not
attempt to defne a pubc performance, t was a proper sub|ect for an n-
terpretatve reguaton. The Interna Revenue ureau adopted the foowng
reguaton after the enactment of the statute n queston, the pertnent parts of
whch reguaton are as foows:
Sec. 101.1 . Scope of Ta . The term roof garden, cabaret, or other smar
pace ncudes any room In any hote, restaurant, ba, or other pubc pace
where musc and dancng prveges or any other entertanment, e cept nstru-
menta or mechanca musc aone, are afforded the patrons n connecton wth
the servng or seng of food, refreshment, or merchandse. pubc performance
furnshed at a roof garden, cabaret, or other smar pace sha be regarded
as beng furnshed for proft for purposes of ths secton even though the charge
made for admsson, refreshment, servce, or merchandse s not Increased by
reason of the furnshng of such performance.
Where musc, whether by an orchestra, a mechanca devce, or otherwse,
and a space n whch the patrons may dance s furnshed n the dnng room
of a hote, or In a restaurant, bar, etc., the entertanment consttutes a pubc
performance for proft at a roof garden, cabaret, or smar pace, and the
payments made for admsson, refreshment, servce, and merchandse are sub|ect
to the ta .

820828 9 12
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Regs. 3 (19 1), 101.25 170
ampes. (1) propretor of a dancng estabshment provdes for the
servng of refreshments to hs patrons. n admsson or cover charge Is made
to each patron. In ths case the admsson or cover charges and aso the charges
for refreshment, servce, and merchandse are sub|ect to the ta . (26 Code
Fed. Regs. 101.1 (Cum. Supp. 19 ).)
Ths reguaton s a far nterpretaton of the statute; t s not n confct
therewth but seeks to ad and does ad n the carfcaton of the statute for
admnstratve purposes. Such far and reasonabe nterpretaton of the statute
s entted to favorabe consderaton and weght n the constructon thereof.
rewster v. Gage, Coector of Interna Revenue, 280 U. S. 327, 336, 50 S. Ct.
115, 7 L. d. 57 (2 U. S. T. C. par. 51) Ct. D. 1 8, C. . I -1, 27 (1930) .
Ths reguaton s n accordance wth our understandng of the statute and s
vad; and t supports the dstrct court s concusons and udgment
The |udgment of the dstrct court s affrmed.
DU S ND INITI TION F S
S CTION 1710, S M ND D
Reguatons 3 (19 1), Secton 101.25: Soca 19 8-17-12907
cubs. Ct. D. 170
( so Secton 101. 2.)
T ON DMISSIONS, DU S ND INITI TION F S INT RN L R NU
code decson of court
1. Soca Cub Luncheon Cub.
cub the actvtes of whch consst of uncheons served for
ts members and guests durng the unch hour n prvate quarters s
a soca cub wthn the meanng of secton 1710 of the Interna
Revenue Code, and dues and ntaton fees pad are sub|ect to the
ta mposed by that secton. The soca features of the cub are a
matera purpose of ts organzaton and are not subordnate and
merey ncdenta to the actve furtherance of a dfferent and pre-
domnant purpose.
2. Sut for Refund No Powers of ttorney Fed by Cub
Members.
The cub Is barred from recovery of ta es pad because no powers
of attorney were fed wth the ureau on behaf of ts members,
as requred by secton 101. 2 of Reguatons 3 (19 1 ed.).
In the Unted States Cbcut Court of ppeas for the Frst Crcut
Turks ead Cub, pantff-appeant, v. nna O. roderck, dmnstratr ,
defendant-appeee
ppea from the Dstrct Court of the Unted States for the Dstrct of Rhode Isand
March 15, 19 8
OPINION
Magrudeb, .: Ths Is an appea by the Turks ead Cub from a udgment for
the defendant entered by the Unted States Dstrct Court for the Dstrct of
Rhode Isand n a sut for refund of ta es pad by appeant s members on ther
dues, membershp fees, and ntaton fees for the months of May, une, uy,
and ugust, 19 , n the tota amount of 8,161.09. The ta es were e acted
under the provsons of secton 1710 of the Interna Revenue Code, whch, as
amended by secton 5 3 of the Revenue ct of 19 1 (55 Stat. 711) and by secton
302(a) of the Revenue ct of 19 3 ( 58 Stat 61, now Incorporated n I. R. C.
secton 1650), mposes a ta of 20 per centum of any amount pad as dues or
membershp fees to any soca, athetc, or sportng cub or organzaton, f the
dues or fees of an actve resdent annua member are n e cess of 10 per year,
and the same per centum of any amount pad as ntaton fees to such a cub
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171
Regs. 3 (19 1), 101.25
or organzaton, f such fees amount to more than 10, or f the dues or membershp
fees, not ncudng ntaton fees, of an actve resdent annua member are n
e cess of 10 per year. The acton was brought orgnay aganst oseph .
roderck, who was coector of Interna revenue for the Dstrct of Rhode Isand
when the ta es nvoved heren were assessed and coected ; upon hs death, nna
C. roderck, admnstratr of hs estate, was substtuted as defendant. The
opnon of the dstrct court s reported n 71 Fed. Supp. 272 (19 7).
There s no dspute over the facts. Most of them are stpuated by the partes,
n substance as foows:
The cub was organzed n 1912 as a nonbusness corporaton under the pro-
vsons of secton 11, cass III, of the Rhode Isand Genera Laws of 1909, whch
provde n part: corporatons formed for regous, chartabe,
terary, scentfc, artstc, soca, musca, agrcutura, or sportng purposes,
not organzed for busness purposes, and a other corporatons of ke nature
not herenbefore otherwse provded for, sha be created n the foowng man-
ner . The purposes of the cub as e pressed n Its charter are the
mantenance of cub rooms for the use of ts members, the promoton of the
busness nterests of ts members, the advancement of the mercante and ndus-
tra fe of the cty of Provdence and vcnty, and the encouragement of soca
ntercourse.
cept for oca persona property ta es, and those now n tgaton, the cub
Las never pad ta es of any knd. It apped for. and was granted, e empton
from the Federa corporaton ncome ta 1 and has not been sub|ected to the
Rhode Isand corporaton ta .
Durng the ta perod In queston, the cub occuped, under ease, the s teenth
foor of the Turks ead udng n the cty of Provdence. Its rooms conssted
of one arge and one smaer dnng room for men ony, normay seatng appro -
matey 175 and 30 respectvey: one dnng room, normay seatng about 5, for
ades, wth or wthout mae escorts; ktchen and pantry; washroom for men;
washroom and powder room for ades; foyer contanng a counter for the
sae of cgars and other tobacco products; and a ounge room for men, contanng
the Provdence ourna and seven out-of-town newspapers. of these rooms
were ght and ary, adequatey and attractvey furnshed and propery servced
and mantaned. The men s dnng rooms fforded a wde and attractve vew
over the water, the cty, and the surroundng country.
The cub rooms were open ony on Mondays through Frdays, wth the e cep-
ton of hodays, between the hours of 11: 30 a. m. and 3: 00 p. m., durng whch
perod meas, wth or wthout wne or beer, tabe d hote or a a carte, were
served n the dnng rooms. The number of persons served meas or food averaged
n the neghborhood of 250 day. Meas were charged to the members who
ordered them. The cub gave no dances, receptons, banquets, teas, muscas,
ectures or card partes. It had no factes for swmmng, gof, tenns, squash,
or other forms of athetcs, and no rado, vctroa, pano, card rooms, poo or
bard rooms or tabes, and no game rooms. t meas there were no speeches
or Incdenta musc, and the cub conducted no other form of amusement and
no entertanment or soca functons for ts members. It had no recproca
arrangements wth other cubs.
Durng the year 19 the cub s membershp was composed of appro matey
600 resdent members, 30 nonresdent members, and 19 fe members. The break-
down wth respect to occupatons was roughy as foows: usness 375 (fnance
65, manufacturng 220, others 90) ; professona 225 (awyers 110, doctors 15,
others 100).
The fnanca statement of the cub for the fsca year endng ugust 29, 19 ,
reveas that the cub durng that perod receved Income from sources and n
amounts as foows:
Dues 28,627.10
Intaton fees 962. 50
Lades prvege cards 1, 0. 85
Speca assessments 1,368. 80
Cgars, tobacco, etc 2, 913. 09
Lquor 75. 72
Presumaby under I. R. C. secton 101(9) whch e empts Cubs organzed and
operated e cusvey for peasure, recreaton, and other nonproftnbe purposes, no part
of the net earnngs of whch nures to the beneft of any prvate sharehoder. (S e aso
U. S. Treas. Reg. I, secton 29.101(9)- .)
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Regs. 3 (19 1), 101.26
172
The restaurant operated at a oss of 5,670.17. Thus gross operatng gan was
30,320.99. dmnstratve e penses totaed 2 ,9 9.17, eavng a net operatng
gan of 5,371.82. The cub s baance sheet as of ugust 29, 19 , shows assets
of 3,013. , ncudng cash of 29,9 0.66, and furnture and f tures of 10,525.13
before deprecaton.
Other facts not stpuated, but uncontradcted, were testfed to at the tra
or appear In e hbts. The sma dnng room s frequenty reserved for uncheon
conferences by drectors or other busness groups. The cub s managed by a
board of 16 governors eected by the membershp. Under the by-aws member-
shp n the cub s mted to gentemen of good standng 21 years of age or
over, and to such number, not ess than 675 nor more than 700, as the board of
governors sha from tme to tme determne. Canddates for membershp must
be proposed and seconded by two resdent members who are not members of
the board of governors, and these members must wrte etters of recommenda-
ton to the governors statng the canddate s quafcatons. canddates must
be personay known to at east two governors. Names of a canddates are
posted on the buetn board for at east 1 days pror to acton by the governors,
and they are eected by the governors, three negatve votes preventng eecton.
eecton proceedngs of the governors are secret and confdenta and
not to be dvuged ontsde of the board on pan of e puson from the cub.
The annua (ues of resdent members are 50 for those 35 years of age or
over, and 25 for those under 35. nnua dues for nonresdents are 25. Inta-
ton fees are n such amounts as the board of governors from tme to tme
determnes.
The rues of the ouse Commttee permt any person egbe for resdent
membershp to be admtted to the cub rooms as a guest of a member once n 30
days, and a person not so egbe to be admtted as a guest for a term not
e ceedng fve consecutve days at any one tme and not e ceedng a ma mum
of 30 days a year. Lades and chdren of a member s househod may unch at
any tme wth a member n the ades restaurant. Prvate dnng rooms may
be engaged by prvate partes of four or more upon appcaton to the supern-
tendent, for use between the hours of noon and 3: 00 p. m.
The rues provde that ades prvege cards may be Issued by the secretary to
ades of the mmedate househod of a member, over 18 years of age, for a fee
of 6. and to wdows and unmarred daughters of deceased members, over 18
years of age, for a fee of 10. These cards entte ther hoders to the same
prveges and use of the ades porton of the cub as those to whch members
are entted n the other rooms. In practce, ades are gven the addtona
prvege of havng guests, mae or femae, unch wth them and partake of
cub factes for a perod not to e ceed fve days. If a prvege-card hoder
desres to brng more than three or four guests to unch at any one tme, she s
e pected to request n advance permsson of the steward or watress n charge,
but there are no mtatons n the rues as to the number of her guests. n average
of 30 to 35 ades unch at the cub day. There were 21 ades prvege cards
outstandng n May, 217 n une, 222 In uy, and 22 In ugust, the months
here n queston.
On anuary 25, 1930, the Commssoner of Interna Revenue rued that durng
the perod from pr 20, 1925, to March 26, 1929, the cub was not a soca cub
wthn the meanng of secton 13 of the Revenue ct of 1928 (the statute then
Imposng the ta on cub dues and fees), and of the appcabe Treasury regua-
tons, and that the dues and fees pad by ts members were not sub|ect to the
ta es mposed thereunder. e therefore granted the cub s cam for a refund
of ta es coected for that perod. It s not suggested, however, that ths rung
n any way estopped or precuded the Government from assertng that the cub
dues of a ater perod were ta abe. The admnstratve rung coud have no
such bndng effect. (See Sctofer v. everng, 83 Fed. (2d) 317, 320 ( pp.
D. C. 1036) ; 10 Mertens, Law of Federa Income Ta aton, secton 60.1 (19 3).)
On anuary 19, 19 , the Commssoner rued that the cub was a soca cub
wthn the meanng of secton 1710 of the Interna Revenue Code, and that the
dues and Intaton fees pad by the members woud thereafter be ta abe.
The cub proceeded to coect the ta es from Its members and pad them to
the coector. In ugust and September, 19 , It fed four cams for refund,
coverng each of the months n queston. These cams were re|ected by the
Commssoner wth the e panaton :
Snce the evdence shows that the actvtes of the cub consst of uncheons
served for ts Members durng the unch hour and n vew of the cub quarters
mantaned and the factes afforded the members, t was hed on anuary 19,
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173
Regs. 3 (19 1), 101.25
19 , reversng the rung dated anuary 25, 1930, that the cub quafes as a
soca cub wthn the meanng of secton 1710 of the Interna Revenue Code,
as amended, and the dues and ntaton fees pad are sub|ect to the ta mposed
by that secton.
In vew of the foregong, the ta n queston was propery due and the cams
are re|ected.
Upon dena of the refund, the cub fed ts compant beow, aegng that the
ta es n queston had been egay coected because t was not a soca cub
wthn the meanng of the statute, and demandng |udgment for 3,161.09 wth
Interest. In the stpuaton above referred to, the partes agreed that the ony
ssues n the case were (a) whether durug the perod n queston Turks ead
Cub was a soca cub wthn the meanng of I. R. O. secton 1710 as nterpreted
by the appcabe Treasury reguatons, and (6) whether the cub was barred
from recovery because no powers of attorney were fed wth the ureau of
Interna Revenue on behaf of the cub s members, as requred by secton 101. 2
of Treasury Reguatons 3 (19 1 ed.).1
The dstrct court made no rung on the second of these Issues. On the frst,
t found that the soca features of the Turks ead Cub are a matera purpose
of ts organzaton and are not subordnate and merey ncdenta to the actve
furtherance of a dfferent and predomnant purpose ; and that the facts n the
Instant case brng the Turks ead Cub wthn the term soca used n secton
1710 of the Interna Revenue Code. The correctness of ths rung s now
before us. so, the Government stands on ts contenton that n any event the
cub coud not recover n ths acton, snce ts cams for refund were not ac-
companed by powers of attorney e ecuted by ts members.
We thnk appeant s faure to procure and fe the powers of attorney const-
tutes a fata defect In ts case. ven now t does not appear that the cub was
ever authorzed by ts members to cam a refund and obtan payment of the
same on ther behaf.
The ta In queston s ad upon the dueSrpayng members, as s specfcay
provded n I. R. C. secton 1710(b), not upon the cub. The cub has the burden
of coectng the ta , payng t over to the Government, fng returns, and com-
pyng wth other admnstratve dutes as the Commssoner may prescrbe,
I. R. C. sectons 1715, 1710, 1720, 3661; and any wfu faure to compy wth
these requrements w sub|ect the cub to the penates prescrbed by I. R. C. sec-
ton 1718. ut the cub s not abe for the ta f a member refuses to pay t or
f for any other reason the ta cannot be coected from such member; secton
10157 of Reguatons 3 (19 1 ed.) provdes n such cases that the cub s to re-
port the refusa of the member to the Commssoner, who w then make a drect
assessment of the ta aganst the ndvdua member.
Therefore, the rght to cam a refund s n the cub member as ta payer.
(Shannopn Country Cub v. ener, 2 Fed. (2d) 393 (W. D. Fa. 192 ).) It s
ony as authorzed agent of the members, evdenced by powers of attorney In the
form prescrbed by the reguaton, that a cub has any standng to put n a cam
for refund on behaf of the members. (See Sharp d Dohme, Inc. v. Unted States,
1 Fed. (2d) 56, 58-9 (C. C. . 3d, 19 ).) The cub s hardy n a poston to
chaenge the vadty of such reguaton. (See Lath s Products Co. v. Unted
States, 278 U. S. 175, 176 (1929) T. D. 259, C. . III-1, 303 (1929) .) In any
case, the reguaton s ceary a reasonabe and vad requrement, for t s de-
sgned to obvate the payment by the Government of a refund to a person not the
ta payer wthout satsfactory wrtten evdence of the authorty of the camant
to receve payment on behaf of those entted; otherwse doube abty mght
resut. Such requrement has appeared n the same anguage n every revson
of the reguatons subsequent to ther frst promugaton under the Revenue ct
of 1926, the orgna statute mposng the present ta on cub dues and fees. (See
26 Code Fed. Reg. secton 100.5 (1939) ; d., Supp. 19 0, secton 101.50.) Treas-
batement or refund of erroneous or ega assessments or coectons. cam or
abatement or refund of tunes aeged to have been erroneousy or Iegay assessed or
pad must be fed by the person aganst whom they were assessed, or by
whom they were In the frst nstance erroneousy or Iegay pad . In any case
where a cub as agent of ts members seeks a refund of ta coected by the cub and pad
over by It to the coector of nterna revenue, snce the members and not the cub are the
actua ta payers, the cam must be accompaned by the foowng: (ft)
power of attorney e ecuted by ench person n whose behaf the cam Is fed authorzng
the organzaton to act as hs agent. The power of attorney must be prepared In the
usua form of such Instruments; must be acknowedged before a notary pubc or sgned
n the presence of two wtnesses, and must Incude a statement that any revocaton
thereof w not be effectve uness the Commssoner receves notfcaton .
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Reg 3 (19 1), 101.251 17
ury reguatons and nterpretatons ong contnued wthout substanta change,
appyng to unamended or substantay reenacted statutes, are deemed to have
receved congressona approva and have the effect of aw. ( everng v. WnmU,
305 U. S. 79, 83 (1938) Ct. D. 1365, C. . 1938-2, 212 .)
In uders Cub of Chcago v. Unted State (1 Fed. Supp. 1020 (1926)), the
Court of Cams hed the reguaton nvad, statng (p. 1022) : departmenta
reguaton whch treats the cub merey as an agent of ts members and requres
that the ndvdua cub members each fe cam for refund for the ta es pad by
the cub or gve to the cub duy e ecuted powers of attorney to act as ther agent
s obvousy egsaton n the guse of a reguaton and therefore nvad.
Whether the Court of Cams woud st adhere to ths vew, we cannot say.
(Cf. ngneer s Cub of Phadepha v. Unted States, 2 Fed. Supp. 1S2, 188, and
concurrng opnon by Whtaker, . (Ct. CI. 19 2), cert, dened 316 U. S. 700
(19 2).) For the reasons aready set forth, we thnk t pan that the ta s
upon the members, not upon the cub, and therefore that the court s concuson n
the uders Cub case rested upon a fauty premse.
It s contended by appeant that the Commssoner waved the requrement
of hs reguaton wth reference to powers of attorney by e amnng and re|ectng
the cam on the merts, wthout ob|ectng on the score of the cub s faure to fe
the powers of attorney. In nycus Mng Co. v. Commssoner (325 U. S. 293.
296 (19 5) Ct. D. 16 0, C. . 19 5, 03 ), t s sad: Candor does not permt one
to say that the power of the Commssoner to wave defects n cams for refund
Is a sub|ect made crysta-cear by the authortes. The Commssoner may effec-
tvey wave certan requrements of hs reguatons as to the form and content of
cams for refund. (Tmker v. e ander, 275 U. S. 228 (1927) ; Unted State v.
Memphs Cotton O Co., 288 U. S. 62, 71 (1933) Ct. D. 626, C. . II-1,
307 (1933) ; Unted States v. Oat-butt O Co., 302 U. S. 52S. 533- (1938)
Ct. D. 1301, C. . 1938-1, 370 ; owbcrt v. Penrose, 38 Fed. (2d) 577 (C. C. .
10th, 1930).) ut even apart from the reguaton now n queston, the Com-
mssoner s certany wthout authorty to pay out a refund to a camant not
the ta payer, uness such camant s the duy authorzed agent of the ta payer.
Therefore we do not see how the Commssoner s acton n re|ectng the cub s
refund cam on the merts can have the effect of wavng the requrement, nec-
essary for the Government s protecton, that the cub must furnsh proof of ts
agency to represent the members and coect the refund on ther behaf. Ths s
not the knd of forma defect n refund cams wth respect to whch the cases
have recognzed the possbty of a waver by the Commssoner. It foows that
I. R. C. secton 3772(a) (1) s an obstace to the mantenance of the present sut.
That secton provdes: No sut or proceedng sha be mantaned n any court
for the recovery of any nterna revenue ta aeged to have been erroneousy or
egay assessed or coected unt a cam for refund or credt has
been duy fed wth the Commssoner, accordng to the provsons of aw n that
regard, and the reguatons of the Secretary estabshed n pursuance thereof.
On the merts, we thnk the dstrct court was rght In concudng that the
Turks ead Cub was a soca cub wthn the meanng of I. R. C. secton 1710.
We sha not undertake an e tensve revew of the decded cases whch are
egon nvovng appcaton of ths ta on cub dues; the cases so argey turn
on ther partcuar facts.
The Code contans no defnton of soca cub. In Reguatons 3 (19 1
ed.), the foowng eaboraton of the phrase appears (26 Code Fed. Reg., Supp.
19 1, sectons 101.2 , 101.25) :
Sec. 101.2 . Determnaton of Character op Cud.- The purposes and actv-
tes of a cub or organzaton and not ts name determne ts character for the
purpose of the ta . very cub or organzaton havng soca features
s presumed to be ncuded wthn the meanng of the phruse, any soca
cub or organzaton, unt the contrary has been proved, and the burden of proof
f upon t
Sec. 101.25. Soca Cus. ny organzaton whch mantans quarters or
arranges perodca dnners or meetngs, for the purpose of affordng ts members
an opportunty of congregatng for soca Intercourse, s a soca cub
or organzaton wthn the meanng of the Code, uness ts soca features are
not a matera purpose of the organzaton but are subordnate and merey n-
cdenta to the actve furtherance of a dfferent and predomnant purpose, such
as, for e ampe, regon, the arts, or busness. The ta does not attach to
dues or fees of a regous organzaton, chamber of commerce, commerca cub,
trade organzaton, or the ke, merey because t has ncdenta soca features,
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175
Regs. 3 (19 1), 101.25
but If the soca features are a matera purpose of the organzaton It Is a
soca cub or organzaton wthn the meanng of the Code.
There s a ne of decsons n the Court of Cams takng the vew that the
furnshng of meas to cub members s In Itsef a nonsoca actvty, and f
ths Is the predomnant purpose of the cub, other features, of a soca character,
beng merey subordnate or ncdenta to the actve furtherance of such pre-
domnant purpose, then that the cub s not a soca cub wthn the meanng
of the statute and the reguatons above quoted. (See Merchants Cub v. Unted
States, 66 Fed. Supp. 12(5 (Ct. CI. 19 (1), and earer cases cted theren.) The
argument s that eatng can scarcey be cassed as a soca actvty snce It s
unversa and necessary. (( Fed. Supp. at 129.)
ut If one nvtes frends to dnner, the occason s a soca one, n common
parance, whether the nests are moved to acceptance by contempaton of the
fne mea they w have or of the peasant company wherew|th to begue away
the tme. nd so, t seems to us, when a group of men get together to form
a cub for the ma|or purpose of furnshng prvate quarters of attractve outook
where carefuy screened congena sprts, and members of ther fames and
guests, ran partake together of food and drnk, they have formed a soca cub
n the everyday use of anguage, and n what we thnk must have been the sense
of Congress n Imposng ths u ury e cse ta . atng s a unversa human
necessty. ut eatng n a seect company n such agreeabe envronment as
the Turks ead Cub s a u ury. In ths way the cub has furthered one of
s decared purposes, the encouragement of soca Intercourse. Certany
the facts n the record Indcate that n practce ts actvtes have been drected
many to ths end; so far as other purposes have been served, such as the pro-
moton of the busness nterests of the members and the advancement of the
mercante and ndustra fe of the cty, these have ony been ncdenta
byproducts.
We are In genera agreement wth the vews e pressed n Duque ne Cub v.
e (127 Fed. (2d) 363 (C. C. . 3d, 19 2), cert, dened 317 . S. (538 (19 2)),
whch has become a eadng case. Insofar as our present decson may be
deemed not n harmony wth the bref opnon of ths court n Page v. Squantum
ssn. (77 Fed. (2d) 918 (1935)), that case s now overrued.
The |udgment of the dstrct court s affrmed.
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Regs. 2, 130.61 176
TR NSPORT TION T S
INT RN L R NU COD
S CTIONS 3 69 ND 1650, S M ND D TR NSPORT TION OF P RSONS
Reguatons 2 (19 2), Secton 130.51: Scope 19 8-18-12916
of ta . M. T. 31
( so Secton 130.58.)
mounts pad for transportaton of persons by arpane are sub-
|ect to the ta Imposed by secton 8 69 of the Interna Revenue Code,
as amended, Irrespectve of the seatng capacty of the arpane or
ts operaton on an estabshed ne or f ed schedue.
dvce s requested concernng the appcaton of the ta on the
transportaton of persons mposed by secton 3 69 of the Interna
Revenue Code, to amounts pad for transportaton by arpane where
the seatng capacty thereof s ess than 10 persons and t s not
operated on an estabshed ne.
Sectons 3 69 and 1650 of the Interna Revenue Code, as amended,
provde that there sha be mposed upon the amount pad wthn the
Unted States for the transportaton of persons by ra, motor vehce,
water, or ar a ta equa to 15 percent of the amount so pad | and that
such ta sha appy to transportaton by motor vehces havng a pas-
senger seatng capacty of ess than 10 adut passengers, ncudng the
drver, ony when such vehce s operated on an estabshed ne.
The anguage of the ta ng statute makes a cear dstncton between
the separate categores of ta abe transportaton servce by desgnat-
ng ra, motor vehce water, or ar, as the four knds of transpor-
taton servces upon whch the ta sha appy. It s apparent that the
e empton whch s specfcay provded for certan transportaton
by motor vehce s not appcabe to transportaton by ar.
ccordngy, amounts pad for transportaton of persons by ar-
pane, ncudng amounts pad for peasure rdes or other short rdes
by passengers and amounts pad for the charter of an arpane and
the servces of a pot, are sub|ect to the ta mposed by secton 3 69
of the Code, as amended, rrespectve of the passenger seatng capacty
of the arpane or ts operaton on an estabshed ne or f ed
schedue.
Reguatons 2, Secton 130.61: Transportaton 19 8-1 -128 7
and factes furnshed to States, Terrtores M. T. 28
of the Unted States, or potca subdvsons
thereof, or the Dstrct of Coumba.
ppcaton of ta on the transportaton of persons to payment
for transportaton of students of a schoo operated by a State, Ter-
rtory of the Unted States, or potca subdvson thereof, or the
Dstrct of Coumba, from funds derved from charges for admssons
to schoo actvtes or fees coected from students.
dvce s requested whether the ta mposed by sectons 3 69 and
1650 of the Interna Revenue Code, as amended, appes to payments
for the transportaton of students of a schoo operated by a State or
potca subdvson thereof, from funds derved from charges for
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177 Regs. 113 (19 3), 1 3.51,1 3.52
admssons to athetc events and other schoo actvtes, such as dances,
pays, concerts, etc.
Sectons 3 69 (a) and (c and 1650 of the Interna Revenue Code,
as amended, mpose a ta or 15 per centum of the amounts pad n the
Unted States, wth certan e ceptons not here appcabe, for the
transportaton of persons by ra, motor vehce, water, or ar, and for
seatng or seepng accommodatons furnshed n connecton wth such
transportaton.
Under the provsons of secton 3 69(f)(1) of the Code, the ta
does not appy to the payment for transportaton or factes furnshed
to any State, Terrtory of the Unted States, or potca subdvson
thereof, or the Dstrct of Coumba.
It s hed that where payments for the transportaton of students of
a schoo operated by a State, Terrtory of the Unted States, or pot-
ca subdvson thereof, or the Dstrct of Coumba, are made from
funds derved from charges for admssons to athetc events and other
schoo actvtes, such as dances, pays, concerts, etc., or from fees
coected from a of the students, regardess of whether they partc-
pate n the trps and the funds are admnstered and controed by the
schoo as schoo funds, such payments for transportaton are e empt
under secton 3 69(f) (1) of the Code. owever, where transporta-
ton payments are made from funds whch are coected ony from
partcpatng students for the purpose of defrayng ther ndvdua
e penses for a trp, such payments are not e empt from the ta .
The rght to e empton provded by secton 3 69(f) (1) of the Code
must be estabshed by the use of e empton certfcates, Form 731,
Revsed, whch must be presented to the carrer at the tme the charges
for transportaton are pad.
T WIT R SP CT TO T TR NSPORT TION OF PROP RTY
Reguatons 113 (19 3), Sectons 1 3.51 and 19 8-25-12986
1 3.52. T. D. 5678
TITL 26 INT RN L R NU C PT R I, SU C PT R C, P RT 1 3.
T WIT R SP CT TO T TR NSPORT TION OP PROP RTY
Orgna return to be fed wth coector and dupcate retaned
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. C.
To Coectors of Interna Revenue and Others Conserved:
In order to conform Reguatons 113 (19 3 edton) 26 CFR, Part
1 3 , reatng to the ta on the amount pad for the transportaton of
property, to a change of system for the verfcaton of returns, such
reguatons are hereby amended as foows:
Paragraph 1. Secton 1 3.51 26 CFR 1 3.51 s amended by n-
sertng mmedatey foowng the frst sentence thereof another sen-
tence readng as foows:
Such person sha aso retan as part of hs records the dupcate returns requred
by sectoD 1 3.52 26 CFR 1 3.52 .
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Regs. 2 (19 2), 130.71,130.72 178
Par. 2. Secton 1 3.52 26 CFR 1 3.52 s amended by aterng the
frst paragraph thereof as foows:
( ) y strkng from the second sentence the word made and
nsertng n eu thereof the word prepared.
( ) y strkng from the second sentence thereof under oath,
and nsertng theren mmedatey precedng the words must be sworn
to the words the orgna.
(C) y nsertng n the thrd sentence mmedatey foowng the
frst word thereof the word orgna.
(D) y nsertng mmedatey foowng the thrd sentence another
sentence readng as foows:
The dupcate return sha be retaned as prescrbed by secton 1 3.51 26 CFR
1 3.51 .
( ) y nsertng n the ast sentence, mmedatey after the word
sectons the foowng: 1 8.51, reatng to records, .
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 3 72 and 3791 of the Interna Revenue Code (53 Stat. 23,
67,55 Stat. 722; 26 U. S. C. and Sup., 3 72, 3791).)
ecause ths Treasury Decson makes ony a mnor procedura
change n net effect reducng the burden of persons sub|ect to the
reguatons, t s found that t s unnecessary to ssue such Treasury
Decson wth notce and pubc procedure thereon under secton (a)
of the dmnstratve Procedure ct, approved une 11, 19 6, or
sub|ect to the effectve date mtaton of secton (c) of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pubca-
ton n the Federa Regster.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 23, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 29, 19 8, 8 : 5 a. m.)
T S ON S F D POSIT O S ND ON C RT IN TR NSPORT TION
ND COMMUNIC TION S R IC S
Reguatons 2 (19 2), Sectons 130.71 and 19 8-25-12980
130.72. T. D. 5672
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 130
T S ON S F D POSIT O S ND ON C RT IN TR NSPORT TION ND
COMMUNIC TION S R IC S
Orgna return to be fed wth coector and dupcate retaned
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 2 (19 2 edton) 26 CFR, Part 130 , reatng to the
ta es on safe depost bo es, transportaton of o by ppe ne, tee-
phone, teegraph, rado and cabe messages and servces, and trans-
portaton of persons under the provsons of the Interna Revenu
Code, are hereby amended as foows:
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179 Regs. 2 (19 2), 5 130.71,130.72
Paragraph 1. Secton 180.71 26 CFR 130.71 s amended by chang-
ng the desgnaton of paragraph (c) to (/) and nsertng a new
paragraph (e) to read as foows:
(e) In addton to the records prescrbed n paragraph (a), (6), (c), or (d)
each person requred to keep such records sha aso retan the dupcate re-
turns prescrbed by secton 130.72 20 CFR 130.72 .
Par. 2. Secton 130.72, as amended by Treasury Decson 53 7
C. . 19 , 627 , approved March 15, 19 26 CFR.130.72 , s fur-
ther amended by aterng paragraph (e) thereof as foows:
( ) y strkng from the frst sentence the words under oath
and the comma mmedatey foowng, and nsertng n such sentence
mmedatey precedng the .words must be sworn the words the
orgna.
( ) y nsertng n the second sentence mmedatey foowng the
frst word thereof the word orgna.
(C) y nsertng mmedatey foowng the second sentence a new
sentence as foows:
The dupcate return sha be retaned as prescrbed by secton 130.71(c)
26 CFR 130.71(e) .
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n sectons 3 72 and 3791 of the Interna Revenue Code (53
Stat. 23, 67, 55 Stat. 722; 26 U. S. C. and Sup., 3 72, 3791).)
ecause ths Treasury Decson makes ony a mnor procedura
change n net effect reducng the burden of persons sub|ect to the
reguatons, t s found that t s unnecessary to ssue such Treasury
Decson wth notce and pubc procedure thereon under secton (a)
of the dmnstratve Procedure ct, approved une 11,19 6, or sub-
|ect to the effectve date mtaton of secton (c) of sad ct.
Ths Treasury Decson sha be effectve upon ts fng for pubca-
ton n the Federa Regster.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 23,19 8.
Thomas . Ltnch,
ctng Secretary of the Treasury.
(Fed wth the dvson of the Federa Regster November 29, 19 8, S: 55 a. m.)
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Regs. 6 (19 0), 316.9
180
M NUF CTUR RS CIS T S
INT RN L R NU COD
S CTION 3 05(c) S M ND D IR-CONDITION RS
S LF-CONT IN D IR-CONDITIONING UNITS
Reguatons 6 (19 0), Secton 316.72: r-
condtoners.
19 8-1 -128 6
S. T. 93
Type of sef-contaned ar-condtonng unts sub|ect to ta under
secton 3 05(c) of the Interna Revenue Code, as amended.
dvce s requested concernng the type of sef-contaned ar-cond-
tonng unts sub|ect to ta under secton 3 05(c) of the Interna Reve-
nue Code, as amended.
Secton 3 05(c) of the Code, as amended, mposes a ta of 10 per
centum on saes by the manufacturer, producer, or mporter of sef-
contaned ar-condtonng unts.
It s hed that the type of sef-contaned ar-condtonng unt sub|ect
to ta under secton 3 05(c) of the Code, as amended, s a factory-made
encased assemby prmary desgned for free devery of ar and for
nstaaton n a wndow or n front of a wndow whch (1) contans
means for movng outsde ar through ts condenser, (2) ncudes means
for coong, dehumdfyng, and crcuatng the ar of a room, and (3)
has a tota motor horsepower of ess than 1 horsepower or a tota coo-
ng capacty of ess than 10,000 . t. u. s per hour at standard mercan
Socctv of Refrgeratng ngneers test condtons as set forth n
SR Crcuar No. 16, dated une. 19 0.
M NUF CTUR RS CIS T S INT RN L R NU COD D CISION OF
COURT
Rubber rtces Renta greement Transactons Thereunder
Consttute Saes Sub|ect to Ta on Tota Gross Revenues.
renta agreement under whch ta payers et decoratve trm-
mngs, made n part of rubber, to ther customers for mted perods
and n connecton therewth rendered certan servces n the repace-
ment or renovaton of soed or damaged trmmngs, consttutes a
ease wthn the meanng of secton 3 0, Interna Revenue Code,
as amended, and hence the transactons were saes sub|ect to e cse
ta on the tota gross revenues derved therefrom, under sectons
3 00(a) (7) and 3 1(c) (1) of the Code, as amended, rather than
upon the far whoesae market vaue of the products used, under
secton 3 of the Code, as amended. The fndngs of the dstrct
court are fuy supported by the evdence, and the concuson that
the renta agreement was a ease s borne out by the ntent of te
partes as we as the substance and form of the nstrument used.
S CTION 3 0, S M ND D
Reguatons 6 (19 0), Secton 316.9: ass
of ta on eases, etc.
19 8-20-12933
Ct. D. 1707
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181
Regs. 6 (19 0), 316.9
In the Unted States Orout Coubt of ppeas for the Nnth Crcut
L. . McCUntock and Forence L. McCUntock, Copartners, Dong usness Under
the Fcttous Name and Stye of McCUntock Dspay Co., appeants, v. arry C.
Westover, Coector of Interna Revenue, appeee
167 Fed. (2d) 601
Upon appea from the Dstrct Court of the Unted States for the Southern Dstrct of
Caforna, Centra Dvson
efore Mathews, Stephens, aud Orb, Crcut udges
pr 6, 19 8
Stephens, Crcut udge: L. . McCntock and Forence L. McCUntock, co-
partners, dong busness as the McCntock Dspay Co., appea from a |udgment
of the dstrct court, denyng them a recovery of ta es pad In accordance wth
an aeged Iega assessment of manufacturers saes ta es. The ta es were
eved In March of 19 3 by the Commssoner of Interna Revenue for the 13
months perod from October 1, 19 1, to October 31, 19 2, Incusve. The ta es
as eved were pad, and a cam for refund had been made and re|ected.
The ta payers operate a busness n whch they manufacture decoratve trm-
mngs made n part of rubber, smuatng fresh parsey. The trmmngs are
used n meat markets and smar estabshments n decoratng dspays of meat.
The ta payers entered nto agreements wth ther customers, entted Renta
agreement 1 to et ther products to ther customers for mted perods, and
n connecton therewth to render certan servces In the repacement or reno-
vaton of soed or damaged trmmngs. The servce usuay caed for a repace-
ment of 50 percent of a the trmmngs appro matey every 60 days.
The manufacturer s e cse ta es mposed and due on the transactons were
computed by the Commssoner on the bass of the tota gross revenue derved
from the agreements for the ta abe perods In queston.
The appeant-ta payers aege that they manufactured a ta abe rubber
artce, and concede that It s wthn the scope of secton 3 06(a) (7), Interna
Revenue Code, as t e sted from October 1,19 1, to October 31,19 2 26 U. S. C. .
secton 3 06(a) (7) . They dspute, however, the manner n whch the amount
of the manufacturer s e cse ta was computed. The tra court, upon ts con-
cuson that the renta agreements were eases, consttutng ta abe saes wthn
the meanng of the ta ng statute, hed the computaton to be made upon the
proper bass. ppeants present a varety of contentons, none of whch, In
1 The form of the Renta greement s as foows :
Renta greement
McCLINTOC DISPL Y CO., Lessor
The Orgna Rubber Leaf Decoraton
30 Rversde Drve Phone MOrnngsde 12118
C20396 Lot ngees, Caf., October 1, 19 1.
Lessee SUP R M R T
2000 Connectcut ve.
Newark, New ersey Dstrct
INew contract
dded to
Pcked up
Contract canceed
Rubber Leaf
20 18 cps Instaed
20 18 R. L. at 7 1. 0
Tota Feet 30 Tota 18 Unts 20 0
mount
20 Tota oders Instaed :
Rubber Leaf changed :
Coected for 3 Month :
Rent Payabe In dvance :
Tota Coected : 20
Rent from 10-1- 1 to 1-1- 2
Receved rent Smth representatve
Merchandse nstaed s the property of McCntock Dspay Co. Ths ease Is revocabe
by McCntock Dspay Co. or essee upon ten (10) days wrtten notce.
ccepted by Lessee
Form R- Western Saesbook Co., 30 9 I. 12 St., L. ., n. 10338 9751
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Regs. 0 (19 0 , 316.9
182
onr opnon, are mertorous, and we treat them as brefy as seems possbe to
an understandabe anayss of severa technca statutory ta provsons.
The prmary queston rased s whether the Renta greement consttutes a
ease. ppeants argue that the Renta greement s a mere accountng sp
and not a ease form. It does not purport to contan the entre understandng
of the partes, t does not descrbe any property eased to a customer for any
partcuar perod of tme, nor s there n It, or was there n the appcabe agree-
ment, any requrement that appeants shoud furnsh an artce made of robber.1
The Government argues that the agreement n queston s a ease and const-
tutes a ta abe sae wthn the statute; that the e cse ta es were therefore
propery assessed upon the tota gross revenues derved by the ta payers; and
that the ta payers were essors and not users of the rubber products manu-
factured and eased by them n operaton of ther busness. The ssue as set
forth by the Government s bref Is whether the aggregate amount of the
admtted gross revenue receved by the ta payers under that snge document
whch consttuted a ease must be consdered a statutory ta abe sae sub|ect
to ta on the tota gross prce for whch the ta payers artces were thus
eased.
The Government aso argues that the renta agreement consttuted a bament
for use, the song or destructon of the artces durng such use beng mmatera
n that most persona property s worn out and deprecated by use over a short
or ong perod of tme. The fact that the suppyng of renovated or new artces
as the prevousy eased unts became no onger usabe was mmatera snce
the customers kept them under a bament for use and the ta payers kept tte
thereto.
The tra court foowed the contentons of the Government n genera.
Secton 3 06(a) (7) of the Interna Revenue Code Imposes a ta on the sae of
any ta abe artce. Secton 3 0 of the Interna Revenue Code (26 D. S. C. .
secton 3 0) mposes the ta on a artces eased nstead of sod by provdng
that the ease of the artce sha be consdered a ta abe sae. The renta
agreement n the nstant case gave the ta payers customers the possesson and
use of the rubber products over a specfed perod of tme n consderaton of
the rentas pad therefor, and, n our opnon, the court beow propery hed that
such a transacton consttuted a ease wthn the meanng of secton 3 0, as
amended, and, hence, are ta abe saes under secton 3 06(a) (7). The fndngs
of the dstrct |udge are fuy supported by the evdence, and the concuson that
the renta agreement was a ease s borne out by the Intent of the partes as we
as the substance and form of the nstrument used. It s cear that the ta payers
and the customers both ntended and consdered the nstrument and ts renewa
to be a ease of an artce dstrbuted and servced thereunder. The agreement
contans a the essentas necessary to estabsh a vad ease a defnte agree-
ment on the e tent and boundary of the property eased, a defnte and agreed
term, a defnte prce of renta and the tme and manner of payment. (See
Levn v. Saroff, 5 Ca. pp. 285.) The ntenton was present; there was a rght
of possesson and use contnuous n nature under the agreement; and there was
specfc property descrbed Rubber eaf 20-18 R. L. at 7#- 1 0. (See G. C. M
11 10, Cum. u. II-1, 382, 3S (1933).) Lease terms were contnuousy used
by the party In the negotatons and dscussons concernng the agreement, as
we as In the testmony gven by the ta payers wtnesses. Thus the amount of
gross revenues receved from the agreements consttuted rentas, as found by
the tra |udge, the servces rendered beng Incdenta thereto.
The ta payers rey n ther argument upon the case of Peope Outfttng
Co. v. Unted States (58 Fed. (2d) 8 7), whch Invoves the queston of whether
a partcuar document consttutes a ease or a condtona sae. The court hed
that the transactons theren consttuted condtona saes and not eases; thus,
no e cse ta was payabe under the statute (secton 60 of the 192 Revenue
ct), where fna payment was not made before February 20, 19 6, the date of
the enactment of the Revenue ct of 1926.
It s our opnon that the cted case does not support appeants contentons, tn
the effect that athough the statute says a ease what was ntended was a ease
that amounted to a sae. The ct says ease and no mtatons are provded.
We are not at berty to hod that Congress meant ony those Instruments re-
The case of erryford v. Davs (102 U. S. 235, 2 ) s cted wth the foowng quota-
ton therefrom : It Is not to he found In any name whch the partes may have
gven the Instrument, and not aone n any partcuar provson whch It contans, ds-
connected from a the others, but In the rung Intenton of the partes, gathered from a
the anguage they have used. It s the egn effect of the whoe whch s to be sought for.
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183
Regs. 6 (19 0), 316.9
enabng saes, 1. e., an nstrument desgnated a ease whch provdes that tte
sha pass on payment of rent reserved. We do not construe secton 3 0 as
meanng that an e cse ta accrues whether the artce s sod or eased by an
nstrument whch provdes that tte sha pass when the rent reserved s pad.
The appeants mstakeny concude that snce tte woud never pass under the
so-caed renta agreement, t was not such a ease as woud be wthn the purvew
of secton 3 0.
nother attack Is made upon the |udgment upon the argument that t erred when
the dstrct court faed to construe secton 3 1(b) of the Interna Revenue Code,
as prescrbng the manner n whch the ta shoud be computed n the case of
ta abe saes other than ta abe saes at whoesae, and when t faed to con-
strue secton 3 1(c) of the Interna Revenue Code, as prescrbng the tme of
payment of the ta n the mted nstances theren enumerated.
They argue that the ta s not to be computed on the money coected or gross
revenue as was done heren. They cam that secton 3 00(a) (7) paces a ta
on the prce for whch the artces are sod; secton 3 0 defnes the ease of a
ta abe artce as a ta abe sae; nn assumng that the agreement was a ease,
there woud be a ta abe sae based under secton 3 06(a) (7) on the prce for
whch the artce was sod.
Secton 3 1 defnes Saes prce and subsecton (a) thereof reates to ta abe
artces sod at whoesae, but the secton s not appcabe, as t Is not contended
that the artces were ens d at whoesae. ence, upon the determnaton of the
prce for whch appeants sod ther products, subsecton (b) of secton 3 1
must be consuted to decde the ssue. The secton reads:
(b) If an artce s
(1) sod at reta:
(2) sod on consgnment; or
(3) sod (otherwse than through an arm s ength transacton) at ess
than the far market prce;
the ta under ths chapter sha (f based upon the prce for whch the artce
s sod) be computed on the far prue for whch such artces are sod, n the
ordnary course of trade, by manufacturers or producers thereof, as determned
by the Commssoner. Itacs added.
Secton 3 1(c) reads:
(c) (1) In the case of ( ) a ease, ( ) a contract for the sae of an artce
wheren t Is provded that the prce sha be pad by nstaments and tte to
the artce sod does not pass unt a future date notwthstandng parta pay-
ment by nstaments, (C) a condtona sae, or (D) a chatte mortgage arrange-
ment wheren t s provded that the saes prce sha be pad n nstaments,
there sha be pad upon each payment wth respect to the artce that porton
of the tota ta whch s proportonate to the porton of the tota amount to oe
pad represented by such payment. Itacs added.
Secton 3 1(b), t s urged, states the manner n whch the ta s to be com-
puted, whereas secton 3 1(c) states the manner n whch the ta sha be
pad. Severa cases are cted to determne when the ta s payabe, a of
whch are n reference to Reguatons 8 (192 ), a pror reguaton. ppeants
cte an Interpretaton of 619(c) of the 1932 Revenue ct us the precursor of
secton 3 1(c), and whch was the same e cept for subsecton (d) of secton
3 1. The appeants concude from the memorandum set out n margna note
Genera Counse of the ureau of Interna Revenue In a memorandum 11, 10, reported
n Cum. u. II-1, pp. 382-38 , dscusses 619(c) (1032 ct).:
Under these contracts the rubber companes, as manufacturers, agree to furnsh tres
and tubes to operators of busses at a specfed rate per me. The manufacturer aso agrees
to servce the tres and retans tte thereto. It Is the opnon of ths offce that
the tres and tubes covered by the contracts are eased wthn the Intent of the Revenue
ct and are ta abe. The operator of the busses agrees upon termnaton of the contract,
uness a new contract s entered Into, to purchase the tres on the bass of the manufac-
turer s prce st, ess the amount aready pad under the meage contract. In the case of
damage by accdent, abuse, or fre the cost of repar s to be norne by the bus company.
In the case of destructon by accdent, abuse, or re the bus company Is to be charged at
the manufacturer s st prce, ess meage pad.
Secton 60 of Tte I of the Revenue ct of 1932 mposes a ta on tres and Inner
tubes sod by the manufacturer, producer, or mporter. Secton 618 of the ct provdes
that:
For the purposes of ths tte, the ease of an artce sha be consdered the sae of
such artce.
The questons on whch an opnon s requested are as foows:
ueston 1. Shoud these contracts be consdered saes contracts or eases
ueston 2. ow shoud the ta be computed
The baments accompshed by the contracts n queston arc wthn the purpose of the
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Regs. 6 (19 0), 316.9
18
3 that ony eases whch are smar to saes are ta abe and ncusve theren, that
Is, that eases of every type were not ntended to be ncuded n the sectons con-
trong the queston before us. nd further, that sad memorandum dd not
decde that secton 619(c), nor secton 3 1(c) (1), requred a ta whch s based
upon or measured by the tota renta payments receved by essor. It decded, so
appeants contend, that the measure of the ta was prescrbed by another secton
(secton 602 of the 1932 ct).
ppeants go on to cam that secton 3 1(c)(1) s apped n determnng
whether a ta abe transacton had occurred (. e., easng smar to a sae) ;
and that a dfferent secton prescrbes the measure of the ta , snce that secton
does not prescrbe a measure of the ta accordng to the rung of the Genera
Counse; and that f the appeants eased ther product and thereby entered nto
a ta abe sae under secton 3 0, they dd so ether at whoesae or reta, and
n ether nstance became sub|ect to the manufacturers saes ta , based on the
far whoesae prce of the artces so sod or eased. If eased, the ta s pay-
abe as prescrbed by secton 3 1(c), supra. If the artce s sod at whoesae,
the ta s computed on the prce for whch sod. (Interna Revenue Code secton
3 1(a).) If t be sod at reta, t s computed on the far whoesae prce.
(Interna Revenue Code secton 3 1(b).) If used by the manufacturer, the ta
s computed on the far whoesae prce. (Interna Revenue Code secton 3 .)
Under secton 3 1(c), the ta payer may pay the ta as the saes prce s
coected.
From ths argument It s concuded by appeants that In a cases of the ds-
poston of a specfc artce whether by whoesae, reta, use, ease, nstament
sae, condtona sae or chatte mortgage a ta abe transacton resuts, and that
n each case the amount of the ta s e acty the same, the ony dfference beng
that secton 3 1(c) permts the ta to be pad as the nstaments are coected.
In no case Is the ta to be computed on the money coected or gross revenue as
was done n appeants case.
To ths reasonng the Government responded:
Snce the artces were used by the essee-customers and not by the ta payers,
the court propery rued that the measure of the ta was not on the far whoe-
sae market vaue of the artces so used secton 316.7 of Treasury Reguatons
0 (19 0 ed.) , as provded n secton 3 , but propery apped to the ta meas-
ure as contaned n secton 3 1(c) (1), as n eases, based upon the tota renta
payments receved by the ta payers under the renta agreement. Further, Con-
gress has consstenty paced such a ta on eases e cept for a perod between
1928 and 1932 n order to prevent evason of ta es by ease contracts. The
memorandum by the Genera Counse s cted by appeants n support of the
proposton that eases are ta abe ony f suffcenty smar to saes to satsfy
the statute, and whch they contend s not true of the renta agreement heren.
owever, as correcty determned by the Ta Court, the facts show that the
agreements were ony eases, and therefore the Commssoner and the court beow
propery nvoked the measure of the ta as prescrbed by secton 3 1(c) (1) of
the Code, whch aone appes n the ease of a ease. Snce the agreement con-
sttuted a ease, the Income therefrom was to be ta ed by reason of secton 3 0,
as amended, under secton 3 06(a) (7), as amended. The purpose of the ta aw,
as agreed to by appeants, was to prevent ta avodance by appcaton of the
statute. The ta Is prmary on saes. Leases were nso made ta abe because of ther
smarty to saes. On page 1 of Senate Report No. 308, reatve to the Revenue ct of
192 . t s sad :
Secton 70 (a) : Snce deaers frequenty dspose of goods under a form of contract
termed a ease, whch In reaty Is a contract for a sae wth payment by nstaments,
t as been e pressy provded that the ta heren eved appes to such transactons.
Secton 018 of the Revenue ct of 1932 provdes that for the purposes of Tte I
the ease of an artce sha be consdered to be the sae of such artce. On page of
Senate Report No. 666, reatng to that measure It s stated that the foregong secton was
retaned In the aw so that the ta coud not be evaded by a ease contract whch does not
Invove passage of tte.
The transactons n the nstant case may aso be vewed as contracts for the sae of tres
wth payment by Instaments measured by the meage covered. y the contracts n
queston the partes get practcay the same resuts that saes woud produce. The Ms
company gets the use of the equpment and the manufacturer receves a money compensaton
appro matng. It may be assumed, the sae prce of the equpment.
It s the opnon of ths ofee that tres and tubes covered by the contracts are eased
wthn the Intent of the Revenue ct and are ta abe. Ths answers the frst queston.
The answers to the second and fourth questons are Indcated by S. T. 96 (C. . I-2,
55). It Is stated theren:
The ta on tres and tubes supped under a meage contract Is ncurred at the tme
when such tres and tubes are devered by the tre manufacturer to hs customer and
shoud be computed on the fu weght of such artces. .
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185 Regs. 6 (19 0), 316.22, etc
manufacturers e cse ta es to a transactons nvovng the dsposton, ease
or use of ta abe manufactured artces.
Under secton 3 1(b), as amended, the ta sha be apped whether the
artce s sod at reta, on consgnment, or sod otherwse than through an arm s
ength transacton at ess than the far market prce. In secton 3 1(c) (1), as
amended, the ta sha appy n case of a ease, an nstament sae where tte
does not pass unt ater, a condtona sae, or a chatte mortgage arrangement for
nstament payments. Secton 3 covers nstances wheren the manufacturer
does not dspose of but uses the artce, n whch cases the ta s measured by the
prce at whch such artces are sod In the ordnary course of trade by the
manufacturer.
To captuate the Government s vews: The agreements were eases consttutng
statutory ta abe saes of the ta payers products sub|ect to e cse ta es on the
tota gross revenues derved therefrom wthn sectons 3 06(a)(7), 3 0 and
3 1(c) (1) of the Code, as amended, as nterpreted by sectons 316.5 and 310.9,
as amended, of Treasury Reguatons 6 (19 0 ed.), whe appeants vews are
that subsecton (b) of secton 3 1 s controng.
ppeants present the nove pont that the dstrct court erred n determnng
that appeants dd not use ther product n the operaton of a busness n whch
they were engaged wthn the meanng of secton 3 of Interna Revenue Code.
They cam that they are abe to pay an e cse ta , based upon the far whoesae
market vaue of the artces whch they used wthn the meanng of secton 3 ,
but not upon the gross revenue from ther whoe dspay servce. It s urged that
the appeants operated a decoratve servce and n connecton therewth used a
ta abe artce manufactured by them, namey, the rubber products here n
queston. See Fracker v. Commssoner (133 Fed. (2d) 509), cted to the effect
that owners of property who devote t to renta purposes and e cusvey to
producng ta abe ncome use t n a trade or busness and are aowed depreca-
ton thereon. Wthn ths premse It s argued that the use heren of the
products by them wthn the meanng of secton 3 of Interna Revenue Code s
estabshed n the operaton of ther busness, and that t foows that the ta
must be computed upon the far whoesae prce of the artces so used. s
ndcated by the foregong, the dstrct court was not n agreement wth appeants,
and we thnk t was rght.
ffrmed.
Reguatons 6 (19 0), Sectons 316.22, tc. 19 8-25-12983
T. D.5675
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 316.
CIS T S ON S L S Y T M NUF CTUR R
Return and oath requrements modfed
Treasury Department,
Offce or Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 6 (19 0 edton) 26 CFR 316 , reatng to ta es on
artces sod by the manufacturer, producer, or mporter, are hereby
amended as foows:
Paragraph 1. Secton 316.22 26 CFR 316.22 s amended by strk-
ng from the frst sentence of the second paragraph thereof the word
sworn.
Par. 2. Secton 316.23 26 CFR 316.23 s amended by strkng
from the frst sentence of the second paragraph thereof the word
sworn.
Par. 3. Secton 316.25 26 CFR 316.25 s amended by strkng
from the second and thrd paragraphs thereof the word sworn
wherever t appears theren.
820828 19 18
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Regs. 6 (19 0), 316.22, etc. 186
Par. . Secton 316.26 26 CFR 316.26 s amended as foows:
( ) y strkng from the frst paragraph thereof the word sworn.
( ) y aterng the second paragraph as foows:
(| y strkng from the frst sentence the words an affdavt
and nsertng n eu thereof the words a statement.
() y strkng from the second and thrd sentences the word
affdavt and nsertng n eu thereof the word statement.
Par. 5. Secton 316.29 26 CFR 316.29 s amended by strkng
from the second sentence of the second paragraph the word sworn.
Pah. 6. Secton 316.200, as renumbered and amended by Treasury
Decson 5099 C. . 19 1-2, 26T , approved November 28, 19 1 26
CFR 316.200 , s amended as foows:
( ) y aterng the frst paragraph thereof as foows:
() y strkng from the frst sentence the words make a return
and nsertng n eu thereof the words prepare a return for each
caendar month n dupcate.
() y strkng from the second sentence the words n dupcate
and the words for each caendar month, and nsertng mmedatey
precedng.the word return the word orgna.
() y strkng from the fourth sentence the openng word Such 1
and nsertng n eu thereof the words The orgna.
( ) y strkng from the frst sentence of the thrd paragraph
the word made and nsertng n eu thereof the word prepared.
(C) y addng at the end thereof a new paragraph readng as
foows:
The dupcate return sha be retaned as prescrbed by secton 316.202 26
CFR 316.202 .
Par. 7. Secton 316.202, as renumbered by Treasury Decson 5099
26 CFR 316.202 , s amended by nsertng n the frst sentence of the
frst paragraph mmedatey foowng the word records the foow-
ng: . ncudng the dupcate returns prescrbed by secton 316.200
26 CFR 316.200 , .
Par. 8. Secton 316.20 , as amended by Treasury Decson 53 8
C. . 19 , 613 , approved March 15, 19 26 CFR 316.20 , s
amended as foows:
( ) y strkng out the word sworn wherever t appears theren.
( ) y strkng out the word affdavt wherever t appears n the
nnth and tenth paragraphs, and nsertng n eu thereof the word
statement.
(C) y aterng the Statement of Utmate endor as foows:
() y changng the frst paragraph to read as foows:
The undersgned certfes that he hmsef, or the
(Name of vendor If other than undersgned)
of whch he Is , s the utmate vendor of the artces specfed
(Tte)
beow or on the reverse sde hereof;
() y strkng out subscrbed and sworn to before me ths
day of , 19 and nsertng n eu
thereof the foowng:
(Date)
(D) y strkng out the eeventh paragraph.
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n sectons 3 50 and 3791 of the Interna Revenue Code (53
Stat. 19, 67; 26 U. S. C. 3 50, 3791).)
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187 Regs. (19 ), 31 .23, etc.
ecause ths Treasury Decson makes ony procedura changes n
net effect reevng restrctons, t s found that t s unnecessary to
ssue such Treasury Decson wth notce and pubc procedure thereon
-under secton (a) of the dmnstratve Procedure ct, approved
une 11,19 6, or sub|ect to the effectve date mtaton of secton (c)
of sad ct.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 23, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 29,19 8, 8 : 55 a. m.)
T S ON G SOLIN , LU RIC TING OIL, ND M TC S
Reguatons (19 ), Sectons 31 .23, tc. 19 8-25-12982
T. D. 567
TITL 26 INT RN L R NU C PT R I, SU C PT R C, P RT 81 .
T S ON G SOLIN . LU RIC TING OIL, ND M TC S
Return and oath requrements modfed

Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 5, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons (19 edton) 26 CFR, Part 31 reatng to ta es
on gasone, ubrcatng o, and matches, are amended as foows:
Paragraph 1. Secton 31 .23 26 CFR 31 .23 s amended by strk-
ng from the frst sentence of the second paragrap thereof the word
sworn.
Par. 2. Secton 31 .25 26 CFR 31 .25 s amended by strkng from
the second and thrd paragraphs the word sworn wherever t appears
theren.
Par. 3. Secton 31 .26 26 CFR 31 .26 s amended as foows:
( ) y strkng from the frst paragraph thereof the word sworn.
( ) y aterng the second paragraph thereof as foows:
() y strkng from the frst sentence the words an affdavt and
nsertng n eu thereof the words a statement.
() y strkng from the second and thrd sentences the word aff-
davt and nsertng n eu thereof the word statement.
Par. . Secton 31 .29 26 CFR 31 .29 s amended by strkng
from the ast sentence of the second paragraph the word sworn.
Par. 5. Secton 31 .60 26 CFR 31 .60 s amended as foows:
( ) y aterng the frst paragraph thereof as foows:
() y strkng from the frst sentence of the frst paragraph the
words make a return and nsertng n eu thereof the words prepare
a return for each caendar month n dupcate.
() y strkng from the second sentence the words n dupcate
and the words for each caendar month and nsertng before the
word return the word orgna.
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Regs. 6 (19 0), 316.190
188
() y strkng from the fourth sentence the openng word Such
and nsertng n eu thereof the words The orgna.
( ) y addng at the end thereof a new paragraph readng as
foows:
The dupcate return sha be retaned as prescrbed by secton 31 .62 26 CF
81 .62 .
Par. 6. Secton 31 .62 26 CFR 31 .62 s amended by nsertng n
the frst sentence of the frst paragraph after the word records the
foowng: , ncudng the dupcate returns prescrbed by secton
31 .60 26 CFR 31 .60 , .
Par. 7. Secton 31 .6 26 CFR 31 .6 s amended as foows:
( ) y strkng out the word sworn wherever t appea s.
( ) y strkng out the word affdavt wherever t appears and
nsertng n eu thereof the word statement.
(C) y amendng the Statement of Utmate endor as foows:
() y strkng out the frst paragraph and nsertng n eu thereof
the foowng:
The undersgned certfes that he hmsef or the
(Name of vendor If other than undersgned)
of whch he s s the utmate vendor of the artces specfed
(Tte)
beow or on the reverse sde hereof;
() y strkng out Subscrbed and sworn to before me ths day of , 19 and nsert-
ng n eu thereof the foowng:
(Date)
(D) y strkng out the tenth paragraph.
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n sectons 3 50 and 3791 of the Interna Revenue Code (53
Stat. 19, 67 | 26 U. S. C. 3 50,3791).)
ecause ths Treasury Decson makes ony procedura changes n
net effect reevng restrctons, t s found that t s unnecessary to
ssue such Treasury Decson wth notce and pubc procedure thereon
under secton (a) of the dmnstratve Procedure ct, approved
une 11, 19 6, or sub|ect to the effectve date mtaton of secton (c)
of sad ct.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 23,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
( aed wth the Dvson of the Federa Regster November 29, 19 8, 8 : 55 a. m.)
S CTION 3 11(a), S M ND D
Reguatons 6 (19 0), Secton 316.190: Scope of 19 8-19-12925
ta . Ct. D. 1706
ta on eectrca energy nterna revenue code decson op court
1. ectrca neboy Sod to Dary Customers Commerca
Consumpton.
Ta payer company, whch sod eectrca energy to varous dary
customers engaged n pasteurzaton of mk and functons normay
ncdent thereto, was sub|ect to the ta mposed by secton 3 11(a),
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189
Regs. 6 (19 0), 316.190
Interna Revenue Code. The Incdence of the ta dd not depend
upon the partcuar operaton n whch the energy was used, but
upon the busness of whch t formed a part, and snce the pre-
domnant busness of the dares was that of fud mk deaers and
dstrbutors, the eectrcty sod to such dares by ta payer was
sod for commerca consumpton. though some of the dares
had more than one eectrc meter, the meters were not so connected
wth the oad as to dfferentate between saes for commerca and
noncommerca consumpton, and n no Instance was there a sepa-
rate meterng of eectrca energy used by a dary n ts pasteurza-
ton process.
2. Decson ffrmed.
Decson of the Dstrct Court of the Unted States for the astern
Dstrct of Wsconsn (69 Fed. Supp. 7 3) affrmed.
In- the Unted States Crcut Court of ppeas for the Seventh Crcut
Wsconsn ectrc Power Co., pantff-appeant, v. The Unted tates of
merca, defendant-appeee
168 Fed. (2d) 285
ppea from the Dstrct Court of the Unted States for the astern Dstrct of Wscousn
May 26, 19 8
OPINION
efore erneb and Mnton, Crcut udges, and Lndet, Dstrct udge
ernf.r, Crcut udge: Ths s a sut to recover moneys camed to have been
wrongfuy coected for the sae of eectrca energy. Pantff sod eectrca
energy to varous dary customers engaged In pasteurzaton of mk and func-
tons normay ncdent to such pasteurzaton. The queston before the dstrct
court was whether such saes were saes for other than commerca consumpton.
The Interna Revenue Code (26 U. S. C. ., secton 3 11(a)) provdes for
the mposton of a ta to be pad by the vendor of eectrca energy sod for
commerca consumpton.
The case was heard by the tra |udge, wthout a |ury, upon evdence and
stpuaton of the partes. Pantff contended that pasteurzaton s a processng
of mk; that the eectrca energy sod by t to the dares was used by the
dares n pasteurzaton; and hence that was not a commerca use of the
eectrca energy.
The tra |udge made fndngs of fact and fed an opnon reported n 69
Fed. Supp. 7 3, n whch he correcty set forth the controng facts, dscussed
pasteurzaton, the egsatve hstory of the secton of the ct here nvoved, and
the reguatons promugated by the Secretary; and concuded that the ncdence
of the ta dd not depend upon the partcuar operaton n whch the energy
was used, but upon the busness of whch t formed a part, and that snce the
predomnant busness of the dares was that of fud mk deaers and dstrbu-
tors, the eectrcty sod to the dares by pantff was sod for commerca
consumpton.
In ths court pantff chaenges the dstrct court s concuson. It argues
that pasteurzaton partakes of the nature Of an ndustra actvty, and cannot
be characterzed as a commerca actvty, and ctes the case of Unted States v.
Pubc Servce Co. (1 3 Fed. (2d) 79), n whch the court hed, under the facts
n that case, that eectrca energy sod to dares and used In pasteurzaton
was not sod for commerca consumpton wthn the meanng of the ct.
We have studed the Pubc Servce Co. case, supra, and Mchgan ed
Dary ssn. v. udtor Genera (302 Mch. 6 3, N. W. (2d) 516), as we as the
other cases cted by pantff, and consdered pantff s argument, but we have
not been persuaded that the court erred n hodng that the proper test to be
apped n determnng whether the eectrcty used by a partcuar consumer
fas wthn the term commerca consumpton s whether the predomnant
character of the enterprse carred on by such consumer Is commerca. We
agree wth udge Duffy that the wordng and egsatve hstory of the ct make
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Regs. 7 (1928), rts. 12, etc 190
It cear that the predomnant character of the busness carred on by a con-
sumer of eectrca energy s what determnes whether the eectrcty sod has
been sod for commerca consumpton ; hence we are content to adopt hs
opnon as that of ths court.
ffrmed.
CIS T ON S L OF PISTOLS ND R OL RS
Reguatons 7 (1928), rtces 12,15, and 17. 19 8-25-1298
T. D.5676
TITL 28 INT RN L R NU . C PT R I, SU C PT R C, P RT 302.
CIS T ON S L OF PISTOLS ND R OL RS
Return and oath requrements modfed
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reguatons 7 (1928 edton) 26 CFR, Part 302 , reatng to ta
on pstos and revovers sod by the manufacturer, producer, or m-
g|rter, but ony as prescrbed and made appcabe to the Interna
evenue Code by Treasury Decson 885 C. . 1939-1, Part 1, 396 .
approved February 11,1939 26 CFR, Cum. Supp., p. 5876 , are bereby
amended as foows:
Paragraph 1. rtce 12 26 CFR 302.12 s amended as foows:
( ) y aterng the frst paragraph thereof as foows:
() y strkng therefrom the words make monthy returns under
oath and nsertng n eu thereof the words prepare a monthy
return.
() y addng at the end thereof a new sentence readng as foows:
The orgna return must be under oath.
( ) y aterng the thrd paragraph thereof as foows:
() y strkng therefrom the openng words The return must be
rendered and nsertng n eu thereof the words The orgna return
must be fed.
() y addng at the end thereof a new sentence readng as foows:
The dupcate return sha be retaned.
(C) y strkng from the frst sentence of the eghth paragraph
the concudng words of the ta abe sae and nsertng n heu thereof
the words the ta becomes due.
Par. 2. rtce 15 26 CFR 302.15 s amended by strkng from
the fourth sentence of the frst paragraph thereof the word sworn.
Par. 3. rtce 17 26 CFR 302.17 s amended as foows:
( ) y strkng from the frst paragraph the words an affdavt
and nsertng n eu thereof the words a statement.
( ) y strkng from the second and thrd paragraphs the word
affdavt and nsertng n eu thereof the word statement.
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n secton 3791 of the Interna Revenue Code (53 Stat. 67,
2617. S.C. 3791).)
ecause ths Treasury Decson makes ony procedura changes n
net effect reevng restrctons, t s found that t s unnecessary to
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191 Regs. 7 (1928), rts. 12, etc.
ssue such Treasury Decson wth notce and pubc procedure thereon
under secton (a) of the dmnstratve Procedure ct, approved
une 11,19 6, or sub|ect to the effectve date mtaton of secton (c)
of sad ct.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 23, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 29, 19 8, 8 : 55 a. m.)
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Regs. 51 (19 1), 320.33 192
R T IL RS CIS T S
INT RN L R NU COD
S CTIONS 1650 ND 2 00, S M ND D. T ON W LRY, TC.
Reguatons 51 (19 1), Secton 320.33: rtces 19 8-15-12866
made of, or ornamented, mounted, or ftted wth, S. T. 935
precous metas or mtatons thereof.
rtces, other than artces commony or commercay known as
|ewery, merey coated wth a depost of precous meta or an aoy
of such meta whch s ess than one one-hundred-thousandth of
an nch n thckness, are not consdered to be ornamented wth a
precous meta or mtaton thereof wthn the meanng of secton
2 00 of the Interna Revenue Code.
dvce s requested whether artces merey coated wth a depost
of precous meta or an aoy of such meta are sub|ect to ta under
secton 2 00 of the Interna Revenue Code.
Sectons 1650 and 2 00 of the Interna Revenue Code, as amended,
mpose a ta of 20 per centum upon the sae at reta of artces made
of, or ornamented, mounted, or ftted wth, precous metas or mta-
tons thereof.
Secton 320.33 of Reguatons 51 provdes, n part, that the ta s
mposed on the sae at reta of any artce, as dstngushed from those
artces commony or commercay known as |ewery as descrbed
n secton 320.31 of such reguatons, whch s made of, or ornamented,
mounted, or ftted wth, precous metas or mtatons thereof. The
term precous metas ncudes patnum, god; sver, and other
ncudes patngs and aoys of such metas.
It s hed that artces, other than artces commony or commer-
cay known as |ewery, merey coated wth a depost of precous
meta or an aoy of such meta whch s ess than one one-hundred-
thousandth of an nch n thckness, are not ornamented wth a precous
meta or mtaton thereof wthn the meanng of secton 2 00 of the
Interna Revenue Code so as to be sub|ect to the ta mposed by such
secton.
Where a retaer ses artces whch are not sub|ect to the ta on
the bass referred to above, he shoud obtan and keep n hs records
a statement from the manufacturer of the artces or other competent
authorty dscosng that the thckness of the depost of precous meta
or an aoy of such meta as apped to such artces s ess than one
one-hundred-thousandth of an nch. In any case, where the retaer
does not have n hs records such statement, and he cannot prove the
thckness of such depost, he may be hed abe for the ta on hs saes
of the artces.
The term mtatons thereof
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193 Regs.51 (19 1), 320.70,etc.
Reguatons 51 (19 1), Sectons 320.70,320.72, 19 8-25-12985
and 320.76. T. D. 5677
TITL 28 INT RN L R NU . C PT R I, SU C PT R C, P RT 320.
R T IL RS CIS T S
Return and oath requrements modfed
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
ToC oectors of 1 nterna Re venue and O thers Concerned:
Reguatons 51 (19 1 edton) 26 CFR, Part 320 , reatng to ta es
on artces sod at reta, are hereby amended as foows:
Paragraph 1. Secton 320.70, as renumbered and amended by Treas-
ury Decson 5353 C. . 19 ,597 , approved March 31,19 26 CFR
320.70 , s amended by aterng the frst paragraph thereof as foows:
( ) y strkng from the frst sentence the words make a return
and nsertng n heu thereof the words prepare a return for each
caendar month n dupcate.
( ) y strkng from the second sentence the words made n dup-
cate and the words for each caendar month and nsertng mme-
datey precedng the word return the word orgna.
(C) y strkng from the fourth sentence the openng word Such
and nsertng n eu thereof the words The orgna.
Par. 2. Secton 320.72, as renumbered by Treasury Decson 5353
26 CFR 320.72 , s amended by nsertng m the frst sentence of the
frst paragraph, mmedatey after the word records the foowng:
, ncudng the dupcate copy of each return as prescrbed by secton
320.70, .
Par. 3. The thrd paragraph of secton 320.76 as renumbered by
Treasury Decson 5353 26 CFR 320.76 , s amended by strkng out
the word sworn wherever t appears theren.
(Ths Treasury Decson s ssued pursuant to the authorty con-
taned n sectons 3791 and 2 10 of tne Interna Revenue Code (53
Stat. 67,55 Stat. 720; 26 U. S. C. and Sup., 3791,2 10).)
ecause ths Treasury Decson makes ony procedura changes n
net effect reducng the burden ncdent to compance wth the regua-
tons, t s found that t s unnecessary to ssue such Treasury Decson
wth notce and pubc procedure thereon under secton (a) of the
dmnstratve Procedure ct, approved une 11, 19 6, or sub|ect to
the effectve date mtaton of secton (c) of sad ct.
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 23,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster November 29, 19 8, 8: 5 a. m.)
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Msc.
19
F D R L FIR RMS CT (1938)
19 8-17-12908
T. D. 56 6
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 815.
R GUL TIONS R L TING TO T LIC NSING UND R T F D R L FIR -
RMS CT OF M NUF CTUR RS OF, ND D L RS IN, FIR RMS OR
MMUNITION
Treasury Decson 898
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, uy 26,191 .
To Coectors of Interna Revenue and Others Concerned:
ecause the current edton of reguatons ssued under the Federa
Frearms ct, Treasury Decson 898, dated May 1, 1939 C. .
1939-1 (Part 1), 36 , s e hausted, ts Treasury Decson s ssued
as a new edton. Ths Treasury Decson ncorporates the severa
amendments of Treasury Decson 898 made by Treasury Decsons
9 6 C. . 1939-2, 03 . 556 C. . 19 7-1, 180 , and 5609 C. .
1918-1, 1 2 , fed wth the Dvson of the Federa Regster on Sep-
tember 26, 1939, May 28, 19 7, and March 19, 19 8, respectvey (26
CFR, Part 315).
Secton 1(8) of the Federa Frearms ct as quoted n ths Treas-
ury Decson refects the amendment made by the ct approved u-
gust 6, 1939 (53 Stat. 1222), whch amendment s effectve as of
ugust 6, 1939; and secton 1(6) of the Federa Frearms ct as so
quoted refects the amendment made by the ct approved March 10,
19 7 (Pubc Law 15, ghteth Congress), whch amendment s
effectve as of March 10,19 7.
ecause ths Treasury Decson makes no ateraton of e stng
rues, t s found unnecessary that t be ssued wth notce and pubc
procedure thereon under secton (a) of the dmnstratve Pro-
cedure ct, approved une 11, 19 6, or sub|ect to the effectve date
mtaton of secton (c) of the sad ct.
Tabe of Contents
subpart a. federa frearms act
Secton
315.0. Introductory.
SU P RT . D FINITIONS
315.1. Defntons.
SU P RT C. LIC NS S
315.2. Persons requred to procure censes.
815.3. Persons not entted to a cense.
315. . ppcaton for a cense.
315.5. Lcense fees.
315.6. Issuance of cense.
315.7. Scope and duraton of cense.
815.8. Remova of censee.
315.9. Suspenson and revocaton of cense.
SU P RT D. R CORDS
815.10. Records.
815.11. emptons.
SU P RT . MPTIONS
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195
Msc.
SU P T F. MISC LL N OUS PRO ISIONS
315.12. Reaton to other provsons of aw.
315.13. Penates.
315.1 . ffectve date.
SU P RT F D R L FIR RMS CT
Sec. 315.0. Introductory. The Federa Frearms ct approved une
30,1938, as amended ugust 6,1939, and March 10,19 7 (52 Stat. 1250,
53 Stat. 1222; 15 U. S. C. 901-909; Pubc Law 15, ghteth Congress,
frst sesson), provdes:
That as used n ths ct
(1) The term person ncudes an ndvdua, partnershp, assocaton,
or corporaton.
(2) The term nterstate or foregn commerce means commerce be-
tween any State, Terrtory, or possesson ( but not ncudng
the Cana Zone), or the Dstrct of Coumba, and any pace outsde
thereof; or between ponts wthn the same State, Terrtory, or posses-
son ( but not ncudng the Cana Zone), or the Dstrct of
Coumba, but through any pace outsde thereof; or wthn any Terr-
tory or possesson or the Dstrct of Coumba.
(3) The term frearm means any weapon, by whatever name known,
whch s desgned to e pe a pro|ecte or pro|ectes by the acton of
an e posve and a frearm muffer or frearm sencer, or any part or parts
of such weapon.
( ) The term manufacturer means any person engaged n the
manufacture or mportaton of frearms, or ammunton or cartrdge
cases, prmers, buets, or propeent powder for purposes of sae or ds-
trbuton ; and the term censed manufacturer means any such person
censed under the provsons of ths ct.
(5) The term deaer means any person engaged In the busness of
seng frearms or ammunton or cartrdge cases, prmers, buets or
propeent powder, at whoesae or reta, or any person engaged n the
busness of reparng such frearms or of manufacturng or fttng speca
barres, stocks, trgger mechansms, or breach mechansms to frearms,
and the term censed deaer means any such person censed under
the provsons of ths ct.
(6) The term crme of voence means murder, mansaughter, rape,
mayhem, kdnapng, robbery, burgary, housebreakng; assaut wth
ntent to k, commt rapt , or rob; assaut wth a dangerous weapon, or
assaut wth ntent to commt any offense punshabe by mprsonment
for more than one year.
(7) The term fugtve from |ustce means any person wno has fed
from any State, Terrtory, the Dstrct of Coumba, or possesson of
the Unted States to avod prosecuton for a crme of voence or to avod
gvng testmony n any crmna proceedng.
(8) The term ammunton sha ncude ony psto or revover am-
munton. It sha not ncude shotgun shes, metac ammunton sut-
abe for use ony n rfes, or any .22 caber rmfre ammunton.
Sec. 2. (a) It sha be unawfu for any manufacturer or deaer, e -
cept a manufacturer or deaer havng a cense ssued under the prov-
sons of ths ct, to transport, shp, or receve any frearm or ammunton
n nterstate or foregn commerce.
(b) It sha be unawfu for any person to receve any frearm or am-
munton transported or shpped n nterstate or foregn commerce n
voaton of subdvson (a) of ths secton, knowng or havng reason-
abe cause to beeve such frearms or ammunton to have been trans-
ported or shpped n voaton of subdvson (a) of ths secton.
(c) It sha be unawfu for any censed manufacturer or deaer to
transport or shp any frearm n nterstate or foregn commerce to any
person other than a censed manufacturer or deaer n any State the aws
of whch requre that a cense be obtaned for the purchase of such
frearm, uness such cense s e hbted to such manufacturer or deaer
by the prospectve purchaser.
1 Omtted matter, reatng to the Phppne Isands, no onger appcabe.
So In orgna.
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196
(d) It sha be unawfu for any person to shp, transport, or cause to
be shpped or transported n nterstate or foregn commerce any frearm
or ammunton to any person knowng or havng reasonabe cause to be-
eve that such person s under Indctment or has been convcted n
any court of the Unted States, the severa States, Terrtores, posses-
sons , or the Dstrct of Coumba of a crme of voence
or s a fugutve from |ustce.
(e) It sha be unawfu for any person who s under ndctment or
who has been convcted of a crme of voence or who s a fugutve from
ustce to shp, transport, or cause to be shpped or transported n nter-
state or foregn commerce any frearm or ammunton.
(f) It sha be unawfu for any person who has been convcted of a
crme of voence or s a fugutve1 from |ustce to receve any freurm or
ammunton whch has been shpped or transported n nterstate or
foregn commerce, and the possesson of a frearn or ammunton by any
such person sha be presumptve evdence that such frearm or ammun-
ton was shpped or transported or receved, as the case may be, by such
person n voaton of ths ct.
(g) It sha be unawfu for any person to transport or shp or cause
to be transported or shpped n nterstate or foregn commerce any stoen
frearm or ammunton, knowng, or havng reasonabe cause to beeve,
same to have been stoen.
(h) It sha be unawfu for any person to receve, concea, store, bar-
ter, se, or dspose of any frearm or ammunton or to pedge or accept
as securty for a oan any frearm or ammunton movng n or whch s
a part of Interstate or foregn commerce, and whch whe so movng or
consttutng such part has been stoen, knowng, or havng reasonabe
cause to beeve the same to have been stoen.
(1). It sha be unawfu for any person to transport, shp, or knowngy
receve n nterstate or foregn commerce any frearm from whch the
manufacturer s sera number has been removed, obterated, or atered,
and the possesson of any such frearm sha be presumptve evdence that
such frearm was transported, shpped, or receved, as the case may be,
by the possessor n voaton of ths ct.
Sec. 3. (a) ny manufacturer or deaer desrng a cense to transport,
shp, or receve frearms or ammunton n nterstate or foregn commerce
sha make appcaton to the Secretary of the Treasury, who sha pre-
scrbe by rues and reguatons the nformaton to be contaned n such
appcaton. The appcant sha, f a manufacturer, pay a fee of 25 per
annum and, f a deaer, sha pay a fee of 1 per annum.
(b) Upon payment of the prescrbed fee, the Secretary of the Treasury
sha ssue to such appcant a cense whch sha entte the censee to
transport, shp, and receve frearms and ammunton n nterstate and
foregn commerce uness and unt the cense s suspended or revoked n
accordance wth the provsons of ths ct: Provded, That no cense
sha be ssued to any appcant wthn two years after the revocaton
of a prevous cense.
(c) Whenever any censee Is convcted of a voaton of any of the
provsons of ths ct, tt sha be the duty of the cerk of the court to
notfy the Secretary of the Treasury wthn 8 hours after such convcton
and sad Secretary sha revoke such cense: Provded, That n the case
of appea from such convcton the censee may furnsh a bond n the
amount of 1,000, and upon recept of such bond acceptabe to the Secre-
tary of the Treasury he may permt the censee to contnue busness
durng the perod of the appea, or shoud the censee refuse or negect to
furnsh such bond, the Secretary of the Treasury sha suspend such
cense unt he s notfed by the cerk of the court of ast appea as to
the fna dsposton of the case.
(d) Lcensed deaers sha mantan such permanent records of mpor-
taton, shpment, and other dsposa of frearms and ammunton as the
Secretary of the Treasury sha prescrbe.
Sf.c . The provsons of ths ct sha not appy wth respect to the
transportaton, shpment, recept, or mportaton of any frearm, or am-
munton, sod or shpped to, or ssued for the use of, (1) the Unted
States or any department, ndependent estabshment, or agency thereof;
1 Omtted matter, reatng to the Phppne Isands, no onger appcabe.
So n orgna.
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(2) any State, Terrtory, or possesson, or the Dstrct of Coumba, or
any department, ndependent estabshment, agency, or any potca sub-
dvson thereof; (3) any duy commssoned offcer or agent of the
Unted States, a State, Terrtory, or possesson, or the Dstrct of Coum-
ba, or any potca subdvson thereof; ( ) or to any bank, pubc car-
rer, e press, or armored-truck company organzed and operatng n good
fath for the transportaton of money and vauabes; (5) or to any re-
search aboratory desgnated by the Secretary of the Treasury: Provded,
That such bank, pubc carrers, e press, and armored-truck companes
are granted e empton by the Secretary of the Treasury; nor to the
transportaton, shpment, or recept of any antque or unservceabe fre-
arms, or ammunton, possessed and hed as curos or museum peces:
Provded, That nothng heren contaned sha be construed to prevent
shpments of frearms and ammunton to nsttutons, organzatons, or
persons to whom such frearms and ammunton may be awfuy dev-
ered by the Secretary of War, nor to prevent the transportaton of such
frearms and ammunton so devered by ther awfu possessors whe
they are engaged n mtary tranng or n compettons.
Sec. 5. ny person voatng any of the provsons of ths ct or any
rues and reguatons promugated hereunder, or who makes any state-
ment n appyng for the cense or e empton provded for n ths ct,
knowng such statement to be fase, sha, upon convcton thereof, be
fned not more than 2,000, or mprsoned for not more than fve years,
or both.
Sec. 6. Ths ct sha take effect 30 days after Its enactment.
Sec. 7. The Secretary of the Treasury may prescrbe such rues and
reguatons as he deems necessary to carry out the provsons of ths
ct.
Sec. 8. Shoud any secton or subsecton of ths ct he decared un-
consttutona, the remanng porton of the ct sha reman n fu force
and effect.
Sec 9. Ths ct may be cted as the Federa Frearms ct.
The foowng reguatons are hereby prescrbed under the Federa
Frearms ct, reatve to the censng of manufacturers of, and deaers
n, frearms or ammunton; to the records to be mantaned by censed
manufacturers and deaers; and to transactons and deangs n fre-
arms or ammunton specfcay e empted from the provsons of the
ct:
SU P RT . D FINITIONS
Sec 315.1. Defntons. s used n these reguatons
(a) The term ct means the Federa Frearms ct.
(6) The term frearm means (1) any weapon, by whatever name known,
whch s desgned to e pe a pro|ecte or pro|ectes by acton of an e posve,
(2) any part or parts of such weapon, and (3) a frearm muffer or frearm
Sencer.
(c) The term ammunton means ony psto and revover ammunton. It
does not ncude shotgun shes, metac ammunton sutabe for use ony In
rfes, or any .22 caber rmfre ammunton.
(d) The term nterstate or foregn commerce means
(1) Commerce between any State, Terrtory, or possesson of the Unted
States (not ncudng the Cana Zone), or the Dstrct of Coumba, and any
pace outsde thereof;
(2) Commerce between ponts wthn the same State, Terrtory, or posses-
son of the Unted States (not ncudng the Cana Zone), or the Dstrct
of Coumba, but through any pace outsde thereof; or
(3) Commerce wthn any Terrtory, or possesson of the Unted States
(ncudng the Cana Zone), or the Dstrct of Coumba.
(e) The term person ncudes an ndvdua, partnershp, assocaton, or
corporaton.
(f) The term manufacturer means any person engaged n the manufacture
or mportaton of frearms, or ammunton, for purposes of sae or dstrbuton.
(g) The term censed manufacturer means a manufacturer censed under
secton 3 of the ct.
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(fc) The term deaer means any person engaged n the busness of seng
frearms or ammunton at whoesae or reta, or any person engaged In the
busness of reparng such frearms or of manufacturng or fttng speca barres,
stocks, trgger mechansms, or breech mechansms to frearms.
() The term censed deaer means a deaer censed under secton 3 of the
ct.
(|) The term cense means a cense ssued under authorty of secton 3(b)
of the ct.
( -) The term cense fee means the annua fee payabe by a manufacturer of,
or deaer In, frearms or ammunton.
(() The term Secretary means the Secretary of the Treasury.
(m) The term Commssoner means the Commssoner of Interna Revenue.
(n) The term coector means coector of nterna revenue.
(o) The terms ncudes and ncudng when used n a defnton or state-
ment n these reguatons sha not be deemed to e cude other thngs otherwse
wthn the scope thereof.
SU P RT C LIC NS S
Sec. 315.2. Persons requred to procure censes. Under secton 2(a) of the
ct, t s unawfu for any manufacturer or deaer, e cept a manufacturer or
deaer havng a cense ssued under the provsons of the ct, to transport, shp,
or receve any frearms or ammunton n nterstate or foregn commerce. There-
fore, every manufacturer or deaer wthn the meanng of the ct und these regu-
atons (see secton 315.1 (f) and (h)) must frst procure a cense under secton
3 of the ct before he may, on or after uy 30, 1938, awfuy transport, shp, or
receve any frearms or ammunton n nterstate or foregn commerce.
It s not necessary n any case for a person censed as a manufacturer aso to
procure a cense as a dener. The cense as manufacturer enttes the censee,
wthn the mtatons of Ihe ct, to transport, shp, or receve, n nterstate or
foregn commerce, frearms or ammunton, whether of hs own producton or
produced by another. owever, a person requred to be censed as a manu-
facturer does not compy wth the provsons of the ct by procurng a cense as
deaer.
person engaged n the mportaton of frearms or ammunton for sae or
dstrbuton s requred to be censed as a manufacturer even though he may not
perform any manufacturng operatons.
person engaged n the busness of reparng frearms, or of manufacturng or
fttng speca barres, stocks, trgger mechansms, or breech mechansms to fre-
arms, f not otherwse requred to be censed as a manufacturer, must be censed
as a deaer before he may, on or after uy 30, 1938, awfuy transport, shp, or
receve any frearm, ncudng any part of a weapon (see secton 315.1(6)), or
ammunton n nterstate or foregn commerce.
Skc. 315.3. Persons not entted to a cense. cense sha not be ssued to any
person who s under ndctment for, or has been convcted of, a crme of voence
as defned n secton 1(6) of the ct, or who s a fugtve from |ustce as defned
n secton 1(7) of the ct. Nor sha a cense be ssued to any appcant wthn
two years after the revocaton of a prevous cense.
Sec. 315. . ppcaton for a cense. The appcaton for a cense sha be made
on Form 7 (Frearms), copes of whch may bo procured from coectors. The
appcaton sha be fed wth the coector for the dstrct wthn whch the
prncpa pace of busness of the appcant s ocated. The appcaton must
contan a the nformaton requred by the form.
Sec. 315.5. Lcense fees. In the case of a manufacturer the cense fee s 25
per annum, and n the case of a deaer the cense fee s 1 per annum.
Sec. 315.0. Issuance of cense. If an appcaton on Form 7 (Frearms) has
been fed wth the coector, propery e ecuted by a person awfuy entted to a
cense and accompaned by the requred cense fee, there sha be ssued to the
appcant a cense on Form 8 (Frearms).
Sec. 315.7. Scope and duraton of cense. The cense sha entte the person
to whom ssued to transport, shp, or receve frearms or ammunton n nterstate
or foregn commerce for a perod of one year from the date of ssuance, sub|ect,
however, to suspenson or revocaton of the cense at any tme f the censee s
convcted of voaton of any of the provsons of the ct. (See secton 315.9.)
cense sha not be ssued In any case for a perod of ess than one year. No
refund of any part of the amount pad as a cense fee sha be made where, for
any reason, a censee dscontnues operatons pror to the e praton of the perod
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covered by the cense. Nor sha any refund be made f the cense Is suspended
or revoked because of voaton by the censee of any provson of the ct.
When a cense has e pred, or s about to e pre, a new cense, f desred, may
be obtaned by fng wth the coector an appcaton on Form 7 (Frearms),
accompaned by the requred cense fee, provded the appcant s otherwse
entted to a cense (see secton 315.3).
The cense under secton 3 of the ct s not assgnabe or transferabe under
any crcumstances and s vad ony wth respect to the operatons of the person to
whom ssued.
The cense appes to the operatons of the censee and not to any partcuar
pace at whch busness s carred on. ccordngy, ony one cense s requred,
regardess of the number of paces at whch the censee operates. If the busness
s carred on at more than one ocaton, the cense sha be hed avaabe for
nspecton at the prncpa pace of busness and an approprate record mantaned
at a other ocatons showng where the cense s so hed.
The cense confers no rght or prvege to conduct busness contrary to State
or other aw. The hoder of a cense s not, by reason of such cense, mmune
from punshment for deang n frearms or ammunton n voaton of the pro-
vsons of any State or other aw. Smary, compance wth the provsons of
any other aw affords no mmunty under the ct. (See secton 315.12.)
Sec. 315.8. Remova of censee. censee may remove hs busness to a new
ocaton wthout procurng a new cense. owever, n every case, whether or
not the remova s from one dstrct to another, prompt notfcaton of the new
ocaton of the busness must be gven to
(1) the coector for the dstrct where the cense was ssued;
(2) the coector for the dstrct from whch or wthn whch the remova
s made; and
(3) the coector for the dstrct to whch the remova s made.
Sec. 315.9. Suspenson and revocaton of cense. Secton 3(c) of the ct
provdes n part that the cense of any person convcted of voaton of any pro-
vson of the ct sha be suspended unt fna dsposton of the case, at whch
tme, f the convcton has not been set asde, the cense sha be revoked. Secton
3(c) further provdes that a censee convcted of voaton of any provson of
the ct may be permtted to contnue n busness durng the pendency of an appea
from such convcton upon furnshng a bond of 1,000 acceptabe to the Secretary.
Upon recept by the Secretary of notce of the convcton of a censee of voa-
ton of any provson of the ct, the cense of such person sha be Immedatey
suspended n accordance wth the provsons of secton 3(c) of the ct, and the
Commssoner sha mmedatey notfy such person thereof by regstered etter
addressed to hs ast known address.
person whose cense s suspended on account of a convcton of voaton of
any provson of the ct and who desres permsson to contnue n busness durng
the pendency of an appea from such convcton sha fe an appcaton wth the
Commssoner for such permsson. The appcaton sha be under oath and
fuy set forth the grounds on whch the appcaton s based. The appcaton
sha he accompaned by a bond, runnng to the Unted States, In the pena sum
of 1,000. The condton of the bond sha be that, unt fna dsposton of the
appea, the censee w compy In every respect wth a the provsons of the
ct. s soon as possbe after the recept of the appcaton and bond, the Com-
mssoner sha notfy the appcant that, by drecton of the Secretary, s app-
caton has been granted or dened, as the case may be.
n appcaton for permsson to contnue n busness durng the pendency of
an appea from a convcton of voaton of any provson of the ct sha not
be granted f on the facts of the case the appcant woud not then be entted
to a cense were he appyng for a cense. (See secton 315.3.)
In every case, the suspenson of a cense sha reman n effect unt fna
acton s taken upon the appcaton, f made, for permsson to contnue n
busness durng the pendency of an appea from the convcton. If such app-
caton s granted, the suspenson s set asde unt fna acton upon the appea
from the convcton, at whch tme the case w be dsposed of accordng to
the outcome of the appea. If the appcaton for permsson to contnue n
busness s dened, or If no such appcaton s made, the suspenson of the
cense remans n effect throughout the pendency of the appea and fna acton
w then be taken n the case as may be requred by the outcome of the appea.
The grantng of an appcaton to contnue n busness durng the pendency
of an appea from a convcton of voaton of any provson of the ct does not
e tend the term of the cense. If a cense e pres by apse of tme before the
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200
appea s decded, the censee must procure a new cense f he desres to con-
tnue to transport, shp, or receve frearms or ammunton n nterstate or foregn
commerce. The new cense sha stand n pace of, and be sub|ect to the same
condtons as, the od cense, that s, the new cense sha be sub|ect to revocaton
f the convcton s not set asde.
If upon appea the convcton of a censee of voaton of any provsons of
the ct s not set asde, or f no appea s fed, hs cense sha be mmedatey
revoked pursuant to the provsons of secton 3(c) of the ct, and the Com-
mssoner sha mmedatey notfy such person thereof by regstered etter
addressed to hs ast known address.
The forfeture of a cense for voaton of any provson of the ct s a
separate and dstnct penaty n addton to any other penates whch may
appy n the case, whether mposed under secton 5 of the ct or under any
other provson of aw.
person whose cense has been revoked for voaton of any provson of
the ct may. f otherwse entted to a cense (see secton 315.3), agan be
censed to transport, shp, or receve frearms or ammunton n nterstate or
foregn commerce, but not unt the e praton of two years from the date of
the revocaton of the prevous cense. In such case, the appcaton for the
new cense sha be fed wth the coector n accordance wth the provsons
of secton 315. .
8U P RT D. R CORDS
Sec. 315.10. Records. (a) Manufacturers. ach censed manufacturer sha
mantan compete and adequate records of a frearms and ammunton ds-
posed of n the course of hs busness, whether manufactured by hmsef or
acqured from other manufacturers or deaers, ncudng frearms n an un-
assembed condton, but not ncudng parts of frearms. The records sha
show and ncude:
(1) the number of the frearms of eac type, together wth a fu and
adequate descrpton thereof, ncudng the sera numbers f such weapons
are numbered;
(2) the types, and quantty of each type, of ammunton;
(3) the name and address of each person from whom the frearms or
ammunton, f not the manufacturer s own product, was acqured, and
the date of acquston; and
( ) the dsposton made of the frearms or ammunton, ncudng the
name and prncpa address of each transferee, the address to whch de-
vered, and date of dsposton.
(b) Deaers. ac censed deaer sha mantan compete and adequate ec-
ords of a frearms (not ncudng parts of frearms hut ncudng frearms In
an unassembed condton) acqured or dsposed of n the course of hs busness.
The records sha show and ncude:
(1) the number of the frearms of each type, together wth a fu and
adequate descrpton thereof, ncudng the sera numbers f such weapons
are numbered;
(2) the name and address of each person from whom frearms are ac-
qured, and the date of acquston ;
(3) the dsposton made of the frearms, ncudng the name and prn-
cpa address of each transferee, the address to whch devered, and date
of dsposton.
(c) Genera. The records prescrbed by ths secton sha be n permanent
form and sha be retaned for a perod of not ess than s years from the
date of the transactons to whch the records reate. Such records must be
hed avaabe for nspecton durng busness hours by any authorzed offcer
or agent of the Unted States engaged n the performance of hs dutes under
the ct.
SU P RT . MPTIONS
Skc. 315.11. emptons. (a) Genera. Under secton of the ct, the pro-
vsons of the ct do not appy wth respect to the transportaton, shpment,
recept, or Importaton of any frearm, or ammunton, sod or shpped to, or
ssued for the use of
(1) the Unted States or any department, ndependent estabshment, or
agency thereof;
(2) any State, Terrtory, or possesson, or the Dstrct of Coumba, or
any department, ndependent estabshment, agency, or any potca sub-
dvson thereof;
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201
Msc.
(3) any duy commssoned offcer or agent of the Unted States, a State,
Terrtory, or possesson, or the Dstrct of Coumba, or any potca sub-
dvson thereof;
( ) any bank, pubc carrer, e press, or armored-truck company or-
ganzed and operatng n good fath for the transportaton of money and
vauabes, provded e empton s granted as prescrbed n subdvson (6)
of ths secton; and
(5) any research aboratory desgnated under subdvson (c) of ths
secton and granted e empton thereunder.
Secton of the ct further e empts from the provsons of the ct
(6) the .transportaton, shpment, or recept of any antque or un-
servceabe frearms, or ammunton, possessed and hed as curos or museum
peces; and
(7) shpment of frearms and ammunton to nsttutons, organzatons,
or persons to whom such frearms and ammunton may be awfuy devered
by the Secretary of War, and the transportaton of such frearms and
ammunton by ther awfu possessors whe they are engaged n mtary
tranng or n compettons.
(6) ank, pubc carrer, e press, or armored-truck company. ny bank, pub-
c carrer, e press, or armored-truck company organzed and operatng n good
fath for the transportaton of money and vauabes, may procure an e empton
under secton of the ct upon appcaton to the coector for the dstrct wthn
whch the prncpa pace of busness s ocated. Such appcaton sha be sub-
mtted under oath and show the character of the busness of the appcant and
the purposes for whch the e empton s requested. If the appcaton and the
purposes stated are bona fde, the e empton sha be granted. In a cases, as
soon as possbe after the recept of the appcaton, the coector sha notfy the
appcant by etter that, by drecton of the Secretary, the e empton s granted
or dened, as the case may be.
(c) Research aboratory. . research aboratory desrng to procure an e emp-
ton under secton of the ct sha fe an appcaton wt the Commssoner.
The appcaton sha be under oath and sha show (1) by whom and the purpose
for whch the aboratory was organzed, (2) the source of the funds e pended
for the mantenance and operatons of the aboratory, (3) the servces performed
by, and operatons of, the aboratory, and ( ) the purposes for whch the e emp-
ton Is requested. The Commssoner sha notfy the appcant that, by drecton
of the Secretary, the appcaton s granted, or dened, as the case may be.
SU P RT F MISC LL N OUS PRO ISIONS
Sec. 315.12. Reaton to other provsons of aw. The provsons of the ct and
of these reguatons are n addton to, and not n eu of, any other provson
of aw, or reguatons, respectng the manufacture or mportaton of, or deang
n, frearms or ammunton.
Sec. 315.13. Penates. Secton 5 of the ct provdes certan penates for voa-
ton of the provsons of the ct or these reguatons, and for knowngy makng
any fase statement In appyng for a cense or e empton. Wth respect to trans-
actons and deangs decared unawfu and n voaton of the act, see secton 2
of the ct.
Sec 315.1 . ffectve date. These reguatons sha take effect upon the date
of ther fng for pubcaton n the Federa Regster and sha supersede, as of
such date, the provsons of Treasury Decson 898 approved May 1, 1939, as
amended.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster uy 29,19 S, 8 : 55 a. m.)
820823 9 1
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Regs. 6 (1938), rt. 2
202
C PIT L STOC T
S CTION 601, R NU CT OF 1938
Reguatons 6 (1938), rtce 2: Dong
busness.
19 8-15-12S65
Ct. D. 170-2
C PIT L STOC T R NU CT OF 1938 D CISION OP COURT
Raroad Company Lessor op Raroad Property Carryng on or
Dong usness.
The ta payer company was essor of certan property for a term of
999 years, wth a provso n the ease agreement that nothng theren
shoud operate to grant or demse the corporate franchse possessed
by the essor or any other rght, prvege or franchse necessary to
fuy preserve ts corporate e stence or organzaton. Its actvtes
were substantay more than ownng and hodng property, coectng
and dstrbutng the ncome therefrom. It was requred to e ercse
ts powers n ad of the busness of the essee. It mantaned ts
own board of drectors, whch had four meetngs durng the year
nvoved. Its wrtten approva was requred before the sae of any
property coud be made by the essee. It approved e pendtures for
addtons, etc., to the eased propertes; approved charges and credts
to ts capta accounts made necessary by addtons, abandonments
and retrements; approved advances for acquston of rght-of-way ;
and approved agreements permttng constructon and mantenance
of santary mprovements and grantng of an easement for other pur-
poses. It mght wth the approva of the essee acqure other nes
of raway to come under the ease. The requrements of certan
forfeture provsons necesstated vgance on the part of Its offcers
f the stockhoders rghts were to be fuy protected. ed: The
company was carryng on or dong busness n the ta abe year n-
voved, wthn the meanng of secton 601 of the Revenue ct of 1938.
The Pttsburgh, Cncnnat, Chcago St. Lous Raroad Co., a Corporaton,
v. The Unted States
ones, Chef ustce, devered the opnon of the Court.
Ths case nvoves a Federa capta stock ta for the ta abe year endng
une 30, 1938.
The queston s whether pantff was carryng on or dong busness wthn
the meanng of secton 601 of the Revenue ct of 1938 (52 Stat. 7), durng
any part of such year.
Subdvson (a) of secton 601 s as foows:
(a) For each year endng une 30, begnnng wth the year endng une 30,
1938, there s hereby mposed upon every domestc corporaton wth respect to
carryng on or dong busness for any part of such year an e cse ta of f for
each 1,000 of the ad|usted decared vaue of ts capta stock.
The essenta facts are set out n the fndngs.
The pantff fed a capta stock ta return for the year n queston, decarng
the vaue of ts capta stock to be 8 ,860,000. It camed e empton from such
ta upon the bass of an accompanyng affdavt, whch set out varous facts n
respect to the organzaton, operaton and status of the corporaton durng the
perod nvoved.
The Commssoner of Interna Revenue dened the cam for e empton, and
accordngy eved an addtona assessment n the sum of 8 ,860, pus statutory
nterest, whch was pad on November 16, 1939, n the tota sum of 91,065.23.
In the Court of Cams of the Unted States
December 1, 19 7
opnon
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Regs. 6 , (1938), t. 2
tmey cam for refund was re|ected, and pantff seeks a recovery of ths
amount.
Pantff was organzed under a merger agreement of fve e stng raway
corporatons n the year 1916 for the purpose of operatng and unt anuary 1,
1921, dd operate as one raway the consodated nes appro matey 2,000 mes
n ength.
In the eary part of 1921 the pantff and the Pennsyvana Raroad Co.
entered nto a ease agreement. y the terms of the agreement pantff eased
to the Pennsyvana Raroad Co. a ts property, rghts, prveges and franchses
for a term of 999 years, wth a provso that nothng heren contaned sha oper-
ate to grant or demse the franchse to be a corporaton possessed by the essor,
or any other rght, prvege or franchse whch s or may be necessary to fuy
preserve the corporate e stence or organzaton of the essor.
The Pennsyvana Raroad Co. agreed to pay pantff (a) a f ed annua
renta; ( ) a suffcent sum each year to pay the nterest and snkng fund
obgatons upon essor s bonded or other ndebtedness and upon any ater bonds
whch mght be ssued wth essee s approva; and (c) a suffcent sum to enabe
pantff to mantan ts corporate organzaton, ncudng reasonabe organzaton,
admnstraton and ega e penses. The essee was to pay a ta es and assess-
ments eved aganst the property, a amounts requred under pantff s eases
wth certan subessor companes, and a cams arsng out of the operaton of
the eased propertes.
The essee was to keep the demsed equpment and premses n thorough repar,
workng order and condton, so that the busness of the demsed raroad woud
be preserved and deveoped and further growth of such busness provded for.
It was provded that any rea and persona property of the essor whch n the
opnon of the essee was not necessary to the contnued and prospectve use of
the eased raroads mght wth the consent of the essor, evdenced by a
resouton of ts board of drectors, be sod from tme to tme by the essee,
who agreed to receve the proceeds of any sae and appy the same, wth due
regard to any mortgages thereon, to betterments or mprovements upon or ad-
dtons to the eased raroads and property of the essor. The essee agreed
to furnsh the money for mprovements, budng, equpment and factes, but
the cost of such mprovements was to consttute an ndebtedness of the essor.
It was further provded that the ease shoud termnate upon the faure of
the essee to pay the agreed rent or any part thereof f such defaut contnued
for 30 days, and that the ease woud kewse termnate upon the faure of
the essee to keep any of the other covenants and agreements, f such defaut
contnued for 90 days after notce thereof gven n wrtng by the essor.
The ease has been n effect snce ts e ecuton. oth partes have at a tmes
comped wth ts terms.
Pantff mantaned ts prncpa offce at Phadepha, Pa., and other offces
n some four dfferent States. These offces were ocated n the offces of the
Pennsyvana Raroad, and a work performed by empoyees of the Pennsyvana
Raroad wthout compensaton from pantff. The pantff at a tmes had a
fu compement of offcers, such as are ordnary had by raroad companes,
ncudng presdent, vce presdents, secretary, assstant secretary, treasurer and
assstant treasurer. The ndvduas who hed these offces hed the same offces
wth the Pennsyvana Raroad, wth one or two e ceptons. Pantff had 15
drectors, of whom 10 were aso drectors of the Pennsyvana Raroad. cept
for the offcers and drectors, pantff had no empoyees and pad no saares, a
the work of pantff beng performed by the offcers and empoyees of the
Pennsyvana Raroad Co.
Durng the fsca year endng une 30, 1938, pantff s stockhoders had one
meetng, and ts board of drectors had four meetngs. The ony busness trans-
acted at the stockhoders meetng was the approva of the annua report of ts
presdent and board of drectors, and the eecton of a board of drectors. t the
drectors meetngs busness was transacted as foows:
(a) pproved reports of saes of rea estate nvovng consderaton of
not to e ceed 10,000 n any one sae, made n accord wth a resouton of
pantff s board of drectors theretofore passed authorzng the presdent
or vce presdent of pantff company to approve saes of rea estate not
e ceedng 10,000 n vaue upon such terms and for such consderaton as n
the |udgment of the presdent and vce presdent were |ust and reasonabe,
and to e ecute such deeds and nstruments n connecton therewth as mght
be necessary, wthout further acton by the board;
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Regs. 6 (1938), rt. 2
20
(6) pproved e pendtures for addtons, betterments, and mprovements
made by the Pennsyvana Raroad Co.;
(c) pproved charges and credts to pantff s capta account because
of addtons, abandonments, retrements or other ad|ustments n connecton
wth the road, equpment, and other parts of the eased premses;
(d) pproved advances by the Pennsyvana Raroad Co. for the acqus-
ton of rght-of-way and for other purposes as requred under the ease;
(e) pproved agreements entered nto by the Pennsyvana Raroad Co.
whch gave the Santary Dstrct of Chcago permsson to construct, man-
tan and operate a sewer under pantff s property, and aso an easement
gven by the essee.
compete set of books was mantaned by pantff, In whch was recorded
the varous transactons affectng pantff as essor, ncudng transfers of
property, addtons to or reductons n the capta accounts, changes n capta
stock and bonded ndebtedness, dvdend and nterest accounts and other accounts
whch ordnary appear n a raroad accountng system.
fter anuary 1, 1921, pantff dd not run any raroad tran, se any
transportaton, make any appcatons to the Interstate Commerce Commsson
for the estabshment of freght or passenger rates or otherwse engage In oper-
atng these raroad nes. Pantff was not n qudaton, but remaned n
e stence as requred by the ease agreement and engaged n the actvtes
requred under the ease agreement and by reason of ts corporate e stence.
The pantff Inssts It was not dong busness wthn the meanng of the ta ng
statute. It ctes a number of cases, ncudng McCoaeh v. Mneh d Schuyk
aven R. R. Co. (228 U. S. 295) ; North Pennsyvana Raroad Co. v. Rothenses
( 5 Fed. Supp. 86) ; Mahonng Coa R. Co. v. ggns (57 Fed. Supp. 717).
The defendant nssts that the actvtes of the essor consttuted dong busness
wthn the meanng of the statute, and ctes numerous cases, ncudng dgar
states Corporaton v. The Unted States (65 C. Cs., 15, 22 T. D. 180. C. .
II-2, 381 (1928) ) ; Fnt v. Stone Tracy Co. (220 U. S. 107) ; Wsconsn Centra
Ry. Co. v. The Unted States (70 C. Cs. 203, 231).
It Is not necessary to dscuss n deta these and other cases cted by the respec-
tve partes.
The upshot of these decsons s that each case must stand on Its own bottom;
that no partcuar voume of busness s necessary and that each case must be
decded separatey upon the bass of whether the facts of the case consttute
carryng on or dong busness wthn the meanng of the statute.
The pantff rees argey upon the decson of the Supreme Court n the
Mneh case, supra. The facts n that case are n some respects smar to the
facts n the case at bar. oth cases nvove the capta stock ta eved upon
the essor company n connecton wth eased premses and factes and the
operaton of the eased raway. In the Mneh case the pantff was hed not
sub|ect to the capta stock ta . owever, In the decson In that case the court
uses the foowng anguage, at page 305:
It shoud be mentoned that there s nothng n the record to show that durng
the ta ng years In queston the company e ercsed ts power of emnent doman,
or put n force any other speca corporate power, n ad of the busness of the
essee. We therefore do not pass upon the queston whether, f t shoud do so,
t woud be ta abe under the act n queston.
It w be seen then that by e press anguage the court narrowed and mted
the effect of ts decson.
Was the essor merey a she corporaton or was t dong busness
The queston s somewhat dffcut, but when the entre record s consdered we
have concuded that pantff was dong busness wthn the meanng of the
statute.
s a genera rue a corporaton of the type nvoved here Is e empt If ts actv-
tes are mted to ownng and hodng property, coectng the ncome therefrom
and dstrbutng t. ( on aumbach v. Sargent Land Co., 2 2 U. S. 503, 517.)
The essor s actvtes were substantay more than ths.
Pantff was not ony requred to mantan a corporaton but to e ercse Its
powers n ad of the busness of the essee. It mantaned Its own board of
drectors whch had four meetngs durng the year nvoved. Its approva n
wrtng was requred by the terms of the ease before a sae of any of the property
coud be made by the essee. Ths requred some dscreton In protectng the
rghts of the respectve corporatons. It approved e pendtures for addtons,
betterments and mprovements to the eased propertes. It approved charges
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205
Regs. 6 (1938), rt. 2
and credts to pantff s capta accounts made necessary by ddtons, abandon-
ments and retrements. It approved advaces for the acquston of rght-of-way.
It approved agreements permttng the Chcago Dstrct to construct and man-
tan santary mprovements, and the grantng of an easement for other purposes.
It mght wth the approva of the essee acqure other nes of raway to come
under the ease.
There were two forfeture provsons, (1) defaut, on the part of essee, n the
payment of rent for a perod of 30 days, and (2) faure on the part of the essee
to keep and perform any of the covenants and agreements contaned n the ease
for a perod of 90 (ays. The nstrument of ease provded that
n ether and every such case, It sha be awfu for the essor, ts successors or
assgns, at ts or ther own opton, to decare ths ease forfeted and ended, and
thereupon to enter nto and upon the raroads and premses hereby demsed,
and any and every part thereof, and remove a persons therefrom; and thereupon
and from thenceforth, the sad raroads and property hereby demsed, wth a
appurtenances thereof, and a addtons and mprovements whch sha have been
made to the same, sha revert to the essor, to have, hod, possess and en|oy as
of ts frst or former estate theren, as fuy and competey, n a respects, as f
ths ease had not beeh made; and upon such entry for nonpayment of rent or
breach or nonperformance of any covenant or agreement heren contaned to be
by the essee observed or performed, a the estate, rght, tte, nterest, property,
possesson, cam and demand whatsoever of the essee, ts successors or assgns,
In or to the sad raroads and property, or any part thereof, sha absoutey
cease, termnate and become and be vod and whoy e tngushed, anythng here-
nbefore contaned to the contrary n anywse notwthstandng.
Certany the requrements of the second forfeture provson necesstated con-
stant vgance on the part of essor s offcers f the rghts of pantff s stock-
hoders were to be fuy protected.
True, 10 of the 15 drectors of the essor corporaton were aso drectors of the
Pennsyvana Co., but 5 of them were not. It Is aso true that the vast ma|orty
of the stock of the essor was owned by the essee, hut a part of t was not, and
t was necessary that the rghts of the mnorty stockhoders be preserved.
These dutes were not perfunctory. It seems a omatc that f the essor drec-
tors had pad no attenton to how the essee was carng for essor s propertes
and had permtted the essee company to dspose of essor s property whch essee
regarded as unnecessary wthout regard to ts prce or vaue, the mnorty stock-
hoders mght have had a bass for acton to protect ther rghts.
There must be a reason for wantng to mantan two corporatons over the ong
ease perod. Naturay ncome ta es woud be affected by the dsposton of
property owned by the essor company as we as by repacement and dscardng
of od propertes.
The capta ta evy Is comparatvey sma. It s eved on the prvege of
dong busness. We are unabe to escape the concuson that pantff n the
pecuar crcumstances of ths case was dong busness under the broad terms of
the capta stock statute. The petton s dsmssed.
It Is so ordered.
owe, udge; Madden, udge; Whtakeb, udge; and Ltteton, udge,
concur.
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MISC LL N OUS RULINGS
S CTION 3 OF T INSON CT ( 8 ST T. 503, 505),
S M ND D
19 8-16-12891
Mm. 6185
( mended)
Reports requred under proft-Umtng provsons of the nson ct
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C, uy 9, 19 3.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
eads of Fed Dvsons of the Technca Staff, and Others Con-
cerned:
The frst sentence of the fourth paragraph of Mmeograph 0185
C. . 19 7-2, 217 , dated September 15, 19 7, as amended C. .
19 8-1, 1 3 on March 8,19 8, s hereby further amended to read:
owever, a genera e tenson of tme s hereby granted to contractors and sub-
contractors to and ncudng March 15, 19 9, for tng annua reports of proft
under the proft-mtng provsons of the nson ct, as amended, for ncome-
ta abe years endng pror to une 1, 19 8.
Geo. . Schoeneman,
Commssoner.
MISC LL N OUS
19 8-20-12935
D. C.833
19 8. Department Crcuar No. 883. Fsca Servce. ureau of the Pubc Debt
Unted States of merca. Treasury Savngs Notes. Seres D
Treasury Department,
Offce of the Secretary,
Washngton, ugust 17,19 8.
I. OFF RING OF NOT S
1. The Secretary of the Treasury, pursuant to the authorty of the
Second Lberty ond ct, as amended, offers for sae to the peope
of the Unted States, at par, an ssue of notes of the Unted States,
desgnated Treasury Savngs Notes, Seres D, whch notes, f nscrbed
n the name of a Federa ta payer, w be recevabe as herenafter
provded at par and accrued nterest n payment of ncome, estate,
(207)
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Msc.
208
and gft ta es mposed by the Interna Revenue Code, or aws amend-
atory or suppementary thereto.
2. The sae of Treasury Savngs Notes, Seres C, ssued under De-
partment Crcuar No. 696, frst revson, dated November 20, 19 3, s
hereby termnated at the cose of busness ugust 31,19 8.
3. The sae of notes of Seres D offered by ths crcuar w contnue
unt termnated by the Secretary of the Treasury.
t. D SCRIPTION OF NOT S
1. Genera. Treasury Savngs Notes, Seres D, w n each nstance
be dated as of the 1st day of the month n whch payment, at par, s
receved and credted by an agent authorzed to ssue the notes. They
w mature 3 years from that date, and may not be caed by the Secre-
tary of the Treasury for redempton before maturty. notes ssued
durng any one caendar year sha consttute a separate seres nd-
cated by the etter D foowed by the year of maturty. t the tme
of ssue the authorzed ssung agent w nscrbe on the face of each
note the name and address of the owner w enter the date as of whch
the note s ssued, and w mprnt hs datng stamp (wth current
date). The notes w be ssued n denomnatons of 100. 500, 1,000.
5,000, 10,000, 100,000, 500,000, and 1,000,000. change of
authorzed denomnatons from hgher to ower, but not from ower
to hgher, may be arranged at the offce of the agent that ssued the
note.
2. cceptance for ta es or cash redempton. If nscrbed n the
name of an ndvdua, corporaton, or other entty payng ncome,
estate, or gft ta es mposed under the Interna Revenue Code, or
aws amendatory or suppementary thereto, the notes w be recev-
abe, sub|ect to the provsons of secton I of ths crcuar, at par and
accrued nterest, n payment of such ncome, estate, or gft ta es
assessed aganst the owner or hs estate. If not presented n payment
of ta es, or f not nscrbed n the name of a ta payer abe to the
above-descrbed ta es, and sub|ect to the provsons of secton of
ths crcuar, the notes w be payabe at maturty, or at the owner s
opton and request they w be redeemabe before maturty at par
and accrued nterest.
3. Interest. Interest on each 1,000 prncpa amount of Savngs
Notes, Seres D, w accrue each month from the month of ssue, on
a graduated scae, as foows:
Frst to s th months, ncusve 0. 80 each month
Seventh to twefth months, Incusve 1. 00 each month
Thrteenth to eghteenth months, ncusve 1. 20 each month
Nneteenth to twenty-fourth months, ncusve 1.30 each month
Twenty-ffth to thrty-s th months, ncusve 1. 0 each month
The tabe appended to ths crcuar shows for notes of each denomna-
ton, for each consecutve caendar month from month of ssue to
month of maturty, (a) the amount of nterest accura, (b) the
prncpa amount of the note wth accrued nterest (cumuatve)
added, and (c) the appro mate nvestment yeds. In no case sha
nterest accrue beyond the month n whch the note s presented n
payment of ta es or for redempton before maturty as provded n
secton of ths crcuar, or beyond ts maturty. Interest w be pad
ony wth the prncpa amount.
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209
Msc.
. Forms of nscrpton. Treasury Savngs Notes, Seres D, may
be nscrbed n the name of an ndvdua, corporaton, unncorporated
assocaton or socety, or a fducary (ncudng trustees under a duy
estabshed trust where the notes woud not be hed as securty for
the performance of a duty or obgaton), whether or not the nscrbed
owner s sub|ect to ta aton under the Interna Revenue Code, or
aws amendatory or suppementary thereto. They may aso be n-
scrbed n the name of a town, cty, county, or State or other govern-
menta body, and n the name of a partnershp, but notes n the name of
a partnershp are not acceptabe n payment of ta es, snce a partner-
shp s not a ta payng entty under the Interna Revenue Code. The
notes w not be nscrbed n the names of two or more persons as
|ont owners or coowners; or n the name of a pubc offcer, whether
or not named as trustee, where the notes woud n effect be hed as
securty.
5. Nontransferabty. The notes may not be transferred n ord-
nary course, e cept that (1) f nscrbed n the name of a marred man
they be ressued n the name of hs wfe, or f nscrbed n the name of a
marred woman they may be ressued n the name of her husband, upon
request of the person n whose name the notes are nscrbed and the
surrender of the notes to the agent that ssued them; (2) f nscrbed
n the name of a corporaton ownng more than 50 percent of the stock,
wth votng power, of another corporaton, the notes may be ressued
n the name of the subsdary upon request of the corporaton and
surrender of the notes to the agent that ssued them; (3) upon the
death or dsabty of an ndvdua nscrbed owner or the dssouton,
consodaton, or merger of a corporaton or unncorporated assoca-
ton named as owner, ressue or payment may be mare n accordance
wth secton I hereof; and ( ) payment, but not ressue, may be
made as a resut of ega proceedngs as set forth n sad secton I.
The notes may not be hypothecated and no attempted hypothecaton
or pedge as securty w be recognzed by the Treasury Department:
Provded, however. That the notes may be pedged as coatera for
oans from bankng nsttutons and f tte thereto s acqured by a
bank because of the faure of a oan to be pad, the notes w be re-
deemed at par and accrued nterest to the month n whch acqured on
surrender to the agent who ssued them, accompaned by proof of the
date of acquston and by request of the pedgee under power of attor-
ney gven by the pedgor n whose name the notes are nscrbed. The
notes w not be transferred to a pedgee. The notes w not be
acceptabe to secure deposts of pubc moneys.
6. Ta aton. Income derved from the notes sha be sub|ect to a
ta es mposed under the Interna Revenue Code or aws amendatory
or suppementary thereto. The notes sha be sub|ect to estate, n-
hertance, gft, or other e cse ta es, whether Federa or State, but
sha be e empt from a ta aton now or hereafter mposed on the
prncpa or nterest thereof by any State, or any of the possessons of
the Unted States, or by any oca ta ng authorty.
III. PURC S OF NOT S
1. Offca agences. In addton to the Treasury Department, the
Federa Reserve banks and ther branches are hereby desgnated
agences for the ssue and redempton of Treasury Savngs Notes,
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210
Seres D. The Secretary of the Treasury, from tme to tme, n hs
dscreton, may desgnate other agences for the ssue of the notes, or for
acceptng appcatons therefor, or for makng payments on account
of the redempton thereof.
2. ppcatons and payment. ppcatons w be receved by the
Federa Reserve banks and branches, and by the Treasurer of the
Unted States, Washngton, D. C. ankng nsttutons and securty
deaers generay may submt appcatons for account of customers,
but ony the Federa Reserve banks and ther branches and the Treas-
ury Department are authorzed to act as offca agences. The use of
an offca appcaton form s desrabe but not necessary. ppro-
rate forms may be obtaned on appcaton to any Federa Reserve
ank or branch, or the Treasurer of the Unted States, Washngton,
D. C. very appcaton must be accompaned by payment n fu, at
par. ny form of e change, ncudng persona checks, w be ac-
cepted sub|ect to coecton, and shoud be drawn to the order of the
Federa Reserve bank or of the Treasurer of the Unted States, as
payee, as the case may be. The date funds are made avaabe on co-
ecton of e change w govern the ssue date of the notes. ny de-
postary, quafed pursuant to the provsons of Treasury Department
Crcuar No. 92, Revsed, as amended, w be permtted to make pay-
ment by credt for notes apped for on behaf of tsef or ts customers
up to any amount for whch t sha be quafed n e cess of e stng
deposts.
3. Reservatons. The Secretary of the Treasury reserves the rght
to re|ect any appcaton n whoe or n part, and to refuse to ssue or
permt to be ssued hereunder any notes n any case or n any cass or
casses of cases f he deems such acton to be n the pubc nterest, and
hs acton n any such respect sha be fna. If an appcaton s
re|ected, n whoe or n part, any payment receved therefor w be
refunded.
. Devery of notes. Upon acceptance of fu-pad appcatons,
notes w be duy nscrbed and, uness devered n person, w be
devered, at the rsk and e pense of the Unted States at the address
gven by the purchaser, by ma, but ony wthn the Unted States, ts
terrtores, and nsuar possessons and the Cana Zone. No deveres
esewhere w be made.
I . PR S NT TION IN P YM NT OF T S
1. Durng and after the second caendar month after the month of
purchase (as shown by the ssue date on each note), durng such tme,
and under such rues and reguatons as the Commssoner of Interna
Revenue, wth the approva of the Secretary of the Treasury, sha
prescrbe, notes ssued hereunder n the name of a ta payer (ndvd-
ua, corporaton, or other entty) may be presented and surrendered by
such ta payer, hs agent, or hs estate, to the coector of nterna reve-
nue to whom the ta return s made, and w be recevabe by the
coector at par and accrued nterest from the month of ssue to the
month, ncusve (but no accrua beyond maturty), n whch presented,
n payment of any ncome (current and back persona and corporaton
ta es, and e cess profts ta es), or any estate or gft ta es (current and
back) mposed by the Interna Revenue Code, or aws amendatory or
suppementary thereto, assessed aganst the nscrbed owner or hs
estate. The notes must be forwarded to the coector at the rsk and
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211
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e pense of the owner, and, for the owner s protecton, shoud be for-
warded by regstered ma, f not presented n person.
. C S R D MPTION T OR PRIOR TO M TURITY
1. Genera. (a) ny Treasury Savngs Note of Seres D not pre-
sented n payment of ta es w be pad at maturty, or, at the opton
and request of the owner and wthout advance notce, w be redeemed
before maturty, but the notes may be redeemed before maturty ony
durng and after the fourth caendar month after the month of ssue
(as shown on the face of each note). (6) Payment at maturty or on
redempton before maturty w be made at par and accrued nterest
to the month of payment, e cept, f a note s nscrbed n the name of
a bank that accepts demand deposts, payment at maturty or on re-
dempton before maturty w be made ony at the ssue prce, or par,
of the note. owever, f a note s acqured by any such bank through
forfeture of a oan, payment w be made at the redempton vaue for
the month n whch so acqured.
2. ecuton of request for payment. The owner n whose name
the note s nscrbed must appear before one of the offcers authorzed
by the Secretary of the Treasury to wtness and certfy requests for
payment, estabsh hs dentty, and n the presence of such offcer sgn
the request for payment appearng on the back of the note, addng the
address to whch check s to be maed. fter the request for payment
has been so sgned, the wtnessng offcer shoud compete and sgn the
certfcate provded for hs use.
3. Offcers authorzed to wtness and certfy requests for payment.
offcers authorzed to wtness and certfy requests for payment of
Unted States Savngs onds, as set forth n Treasury Department
Crcuar No. 530, S th Revson, as amended, are hereby authorzed
to wtness and certfy requests for cash redempton of Treasury notes
ssued under ths crcuar. Such offcers ncude, among others. Unted
States postmasters, certan other post-offce offcas, offcers of a banks
and trust companes ncorporated n the Unted States or ts organzed
terrtores, ncudng offcers at branches thereof, and commssoned
offcers of the rmy, Navy, Marne Corps, and Coast Guard.
. Presentaton and surrender. Notes bearng propery e ecuted re-
quests for payment must be presented and surrendered to any Fed-
era Reserve bank or branch or to the Treasury Department, Washng-
ton. D. C, at the e pense and rsk of the owner. For the owner s
protecton, notes shoud be forwarded by regstered ma, f not pre-
sented n person,
5. Parta redempton. Parta cash redempton of a note, cor-
respondng to an authorzed denomnaton, may be made n the same
manner as for fu cash redempton, approprate changes beng made
n the request for payment. In case of parta redempton of a note,
the remander w be ressued n the same name and wth the same
date of ssue as the note surrendered.
6. Payment. Payment of any note, ether at maturty or on re-
dempton before maturty, w be made by any Federa Reserve bank
or branch or the Treasury Department, foowng cearance wth the
agent of ssue, whch w be obtaned by the agent to whch the note
s surrendered. Payment w be made by check drawn to the order
of the owner, and maed to the address gven n hs request for
payment.
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212
I. P YM NT OR R ISSU TO OT R T N INSCRI D OWN R
1. Death or dsabty. In case of the death or dsabty of an n-
dvdua owner and the notes are not to be presented n payment of
ta es, payment w be made to the duy consttuted representatve of
hs estate, or they may be ressued to one or more of hs hers or
egatees upon satsfactory proof of ther rght; but no ressue w be
made n two names |onty or as coowners.
2. Dssouton or merger of corporatons, etc. If a corporaton or
unncorporated body, n whose name notes are nscrbed, s dssoved,
consodated, merged, or otherwse changes ts organzaton, the notes
may be pad to, or ressued n the name of those persons or organza-
tons awfuy entted to the assets of such corporaton or body by
reason of such changes n organzaton.
3. ankruptcy. If an nscrbed owner of notes s decared bank-
rupt or nsovent, payment, but not ressue, w be made to the duy
quafed trustee, recever, or smar representatve f the notes are
submtted wth satsfactory proof of hs appontment and quafcaton.
. Credtors rghts. Payment, but not ressue, w be made as a
resut of |udca proceedngs n a court of competent |ursdcton, f
the notes are submtted wth proper proof of such proceedngs and
ther fnaty.
5. Instructons and nformaton. efore e ecutng the request for
payment or submttng the notes under the provsons of ths secton,
nstructons shoud be obtaned from a Federa Reserve bank or branch
or from the Treasury Department, Dvson of Loans and Currency.
Washngton 25, D. C.
II. G N R L PRO ISIONS
1. Reguatons. cept as provded n ths crcuar, the notes ssued
hereunder w be sub|ect to the genera reguatons of the Treasury
Department, now or hereafter prescrbed, governng bonds and notes
of the Unted States; the reguatons currenty n force are contaned
n Department Crcuar No. 300, as amended.
2. Loss, theft, or destructon. In case of the oss, theft, or destruc-
ton of a savngs note mmedate notce (whch shoud ncude a fu
descrpton of the note) shoud be gven the agency whch ssued the
note and nstructons shoud be requested as to the procedure necessary
to secure a dupcate.
3. Fsca agents. Federa Reserve banks and ther branches, as
fsca agents of the Unted States, are authorzed to perform such serv-
ces or acts as may be approprate and necessary under the provsons
of ths crcuar and under any nstructons gven by the Secretary of the
Treasury, and they may ssue nterm recepts pendng devery of the
defntve notes.
. mendments. The Secretary of the Treasury may at any tme
or from tme to tme suppement or amend the terms of ths crcuar,
or of any amendments or suppements thereto, and may at any tme
or from tme to tme prescrbe amendatory rues and reguatons gov-
ernng the offerng of the notes, nformaton as to whch w prompty
be furnshed to the Federa Reserve banks.
ohn W. Snyder,
Secretary of the Treasury.
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215
Regs. 3, 182. 85a, etc.
INDUSTRI L LCO OL
INT RN L R NU COD
Reguatons 3, Sectons 182. 85a, 182.6 8a, and
182.6 8b.
19 8-15-12868
T. D.5633
TITL 26 INT RN L R NU . C PT R 1. SU C PT R C, P RT 182.
INDUSTRI L LCO OL
Treasury Department,
Offce of Commssoner of Intern a Revenue,
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1,19 7, a notce of proposed rue makng regardng
ndustra acoho was pubshed n the Federa- Regster (12 F. R.
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 182. 85a, 182.6 8a,
and 182.6 8b of Reguatons 3, approved March 6, 19 2 (26 CFR,
Part 182), are hereby adopted.
3. These amendments are desgned to provde rues for the report-
ng of transactons n warehouse recepts.
btce II. Operaton of Industra coho onded Warehouses
Sec. 182. 85a. Warehouse Recepts Coverno coho. Snce the sae of
warehouse recepts for dsted sprts s equvaent to the sae of dsted sprts,
every propretor of an ndustra acoho pant or bonded warehouse who ses,
or offers for sae, warehouse recepts for acoho stored n ndustra acoho bonded
warehouses or customs bonded warehouses, or esewhere, or who ses, or offers
for sae, dsted sprts (other than acoho) stored In nterna revenue or
customs bonded warehouses, or esewhere, ncurs abty to speca tu as a
deaer n quors at the pace where such warehouse recepts are sod or offered
for sae (e cept saes made at the ndustra acoho pant or ndustra acoho
bonded warehouse of warehouse recepts coverng acoho n the ndustra acoho
pant or ndustra acoho bonded warehouse or n ta -pad storeroom provded
n connecton wth such bonded warehouse), and must fe return and pay occupa-
tona ta n accordance wth the aw and reguatons governng the payment
of such speca ta es (26 CFR, Part 19 ). (Sees. 3103, 3105, 312 , 3176, 3250(a),
325 , 3270, 3271, 3272, I. R. C.)
Sec. 182.6 8a. Record of Warehouse Recepts To e ept by Propretor.
very propretor of an Industra acoho pant or bonded warehouse who ses, or
offers for sae, acoho or other dsted sprts by warehouse recepts sha k ep a
separate record, and render a monthy transcrpt, of a purchases and saes
of warehouse recepts on Form 52-F, Whoesae Lquor Deaer s Monthy Record
and Report of Purchases and Saes of Warehouse Recepts for Dsted Sprts.
There need not be reported on Form 52-F transactons n warehouse recepts
not nvovng the purchase or sae of acoho or other dsted sprts, such as
the recept from a warehouseman of warehouse recepts coverng the depost
of acoho or other dsted sprts n hs warehouse or the surrender of ware-
house recepts for the transfer, n bond, of acoho or other dsted sprts, to
another warehouse. ntres on Form 52-F sha be made as ndcated by the
headngs of the coumns and nes of the form and n accordance wth the nstruc-
tons prnted thereon or Issued n respect thereto, and as requred by these regu-
tons. The provsons of secton 182.6 8(a) wth respect to the tme of makng
mendng Reguatons 3
7118).
S L S OF LCO OL
R CORDS ND R PORTS OF PROPRI TOR
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Regs. 3, 182.6 8(c)
216
entres, and of secton 182.6 8(e) wth respect to forms to be provded by users,
are hereby made appcabe to Form 52-F. The provsons of secton 182.6 8(8)
wth respect to a separate record of sera numbers of cases are hereby made
appcabe to Form 52-F wth respect to sera numbers of packages and cases
purchased or sod by warehouse recepts. The monthy transcrpt on Form 52-F
sha be forwarded to the dstrct supervsor on or before the 10th day of the
succeedng month. The physca remova of acoho from the Industra acoho
pant n connecton wth whch a bonded warehouse s not mantaned sha con-
tnue to be reported n accor. .mce wth the provsons of secton 182. 58. The
physca remova of acoho from the Industra acoho bonded warehouse sha
contnue to be reported on Forms 1 3- and 1 3- n accordance wth the
provsons of sectons 182.6 5 and 182.6 6. respectvey. The physca recept
and dsposton of acoho at ta -pad premses sha contnue to be reported on
Form 52- or Record 52, as the case may be, n accordance wth the provsons
of secton 182.6 8. (Sees. 2S57, 2850, 3105, 312 , 3176, 325 , L R. C.)
Sec. 182.6 8b. Pace Where Form 52-F Sha e ept. very propretor
of an ndustra acoho pant or bonded warehouse sha keep Form 52-F at
the pace of busness where warehouse recepts are sod or offered for sae.
(Sees. 2857, 2850, 3105, 312 , 3176, 325 , I. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned
n sectons 2857,2859, 3103. 3105. 3121, 3176. 3250(a), 325 , 3270. 3271.
and 3272 of the Interna Revenue Code (U. S. C, tte 26. sectons
2857, 2859, 3103, 3105, 312 , 3176, 3250(a), 325 . 3270, 3271, and
3272).)
Geo. . Schoeneman,
Commssoner.
pproved une 25. 19 8.
. L. M. Wogns,
ctng Secretary of the Treasury.
(Pubshed In the Federa Regster uy 3, 19 8)
Reguatons 3, Secton 182.6 8(c) : Reports. 19 8-1 -128 8
T. D.5621
TITL 26 INT RN L R NU . C PT R I, SU C PT R C P RT 182.
INDUSTRI L LCO OL
mendng Reguatons 3
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 5, D. O.
To Dstrct Superv-sor and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
3, Industra coho, approved March 6. 19 2 (26 CFR, Fart 182)
those provsons of Treasury Decson 5323 C. . 19 , 695 , approved
anuary 5, 19 (26 CFR, Part 171), whch pertan to reports pre-
ared and fed by propretors of ndustra acoho bonded ware-
ouses who mantan ta -pad storerooms n connecton wth such
warehouses.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve
Procedure ct (Pubc Law 0 , Seventy-nnth Congress) s unneces-
sary n connecton wth the ssuance of these reguatons for the
reason that no change s made n e stng requrements of reguatons.
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217
Regs. 3, f 182.6 8(c)
8. Reguatons 3, Industra coho, approved March 6, 19 2
(26 CF , Part 182). are hereby amended by addng subparagraph (1)
to secton 182.6 8(o), as foows:
rtce II. Operaton of Industra coho onded Warehouses
R CORDS ND R PORTS OF PROPRI TOR
Sec. 1S2.C S(c). Reports. (1) ddtona requrements. (a) The propretor
of an ndustra acoho bonded warehouse who mantans a ta -pad storeroom
n connecton wth such warehouse sha report, on Form 52- , Part 2, and when
Record 52 s kept, on Part 2 and on transcrpt, Form 52- , the name and address
of each consgnee, n the coumn now desgnated Name. In the coumn now
desgnated ddress, here w be reported the name and address of the person,
frm, or corporaton payng (by advancement or rembursement) ether ta ,
bottng charge, brokerage fee, handng charge, or cearance fee, ndcatng whch
are ncuded. The headng of both coumns w be amended accordngy.
(6) Where the propretor of an ndustra acoho bonded warehouse shps
or devers acoho to a consgnee on the order of another whoesae quor deaer,
detaed records of the transactons sha be kept (1) on Form 52- by the
propretor of the ndustra acoho bonded warehouse makng the shpment or
devery, (2) on Record 52 by the whoesae quor deaer gvng the order, and
(3) on Record 52 by the consgnee If he s a whoesae quor deaer. For
e ampe, assumng that the propretor of ndustra acoho bonded warehouse
( ) shps or devers the acoho to consgnee (C) on the order of whoesae
deaer ( ), entres w be made on the prescrbed forms as foows:
(1) the propretor of the Industra acoho bonded warehouse ( ) w
show n hs Form 52- the name and address of whoesae deaer ( ) who
ordered the acoho, as we as the name and address of consgnee (C), the
person to whom the acoho s actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the acoho was
purchased from warehouseman ( ), gvng both the name and address of ( ),
and w at the same tme make an entry showng that the acoho was shpped
or devered by ( ) to consgnee (C), gvng the name and address of (C) ;
and
(3) consgnee (C). If a whoesae quor deaer, w show n hs Record
52 that the acoho was purchased from whoesae deaer ( ) and receved
by hm from the propretor of ndustra acoho bonded warehouse ( ),
gvng name and address of both. copy of Form 52- and transcrpts of
Record 52 on Forms 52- and 52- , requred to be fed wth the dstrct
supervsor, w smary show the detas of such transactons.
(o) Where the propretor of an ndustra acoho bonded warehouse keeps
Record 52, and s a party to transactons smar to those descrbed In subsecton
(6), he sha make smar entres of such transactons n Record 52, and the
transcrpts on Forms 52- and 52- , requred to be fed wth the dstrct super-
vsor, w kewse show the detas of the transactons. (Sees. 3101, 3105,
312 (a) (6), 3171, 3176, I. R. C.)
. The provsons of Treasury Decson 5323 reatng to propretors
of ndustra acoho bonded warehouses are revoked as of the effectve
date of ths Treasury Decson.
5. Ths Treasury Decson sha be effectve upon fng for pub-
caton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 3101, 3105, 312 (a) (6), 3171, and 3176. of the Interna Reve-
nue Code (U. S. C., tte 26, sectons 3101, 3105, 312 (a) (6), 3171, and
317G).)
Geo. . Schoeneman,
Commssoner.
pproved une 18, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29, 19 8, 8 : 6 a. m.)
820823 19 15
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218
DISTILL D SPIRITS
INT RN L R NU COD
19 8-15-12869
Ct D.1703
LCO OL T INT RN L R NU COD D CISION OP SUPR M COURT
Seakches and Sezures adty of hrest Wthout Warrant of
Person Commttng Feony n Presence of Federa Offcer
adty of Sezure of Contraband Property Wthout Search
Warrant.
The arrest of a person whe engaged n operatng an ega st
In the presence of an agent of the coho Ta Unt, a peace offcer
of the Unted States, n a budng whch was awfuy entered by
such agent, was vad despte the faure to obtan a warrant of
arrest; but the sezure, wthout a search warrant, of contraband
property the e stence and precse nature and ocaton of whch the
aw enforcement offcers were aware ong before makng the arrest
and for whch they had abundant opportunty to obtan such warrant,
was unreasonabe and Iega under the fourth amendment to the
Consttuton of the Unted States.
Supreme Court of the Unted States
ack Trvp-ano, Romdo Rccarde, nthony ntonoe, and Rordan . . Roett,
r., pettoners, v. Unted States of merca
On wrt of certorar to the Unted States Crcut Court of ppeas for the Thrd Crcut
une 1 , 19 8
OPINION
Mr. ustce Murphy devered the opnon of the Court.
Ths case adds another chapter to the body of aw growng out of the fourth
amendment to the Consttuton of the Unted States. That amendment pro-
vdes : The rght of the peope to be secure n ther persons, houses, papers, and
effects, aganst unreasonabe searches and sezures, sha not be voated, and
no warrants sha Issue, but upon probabe cause, supported by oath or affrma-
ton, and partcuary descrbng the pace to be searched, and the persons or
thngs to be sezed. In other words, the fourth amendment s a recognton of
the fact that n ths Naton Indvdua berty depends n arge part upon freedom
from unreasonabe Intruson by those In authorty. It Is the duty of ths Court
to-gve effect to that freedom.
In anuary, 19 6, the pettoners sought to ease part of the e farm n Mon-
mouth County, N. ., and to erect a budng thereon. e suspected that they
ntended to bud and operate an ega st. e accordngy reported the mat-
ter to the approprate Federa authorty, the coho Ta Unt of the ureau
of Interna Revenue. The Federa agents tod e to accept the proposton,
provded he dd nothng to entce or encourage the pettoners Into gong ahead
wth ther pans and provded he kept the agents nformed of a deveopments.
Nsen, one of the agents, was assgned n February to work on the farm n the
dsguse of a dumb farm hand and to accept work at the st f pettoners
shoud offer t.
Toward the end of March, 19 6, e agreed wth pettoners to et them rent
part of hs farm for 300 a month. e and Nsen asssted pettoners n the
erecton of the budng, a roughy constructed barn about 200 yards from the
e farmhouse. Nsen aso asssted n the erecton of the st and the vats.
Operaton of the st began about May 13, 19 6. Nsen thereafter worked as
mash man at a saary of 100 a week, whch he turned over to the Government.
Durng ths perod he was In constant communcaton wth hs feow agents. y
preanangement, he woud meet one or more of the agents at varous paces wth-
n a few mes of the e farm; at these meetngs the conversaton woud be
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about the st budng I had asssted n erectng or about the Ict dstery
that I was workng at on the e farm. On May 20 he met wth one of hs
superor offcers and gave m sampes of acoho, severa sugar bags, a yeast
wrapper and an empty 5-gaon can whch had been taken from the st
premses.
On May 26 Nsen receved a two-way portabe rado set from hs superors.
e used ths set to transmt frequent buetns on the actvtes of the pettoners.
On the bass of rado ntegence supped by Nsen, a truckoad of acoho was
sezed on May 31 about an hour after t had eft the farm.
t about 9 p. m. n the evenng of une 3, 19 6, Nsen radoed hs superor
that the st operators were awatng the arrva of a oad of sugar and that
acoho was to be taken from the farm when the sugar truck arrved. Nsen
apparenty knew then that a rad wus schedued for that nght, for he tod e
durng the evenng that tonght s the nght. e radoed at 11 p. m. that the
truck had been deayed but that pettoners Roett and ntonoe were at the
st.
Three Federa agents then drove to wthn 3 mes of the farm, at whch pont
they were met by e. The remander of the dstance was traversed n e s
automobe. They arrved at the farm at about 11: 5 p. m. The agents stated
that the odor of fermentng mash and the sound of a gasone motor were notce-
abe as the car was drven onto the farm premses; the odor became stronger
and the nose ouder as they aghted from the car and approached the budng
contanng the st. an De Car, one of the agents, went around one end of the
budng. Lookng through an open door nto a dmy ghted nteror he coud
see a st coumn, a boer and a gasone pump n operaton. e aso saw nto-
noe bendng down near the pump. e entered the budng and paced ntonoe
under arrest. Thereupon he sezed the ct dstery.
fter ths arrest and sezure, an De Car ooked about further and observed
a arge number of 5-gaon cans whch he ater found to contan acoho and some
vats whch contaned fermentng mash. nother agent, Casey, testfed that
he coud see severa of these cans through the open door before he entered; he
subsequenty counted the cans and found that there were 262 of them. fter he
entered he saw the remander of the dstery equpment, ncudng four arge
mash vats. The thrd agent, Gette, proceeded to a sma truck standng n the
yard and searched t thoroughy for papers and thngs of an evdentary nature.
It does not appear whether he was successfu n hs search or whether he took
anythng from the truck.
few mnutes ater Roett was arrested outsde the budng. Pettoners
Trupano and Rccarde apparenty were arrested ater that nght by other
agents, the pace and the crcumstances not beng reveaed by the record before
us. In addton, three other persons were arrested that nght because of ther con-
nectons wth the ega operatons; one of them, who was unknown to Nsen,
was arrested when he arrved at the farm wth a truck oaded wth coke.
The agents engaged n ths rad wthout securng a search warrant or warrants
of arrest. It s undented that they had more than adequate opportunty to obtan
such warrants before the rad occurred, varous Federa |udges and comms-
soners beng ready avaabe.
of the persons arrested were charged wth varous voatons of the Inter-
na Revenue Code arsng out of ther ownershp and operaton of the dstery.
Pror to the return of an Indctment aganst them, the four pettoners fed n
the Dstrct Court for the Dstrct of New ersey a moton aegng that the
Federa agents bad egay sezed a st, acoho, mash and other equpment,
and askng that a such evdence be e cuded and suppressed at any tra and
that a of the aforesad property be returned. The dstrct court dened the
moton after a hearng, hodng that the sezure was reasonabe and hence con-
sttutona. (70 F. Supp. 76 .) The Crcut Court of ppeas for the Thrd Cr-
cut affrmed per curam the order of the dstrct court (163 Fed. (2d) 828.)
Thus we have a case where contraband property was sezed by Federa agents
wthout a search warrant under crcumstances where such a warrant coud
easy have been obtaned. The Government, however, cams that the faure to
secure the warrant has no effect upon the vadty of the sezure. Reference s
made to the we estabshed rght of aw enforcement offcers to arrest wthout
a warrant for a feony commtted n ther presence (Carro v. Unted tate ,
267 U. S. 132, 150-157), a rght sad to be unaffected by the fact that there may
have been adequate tme to procure a warrant of arrest. Snce one of the pet-
toners, ntonoe, was arrested who engaged n operatng an ega st n
the presence of agents of the coho Ta Unt, hs arrest was vad under ths
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220
vew even though It occurred wthout the beneft of a warrant nd snce ths
arrest was vad, the argument s made that the sezure of the contraband open
to vew at the tme of the arrest was aso awfu. Reance s here paced on
the ong ne of cases recognzng that an arrestng offcer may ook around at
the tme of the arrest and seze those fruts and evdences of crme or those
contraband artces whch are n pan sght and n hs Immedate and dscernbe
presence. (Weeks v. Unted States, 232 U. S. 383, 392; Carro v. Unted States,
supra, 158; aneo v. Unted States, 269 U. S. 20, 30; Unted States v. Lee, 27
U. S. 559, 563; Matron v. Unted States, 275 U. S. 192, 198-199; Oo- art Co. v.
Unted States, 282 U. S. 3 , 358; Unted States v. Lefkowttg, 285 U. S. 52, 65;
arrs v. Unted States, 331 U. S. 1 5,150-151.)
We sustan the Government s contenton that the arrest of ntonoe was
vad. The Federa agents had more than adequate cause, based upon the
nformaton supped by Nsen, to suspect that ntonoe was engaged n
feonous actvtes on the farm premses. ctng on that suspcon, the agents
went to the farm and entered onto the premses wth the consent of e, the
owner. There ntonoe was seen through an open doorway by one of the
agents to be operatng an ega st, an act feonous n nature. s arrest
was therefore vad on the theory that he was commttng a feony n the ds-
cernbe presence of an agent of the coho Ta Unt, a peace offcer of the
Unted States. The absence of a warrant of arrest, even though there was
suffcent tme to obtan one, does not destroy the vadty of an arrest under
these crcumstances. Warrants of arrest are desgned to meet the dangers of
unmted and unreasonabe arrests of persons who are not at te moment com-
mttng any crme. Those dangers, obvousy, are not present where a feony
pany occurs before the eyes of an offcer of the aw at a pace where he s
awfuy present. Common sense then dctates that an arrest n that stuaton
Is vad despte the faure to obtan a warrant of arrest.
ut we cannot agree that the sezure of the contraband property was made
n conformty wth the requrements of the fourth amendment. It s a cardna
rue that, n sezng goods and artces, aw enforcement agents must secure
and use search warrants wherever reasonaby practcabe. (Carro v. Unted
States, supra, 156; Oo- art Co. v. Unted States, supra, 358; Tayor v. Unted
States, 286 U. S. 1, 6, ohnson v. Unted States, 333 U. S. 10, 1 -15.) Ths rue
rests upon the desrabty of havng magstrates rather than poce offcers deter-
mne when searches and sezures are permssbe and what mtatons shoud be
paced upon such actvtes. (Unted States v. Lefkowtz, supra, 6 .) In ther
understandabe zea to ferret out crme and n the e ctement of the capture of a
suspected person, offcers are es9 key to possess the detachment and neutraty
wth whch the consttutona rghts of the suspect must be vewed. To provde the
necessary securty aganst unreasonabe ntrusons upon the prvate ves of
ndvduas, the framers of the fourth amendment requred adherence to |udca
processes wherever possbe. nd subsequent hstory has confrmed the wsdom
of that requrement.
The facts of ths case do not measure up to the foregong standard. The
agents of the coho Ta Unt knew every deta of the constructon and
operaton of the ega dstery ong before the rad was made. One of them
was assgned to work on the farm aong wth the ct operators, makng t
possbe for hm to secure and report the mnutest facts. In cooperaton wth
the farm owner, who served as an Informer, ths agent was n a poston to suppy
Informaton whch coud easy have formed the bass for a detaed and effectve
search warrant. Concededy, there was an abundance of tme durng whch
such a warrant coud have been secured, even on the nght of the rad after
the odor and nose of the dstery confrmed ther e pectatons. nd the prop
erty was not of a type that coud have been dsmanted and removed before
the agents had tme to secure a warrant; especay s ths so snce one of them
was on hand at a tmes to report and guard aganst such a move. (See Unted
Staes v. apan, 89 Fed. (2d) 869, 871.)
What was sad n ohnson v. Unted States, supru, 15, s equay appcabe
here: No reason s offered for not obtanng a search warrant e cept the ncon-
venence to the offcers and some sght deay necessary to prepare papers and
present the evdence to a magstrate. These are never very convncng reasons
and, n these crcumstances, certany are not enough to bypass the consttutona
requrement. If the offcers n ths case were e cused from the con-
sttutona duty of presentng ther evdence to a magstrate, t s dffcut to
thnk of a case n whch t shoud be requred.
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nd so when the agents of the coho Ta Unt decded to dspense wth
a search warrant and to take matters Into ther own hands, they dd pre-
csey what the fourth amendment was desgned to outaw. Unnhbted by any
mtatons that mght have been contaned n a warrant, they descended upon
the dstery In a mdnght rad. Nothng crcumscrbed ther actvtes on that
rad e cept ther own good senses, whch the authors of the amendment deemed
nsuffcent to |ustfy a search or sezure e cept n e ceptona crcumstances
not here present. The mtess possbtes afforded by the absence of a warrant
were eptomzed by the one agent who admtted searchng thoroughy a sma
truck parked In the farmyard for tems of an evdentary character. The fact
that they actuay sezed ony contraband property, whch woud doubtess have
been descrbed n a warrant had one been Issued, does not detract from the
egaty of the sezure. (See mos v. Unted States, 255 U. S. 313; yars v.
Unted States, 273 U. 8. 28; Tayor v. Unted States, supra.)
Moreover, the pro mty of the contraband property to the person of ntonoe
at the moment of hs arrest was a fortutous crcumstance whch was nadequate
to egaze the sezure. s we have seen, the e stence of ths property and the
desrabty of sezng t were known to the agents ong before the sezure and
formed one of the man purposes of the rad. Lkewse, the arrest of ntonoe
and the other pettoners n connecton wth the ct operatons was a foresee-
abe event motvatng the rad. ut the precse ocaton of the pettoners at the
tme of ther arrest had no reaton to the foreseeabty or necessty of the sezure.
The practcabty of obtanng a search warrant dd not turn upon whether
ntonoe and the others were wthn the dstery budng when arrested or upon
whether they were then engaged n operatng the ct equpment. ntonoe
|ust happened to be workng amd the contraband surroundngs at 11: 5 p. m.
on the nght n queston, whe the other three pettoners chanced to be some
pace ese. ut ntonoe mght we have been outsde the budng at that
partcuar tme. If that had been the case and he had been arrested n the farm-
yard, the entre argument advanced by the Government n support of the sezure
wthout warrant woud coapse. We do not beeve that the appcabty of the
fourth amendment to the facts of ths case depends upon such a fortutous factor
as the precse ocaton of ntonoe at the tme of the rad.
In other words, the presence or absence of an arrestee at the e act tme and
pace of a foreseeabe and antcpated sezure does not determne the vadty of
that sezure f It occurs wthout a warrant. ather the test s the apparent need
for summary sezure, a test whch ceary s not satsfed by the facts before us.
search or sezure wthout a warrant as an ncdent to a awfu arrest has
aways been consdered to be a strcty mted rght. It grows out of the nherent
necesstes of the stuaton at the tme of the arrest. ut there must be some-
thng more n the way of necessty than merey a awfu arrest. The mere fact
that there s a vad arrest does not pso facto egaze a search or sezure wthout
a warrant. Carro v. Unted States, supra, 158.) Otherwse the e cepton
swaows the genera prncpe, makng a search warrant competey unnecessary
wherever there s a awfu arrest. nd so there must be some other factor n
the stuaton that woud make It unreasonabe or mpractcabe to requre the
arrestng offcer to equp hmsef wth a search warrant. In the case before us,
however, no reason whatever has been shown why the arrestng offcers coud not
have armed themseves durng a the weeks of ther surveance of the ocus
wth a duy obtaned search warrant no reason, that s, e cept ndfference to
the ega process for search and sezure whch the Consttuton contempated.
We do not take occason here to ree amne the stuaton nvoved n arrs v.
Unted States, supra. The nstant case reates ony to the sezure of contraband
the e stence .and precse nature and ocaton of whch the aw enforcement
offcers were aware ong before makng the awfu arrest. That crcumstance
was whoy ackng In the arrs case, whch was concerned wth the perms-
sbe scope of a genera search wthout a warrant as an ncdent to a awfu
arrest. Moreover, the arrs case deat wth the sezure of Government prop-
erty whch coud not have been the sub|ect of a pror search warrant, t havng
been found une pectedy durng the course of a search. In contrast, the contra-
band sezed In ths case coud easy have been specfed n a pror search warrant.
These factua dfferences may or may not be of sgnfcance so far as genera
prncpes are concerned. ut the dfferences are enough to |ustfy confnng
ourseves to the precse facts of ths case, eavng t to another day to test the
arrs stuaton by the rue that search warrants are to be obtaned and used
wherever reasonaby practcabe.
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Regs. , 183.5, etc.
222
What we have here s a set of facts governed by a prncpe ndstngushabe
from that recognzed and apped In Tayor v. Unted States, supra. The Court
there hed that the sezure of Ict whsky was unreasonabe, however we-
grounded the suspcons of the Federa agents, where there was an abundant
opportunty to obtan a search warrant and to proceed In an ordery, |udca way.
True, the Tayor case dd not Invove a sezure In connecton wth an arrest. nd
the offcers there made an unawfu entry onto the premses. ut those factors
had no reaton to the practcabty of obtanng a search warrant before makng
the sezure. It was the tme eement and the foreseeabty of the need for
a search and sezure that made the warrant essenta. The Tayor case accord-
ngy makes pan the egaty of the sezure n the nstant proceedng.
The fourth amendment was desgned to protect both the nnocent and the guty
from unreasonabe Intrusons upon ther rght of prvacy whe eavng adequate
room for the necessary processes of aw enforcement. The peope of the Unted
States nssted on wrtng the fourth amendment Into the Consttuton because
sad e perence had taught them that the rght to search and seze shoud not
be eft to the mere dscreton of the poce, but shoud as a matter of prncpe
be sub|ected to the requrement of prevous |udca sancton wherever possbe.
The effectve operaton of government, however, coud hardy be embarrassed by
the requrement that arrestng offcers who have 3 months wthn whch to secure
the authorzaton of |udca authorty for makng search and sezure shoud
secure such authorty and not be eft to ther own dscreton as to what s to be
searched and what s to be sezed. Such a requrement partakes of the very
essence of the ordery and effectve admnstraton of the aw.
It s a mstake to assume that a search warrant n these crcumstances woud
contrbute nothng to the preservaton of the rghts protected by the fourth amend-
ment. search warrant must descrbe wth partcuarty the pace to be searched
and the thngs to be sezed. Wthout such a warrant, however, offcers are free
to determne for themseves the e tent of ther search and the precse ob|ects to
be sezed. Ths s no sma dfference. It s a dfference upon whch depends
much of the potency of the rght of prvacy. nd t s a dfference that must be
preserved even where contraband artces are sezed n connecton wth a vad
arrest.
It foows that t was error to refuse pettoners moton to e cude and sup
press the property whch was Impropery sezed. ut snce ths property was
contraband, they have no rght to have t returned to them.
Reversed.
Dssentng opnon by Mr. ustce nson, wth whom Mr. ustce ack, Mr.
ustce Reed, and Mr. ustce urton concur.
Reguatons , Sectons 183.5, tc. 19 8-23-12962
T.D. 5663
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 183.
PRODUCTION OF DISTILL D SPIRITS
mendng Reguatons
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton #5, D. C.
To Dstrct Supervsors and Others Concerned:
1. On uy 27, 19 8, notce of proposed rue makng, regardng the
prodnoton of dsted sprts, was pubshed n the Federa Regster
(13 F.R. 283).
2. fter consderaton of a such reevant matter as was presented
bv nterested persons regardng the proposa, the foowng amend-
ments of sectons 183.5, 183.6, 183.9, 183.13, 183.1 , 183.15, 183.35,
183. 1.183. ,183. 5.183. 6,183.51,183.52,183.56,183.62,183.70,183.7 .
183.75, 183.78, 183.79, 183.81, 183.9 , 183.121, 183.122, 183.125, 188.127
183.128. 183.132, 183.133, 183.13 , 183.138(a)(2), 183.1 3 to 183.1 6,
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223
Regs. , 183.5, etc.
ncusve, 183.1 8,183.1 9,183.152(a) (3), 183.156(a), (b), 183.157(6),
183.158, 183.160, 183.169, 183.172, 183.176, 183.256, 183.370, 183. 37,
183. 38, 183. 39, 183. 1, 183. 5, and 183. 6 of eguatons (26
CFR, Part 183), approved February 28,19 0, are hereby adopted, and
sectons 183.7, 183.8, 183.126, 183.155(a)(2), 183.155(6) (3), 183.17 ,
and 183.175 of such reguatons are hereby revoked.
3. These amendments are desgned to smpfy certan requrements
reatng to constructon, and the preparaton, fng, and approva of
documents n connecton wth the estabshment and operaton of ds-
teres. It s not ntended by these amendments to requre dsters
to fe addtona pats and pans, or to repant ppe nes or change
equpment mmedatey, n cases where the e stng documents, ppe
nes, and equpment conform essentay to the reguatons pror to
these amendments. Upon fng new pats and pans, repantng ppe
nes, and nstang equpment, these new requrements must be ob-
served.
Sec. 183.5. Wthn 600 Feet of Rectfyng Pant. No dster sha carry on
the busness of dstng sprts at a dstance of ess than 600 feet n a drect ne
from a rectfyng pant, e cept wen e has been so authorzed by the dstrct
supervsor. The dstrct supervsor may grant such authorty when he s of the
opnon that the revenue w not be endangered thereby. (Sees. 2819, 3170, 3176,
I. R. C.)
Seo. 183.6. Speca ppcaton. person desrng to operate a dstery
wthn 600 feet of a rectfyng pant sha fe a speca appcaton, n trpcate,
for such prvege, wth the dstrct supervsor. The appcaton sha state the
ocatons of the dstery and the rectfyng pant, the dstance between the prem-
ses, the name of the propretor of the rectfyng pant, a descrpton of any con-
nectng ppe nes, the reason for ocatng the dstery wthn 600 feet of the
rectfyng pant, and any addtona nformaton whch the dstrct supervsor
may requre. The dstrct supervsor w take acton on such appcaton In
accordance wth the procedure prescrbed n secton 183.158. (Sees. 2819, 3170,
3176,1. R.C.)
Sec. 183.9. Changes Requrng pprova. Where there s to be a change n
the dstance between a dstery and a rectfyng pant ocated wthn 600 feet
of each other as a resut of the e tenson or curtament, or other change of ether
premses, a new speca appcaton, In trpcate, must be fed wth the dstrct
supervsor by the propretor of the premses whch Is to be e tended or cur-
taed. Where a change occurs n the propretorshp of a dstery or rectfy-
ng pant ocated wthn 600 feet of each other, the new propretor sha fe wth
the dstrct supervsor a new speca appcaton, n trpcate. Uness the ds-
tery premses are e tended or curtaed as the resut of such change, the change
may be refected In the ne t amended or annua notce, Form 27- , and pat,
fed by the dster. Such new speca appcaton sha be consdered and ds-
posed of n accordance wth the procedure prescrbed n secton 183.158. (Sees.
2819, 3170,3176, I. R C.)
Sec. 1S3.13. Was.- The outsde was of dstery budngs must be securey
and substantay constructed. If wood, corrugated ron, or tn Is used, the
same must be apped over sod sheathng for the frst 12 feet of heght, and
over sod sheathng, or sheathng spaced not greater than 12 Inches from board
to board, for the remanng heght. Where substanta sheet meta s used,
and the sheets are weded together n such manner as to consttute a sod wa,
sheathng may be apped n any manner desred. The ceng and was nsde
of the cstern room must bo cased wth matched tongue and groove boards,
uness the use of other matera affordng equa protecton from access wthout
detecton s approved by the Commssoner. (Sec. 3170, I. R C.)
Sec. 183.1 . Roofs. The roofs of dstery budngs must be securey and
substantay constructed. Where corrugated Iron or tn s used, the same must
e apped over sheathng spaced not greater than 12 nches from board to board.
Where substanta sheet meta Is used, and the sheets are weded together n
such manner as to consttute a sod roof, sheathng may be apped n any man-
ner desred. (Sec. 3176,1. R. C.)
Sec. 183.15. Doors. The outsde doors of the dstery budngs must be se-
curey and substantay constructed and equpped, so that they may be securey
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Regs. , 183.5, etc.
22
ocked. In addton, the doors of cstern rooms, rectfyng rooms, and other
rooms requred to be ocked by secton 183. 18, must compy wth the foowng re-
qurements: The outsde doors, and those on whch Government ocks are re-
qured, as herenafter provded, must be securey constructed of heavy tmber or
ron, or other equay substanta matera. The hnges must be secured by
roundheaded or carrage bots, nutted, and rveted or battered on the nsde.
nges that cannot be thus secured must be naccessbe from the outsde, and so
attached that they cannot be removed when the doors are cosed. The outsde
doors, and those on whch Government ocks are requred, must be equpped wth
hasp and stape securey fastened on the nsde, so that they may be securey
ocked. The doors secured from the nsde must be provded wth a cross bar
n the mdde of the door, and strong and sutabe attachments for the recepton
of ocks. Where there are doube doors, one of them, at east, must be provded
wth substanta hots at both the top and the bottom. These bots must be bo
arranged as to punge nto substanta fastenngs or hoes n the mdde of the
upper and ower ends of the frame when the door s cosed. Fodng doors of
wood or meta, vertca or horzonta sdng doors of wood or meta, and meta
doors of the roer bnd type, must be provded wth substanta cross bars, or
bots that punge nto the upper and ower ends, or the sdes of the door frame,
so paced as to make the door rgd and secure, uness the doors operate n grooves
or tracks that make them secure. (Sec. 3176, I. R. C.)
Sec. 183.35. Scaes. The dster must provde n the cstern room sutabe
and accurate scaes for weghng packages of dsted sprts. The dster must
aso provde on the dstery premses sutabe and accurate scaes for the
weghng of gran and other nonqud dstng materas receved and used:
Provded. That where the dster receves shpments of materas by ra or
motor carrer, the shpper s weghts appearng on the b of adng or Invoce
may be recorded as the amount receved, and, n such cases, track or truck
scaes for weghng the materas receved need not be furnshed. eams or
das of scaes used to wegh packages must ndcate weght n haf-pound
graduatons. eams or das of weghng tank scaes must ndcate weght n
6-pound graduatons for scaes up to, and Incudng, 25 tons capacty; n 10-
pound graduatons for scaes e ceedng 25 tons capacty, but not e ceedng 60
tons capacty; and n 20-pound graduatons for scaes havng a capacty of
more than 60 tons. (Sees. 2808, 3176,1. R. C.)
Sec. 183. 1. Off-Premses Matera Conveyors. Where dstng materas
are conveyed to the dstery by chute, conveyor, or ppe ne from ad|acent
premses, such chute, conveyor, or ppene sha be equpped at a sutabe pace
for ockng wth Government ocks. (Sees. 2823, 2829, 3176, I. R. C.)
Sec. 183. . Washwater Recevng Tanks. If carbon do de s recovered,
and the washwater s to be utzed n the manufacture of dsted sprts, there
must be provded a suffcent number of washwater recevng tanks, whch sha
be constructed of meta and be of unform dmensons from top to bottom.
ach such tank sha be equpped wth a sutabe measurng devce whereby the
actua contents w be correcty Indcated. There must be panted on each
tank the words, Washwater recevng tank, foowed by Its sera number and
capacty In wne gaons. The outet vave must be equpped for ockng wth
a Government ock. If the washwater Is not used n the manufacture of dsted
sprts, as provded by secton 183.255, washwater recevng tanks need not be
provded. (Sees. 2829, 3176,1. R. O.)
Sec. 183. 5. Sts. The sts must be of substanta constructon and must
have a cear space of not ess than 1 foot around them. The steam or fue ne to
each st sha be equpped wth a vave so constructed that t may be ocked
wth a Government ock when the dstery s suspended, as requred by sec-
ton 183.363. The dran and wash-out ppes of sts must aso, wherever prac-
tcabe, be equpped wth vaves so constructed that they may be ocked wth
Government ocks. If there Is a furnace under the sts or doubers, the door
thereto must, as provded n secton 183.39, be so constructed that It may be
secured wth a Government ock. There must be a cear space of not ess than
2 feet around every douber and condenser or worm tank. The douber and
worm tanks must be eevated not ess than 1 foot from the foor. very st
must be numbered, commencng wth number 1, and have panted thereon ts
desgnated use, such as eer st, Douber, etc., and ts number and sprt
producng capacty n proof gaons n 2 hours, computed n accordance wth
the rues set forth n the ppend to these reguatons. Where the st Is
Insuated, or the manufacturer s sera number s otherwse obscured, such num-
ber w kewse be panted on the coverng of the st. (Sees. 2822,3176,1. R. C.)
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Regs. , 183.5, etc
Sec. 183. 6. Genera Requrements fob Tanks. tanks used as receptaces
for sprts between the outet of the frst condenser or worm and the recevng
csterns sha be constructed of meta, and sha be of unform dmensons from
top to bottom, and sha be equpped wth a sutabe measurng devce whereby
the actua contents w be correcty Indcated. tanks must be so con-
structed as to permt e amnaton of every part thereof, and so arranged as
to eave an open space of not ess than 3 feet between the top and the roof or
foor above. tanks, such as ow-wne tanks, hgh-wne tanks, heads and
tas tanks, fuse o tanks, dsted water tanks, and smar equpment, sha
each have pany and egby panted thereon ts desgnated use, sera number,
and capacty n wne gaons. Manheads, nets, and outets of the tanks and a
necessary openngs n the dstng apparatus and equpment, e cept coumn
sts, whereby access may be had to the sprts, must be provded wth factes
for ockng wth Government ocks: Provded. That dsted water storage tanks
need not be so equpped uness a ppe ne s connected therewth for the con-
veyance of dsted water to contguous estabshments, as provded n secton
183. 9. openngs n tanks and other dstng apparatus and equpment,
whch are not absoutey necessary, and whch can be permanenty cosed wthout
Interference wth pant operatons, sha be cosed by brazng, wedng, or other-
wse securey fastenng and seang. Tanks used as receptaces for sprts may
be permanenty connected wth ppe nes for the conveyance thereto of ar and
aso dsted water, but the dsted water ppe ne must be aff ed to the top
of the tank, and may not e tend nto the tank. Such ppe nes must be equpped
wth a contro vave whch may be ocked wth a Government ock. Ppe nes
used for the conveyance of ar must aso be equpped wth a check vave ocated
near the pont of entry to the tank n order to effectvey prevent any abstracton
of sprts from the tank. Other ppe nes, e cept those used for the conveyance
of sprts, may not be permanenty connected wth such tanks. (Sees. 2823, 2829,
3176, I. R. C.)
Sec. 183.51. Rectfyng qupment. Where sprts are rectfed, purfed, or
refned n a rectfyng room or budng, as provded n secton 183.2 , sutabe
tanks for the recepton of the sprts to be so treated must be provded n such
room or budng. The ppes, percoators, vesses, and other apparatus used
n purfyng or refnng sprts must be so constructed that the sprts w pass
through the purfyng process n ther passage from the beer st to the recevng
csterns. The ppes, vesses, and other apparatus must be cosed and contnuous.
necessary openngs must be so constructed that they may be cosed and
ocked wth Government ocks. cept as provded by secton 183. 6, no per-
manent water ppe ne sha be connected wth the hgh-wne tanks, percoators,
or other rectfyng apparatus. (Sees. 2 20, 2829, 3176, I. R. C.)
Sec. 183.52. Recevng Csterns. The dster must provde n the cstern
room recevng csterns havng suffcent capacty to permt the effcent depost,
wthdrawa and supervson of each type of dsted sprts produced day n
accordance wth these reguatons. The adequacy of the capacty of the recevng
csterns sha be determned by the dstrct supervsor. Recevng csterns must
be constructed and arranged n conformty wth the requrements of secton
183. 6, and, n addton thereto, such csterns must be eevated not ess than 18
nches from the foor, and so separated that Government offcers may pass
competey around each. ach recevng cstern must be equpped wth a sutabe
measurng devce whereby the actua contents w be correcty ndcated, and
sha have pany and egby panted thereon the words, Recevng cstern,
foowed by ts sera number and capacty n wne gaons. The csterns must
not be connected wth each other, e cept that a connectng ppe ne w be per-
mtted between them n order to prevent oss of sprts by overfow. Such con-
nectng ppe ne must be ocated as cose to the top of each cstern as the
constructon thereof w permt, and It must be cosed and a connectons theren
brazed or weded to prevent abstracton of sprts wthout showng evdence of
tamperng. vave equpped for ockng wth a Government ock must be pro-
vded n such ppe ne. Ppe nes connected wth recevng csterns must be
brazed, weded, or otherwse secured and seaed, to the csterns n such a manner
that they cannot be detached or atered wthout showng evdence of tamperng.
cept as provded by secton 188. 6, ppe nes for the conveyance of water,
ar, or other substance than sprts, may not be permanentv connected wth
recevng csterns. (Sees. 2817(6), 2820, 3170, 3176, I. R. C.)
Sec. 183.56. Coors fob Ppe Lnes. The ppe nes n the dstery used for
conveyng the foowng substances sha be kept panted n the coors ndcated:
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Regs. , 183.5, etc.
226
ack Whsky, gn, run, or other fnshed sprts.
ue apor, sngngs, hgh wnes and ow wnes, or
other unfnshed sprts.
Red , Fermented mash or beer.
Gray Moasses or other unfermented matera
rown Spent beer or sop.
eow Fuse o.
Whte Water.
umnum Steam.
Orange r.
Ove green Carbon do de.
These coors are ntended for such ppe nes ony, and are prescrbed for the
purpose of dstngushng such ppe nes from each other, and from a other
ppe nes on the premses whch are panted, but for whch coors are not pre-
scrbed. The pantng n one of the prescrbed coors, or a coor smar thereto,
of a ppe ne for whch a coor s not prescrbed Is prohbted. Ppe nes for
whch coors are not prescrbed may be panted n sectons of contrastng coors.
(Sees. 2822, 3176,1. R. 0.)
Skc. 183.02. Descrpton of Premses. The ot or tract of and on whch the
dstery s stuated must be descrbed on Form 27- by courses and dstances,
n feet and nches, wth the partcuarty requred n conveyances of rea estate.
If the dstery premses consst of two or more ots or parces, the condton of
the tte to whch s not the same, the entre dstery premses sha be frst
descrbed, foowed by a separate descrpton by courses and dstances, n feet
and Inches, of each such ot or parce. The contnuty of the dstery premses
must be unbroken, e cept that the premses may be dvded by a pubc street or
hghway, f parts of the premses so dvded abut on such street or hghway
opposte each other. The premses may be smary dvded by a raroad
rght-of-way, f the raroad s a common carrer. In such cases, each tract
of and consttutng the dstery premses sha be descrbed separatey on the
form. (Sees. 2812, 3176, I. R. C.)
Seo. 183.70. Dstance Fkom Rectfyng Pant ob negar Factory. If the
dstery premses are stuated more than 600 feet n a drect ne from any
premses authorzed to be used for rectfyng sprts, or from a vnegar factory
usng the vaporzng process, such fact sha be stated on Form 27- . If the ds-
tance between the dstery premses an the premses of a rectfyng pant s
ess than 600 feet n a drect ne, there must be stated In the notce, Form 27- ,
the name of the propretor of the rectfyng pant, the e act dstance n feet and
nches between the dstery and te rectfyng pant, and whether the ocaton
of the dstery wthn such dstance of the rectfyng pant has been approved
by the dstrct supervsor. If such ocaton of the dstery has been approved
by the dstrct supervsor, the date of such approva sha be gven. If the ds-
tance between the dstery premses and a vnegar factory usng the vaporzng
process s ess than 600 feet In a drect ne, such fact, and the date of the estab-
shment of the vnegar factory, sha be stated on the form. (Sees. 2812. 2819.
283 , 2835, 3170, 3176. I. R. C.)
Sec. 183.7 . ppcaton. The appcaton sha contan (1) an accurate
descrpton of the ot or tract of and on whch the dstery Is stuated and of
the dstery, the budngs, and the dstng apparatus thereon ; (2) a fu and
cear statement of the condton of the tte to the dstery premses and appa-
ratus and equpment, ncudng the name and address of the owner and of a
mortgagees, |udgment-credtors, condtona saes vendors, pror essees, and other
persons havng ens thereon, the knd, date, and amount of each encumbrance,
and the baance due thereon, and, n the case of apparatus or equpment pur-
chased under a condtona saes contract, or other form of tte retanng con-
tract, the purchase prce and the baance due; and (3) a fu and cear statement
of the reasons why the appcant cannot obtan the prescrbed wrtten consent.
The dstrct supervsor w take acton on such appcaton n accordance wth
the procedure prescrbed n secton 183.160. (Sees. 2815, 3176, I. R. C.)
Sec. 183.75. ond, Form 3- . If the appcaton s approved, the dster sha
e ecute bond on Form 3- , ond of Indemnty n Favor of the Unted States,
In trpcate, n conformty wth the appcabe provsons of sectons 183.98 to
183.119, ncusve, and fe the same wth the dstrct supervsor. The pena sum
of the bond sha be equa to the apprased vaue of the ot or tract of and on
whch the dstery s stuated, the dstery, the budngs, and the dstng
apparatus. If, after such bond s fed, the vaue of the dstery premses, bud-
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227
Regs. , 183.5, etc.
Ings, or dstng apparatus s Increased by addtona and, budngs, or ds-
tng apparatus, an addtona bond on such form to cover the ncrease n vaue
w be requred: Provded, That f such ncrease n vaue s ess than 1,000, no
addtona bond w be requred. In the event of a faure of bond on Form
3- , the dster w be no onger quafed, uness a new and satsfactory bond
s fed. (Sees. 2815, 8176, I. R. O.)
Sec. 183.78. ppcaton. ny dster desrng to ava hmsef of the prv-
ege of fng bond on Form 3, n eu of the prescrbed consent, must fe appca-
ton, In trpcate, wth the dstrct supervsor. The appcaton must show that
the dstery was erected pror to uy 20, 1868, and contan a fu and cear
statement of the condton of the tte or the nature of the Incapacty of the
hoder of the fee, as the case may be. The dstrct supervsor w take acton on
such appcaton n accordance wth the procedure prescrbed n secton 183.1G0.
(Sees. 3176, 3180, I. R. C.)
Sec. 183.70. ond, Form 3. If the appcaton s approved, the dster sha
e ecute bond on Form 3, n trpcate, n conformty wth the appcabe prov-
sons of sectons 183.98 to 183.119, ncusve, and fe the same wth the dstrct
supervsor. The pena sum of the bond sha be equa to the apprased vaue of the
ot or tract of and on whch the dstery Is ocated, together wth the budngs
and dstng apparatus. If, after such bond Is fed, the vaue of the dstery
premses, budngs, or dstng apparatus s Increased by addtona and,
budngs, or dstng apparatus, an addtona bond on such form to cover the
ncrease n vaue w be requred: Provded, That f such Increase n vaue s
ess than 1,000, no addtona bond w be requred. The apprasa sha be
made n accordance wth the provsons of secton 183.76. In the event of faure
of bond on Form 3, the dster w be no onger quafed, uness a new and
satsfactory bond s fed. (Sees. 3176, 3180,1. R. C.)
Sec. 183.81. ond n Leu of Consent Where Dstery Is Sod for Unted
States. Where a dstery s sod at a udca or other sae n favor of the
Unted States, the dster may gve bond on Form 3- , In eu of the consent
of the person possessng the rght of redempton, and of any mortgagee, |udg-
ment-credtor, or other enor, and be aowed, upon compyng wth a other
provsons of aw and these reguatons, to operate such dstery durng the
e stence of the rght of redempton from such sae. dster desrng to gve
bond n such case sha fe appcaton, In trpcate, wth the dstrct supervsor
for permsson so to do. The appcaton sha contan a fu and cenr state-
ment of the condton of the tte, ncudng the name and address of the person
havng the rght of redempton and of a encumbrancers, the knd, date, and
amount of each encumbrance, the date of the sae, and the date of e praton
of the rght of redempton. The pena sum of the bond sha be equa to the
apprased vaue of the ot or tract of and on whch the dstery Is stuated,
together wth the budngs and dstery apparatus. If, after such bond Is
fed, the vaue of the dstery premses, budngs, or dstng apparatus s
Increased by addtona and, budngs, or dstng apparatus, an addtona bond
on such form to cover the ncrease In vaue w be requred: Provded, That f
such ncrease n vaue s ess than 1,000, no addtona bond w be requred.
The apprasa sha be made n accordance wth the provsons of secton 183.76.
(Sees. 2815, 3176, I. R. O.)
Sec. 183.9 . Statement of Process. There must be submtted to the dstrct
supervsor wth the dster s orgna notce, Form 27- , a statement of process,
n trpcate. Upon any change In the process, a new statement, n trpcate,
must be fed wth the dstrct supervsor, who w forward a copes to the
Commssoner n accordance wth secton 183.167. Reference by date to the
current statement of process must be ncorporated n each annua notce, Form
27- . The statement of process shoud present a step by step descrpton of
the mashng, fermentng, dstng, purfyng, and refnng processes used n
the producton of each type of dsted sprts. It must show specfcay the
knd and appro mate quantty, or proporton of a nonacoho producng mate-
ras or substances added to the yeast mash or beer for the purpose of provdng
yeast food, or for Inhbtng the acton of wd yeast, or for any other purpose, and
a materas used for purfyng, refnng, or otherwse treatng the sprts.
Sampes of any such matera or substance w be prepared and furnshed to
the dstrct supervsor, upon request, for anayss by Government chemsts.
Materas or chemcas whch are voate, and woud reman ncorporated wth
the fnshed sprts after fna dstaton, may not be used, e cept that |unper
berres .and other aromatcs may be used In the producton of gn. (Sees. 3176,
825 (g), I. R.O.)
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Reg . 183.5, etc.)
228
Sec. 183.121. Preparaton. very pat and pan sha be drawn to scae, and
each sheet thereof sha bear a dstnctve tte, enabng ready dentfcaton.
The cardna ponts of the compass must appear on each sheet, e cept the
eevatona pans. The mnmum scae of any pat w not be ess than one-
ffteth nch per foot. ach sheet of the orgna pat and pans sha be numbered,
the frst sheet beng desgnated number 1, and the other sheets numbered n
consecutve order. Pats and pans sha be submtted on sheets of tracng coth,
opaque coth, or senstzed nen. The dmensons of pats and pans sha dp
15 by 20 nches, outsde measurement, wth a cear margn of at east 1 nch on
each sde of the drawng, etterng, and wrtng. Pats and pans may be orgna
drawngs, or reproductons made by the dtto process, or by bue or brown ne
thoprnt, f such reproductons are cear and dstnct. (Sees. 2816,3176,1. R. C.)
Sec. 183.122. Depcton of Dstery Premses. Pats must show the outer
boundares of the dstery premses by courses and dstances, n feet and nches.
In a coor contrastng wth those used for other drawngs on the pat, and the
pont of begnnng, wth respect to ts dstance and bearngs, from some near and
we-known andmark, and must contan an accurate depcton of the budng
or budngs comprsng the premses, and any drveway, pubc hghway, or
raroad rght-of-way ad|acent thereto, or connectng therewth. The depcton
of the premses sha agree wth the descrpton In the notce. Form 27- . If the
dstery premses consst of two or more ots or parces of and, the condton
of the tte to whch s not the same, each such ot or tract sha be separatey
depcted by courses and dstances, n feet and nches, and such ots or parces
sha be deneated or cross-hatched In contrastng coors. If two or more bud-
ngs are to be used, the desgnated name of each sha be ndcated, and a ppe
nes or other connectons, f any, between the same, depcted. Where two or
more budngs are used for the same purpose, the name of each such budng
sha ncude an aphabetca desgnaton, begnnng wth , and they sha be so
shown on the pat. frst foor e teror doors of each budng on the premses
w be shown on the pat. cept as provded n secton 183.131, a ppe nes
eadng to or from te premses, the purpose for whch used, and the ponts of
orgn and termnaton w be ndcated on the pat. (Sees. 2816, 3176, I. R. O.
Sec. 183.125. Foor Pans. The pans sha ncude a foor pan of each foor
of each budng, showng the genera dmensons of the rooms and foors, and
the ocaton of a doors, wndows, and other openngs, and how such openngs
are protected. apparatus and equpment, e cept ppe nes, must be shown
n ther e act ocaton on the foor pans, and ther desgnated use ndcated.
Ppe nes may aso be shown, f desred. In the case of sts, tanks, and smar
equpment, the sera number and capacty sha aso be shown. (Sees. 2816,
317(1. I. R C.)
Sec. 183.127. evatona Pans op udngs. The pans sha aso ncude
an e teror, eevatona vew of each e posure of each budng, showng the type
of securty afforded the openngs. The number of stores and the heght of each
story w be Indcated on the eevatona pans. In eu of drawngs, the ds-
ter may submt a photograph of each e posure of each budng n a sze not
smaer than 7 by 9 nches. The photographs must he n suffcent deta to
ceary depct the budngs from the ground to the roof, and must be propery
dentfed. Where photographs are submtted, drawngs must be furnshed to
show the securty afforded openngs n a rooms requred to be ocked, such as
cstern rooms, rectfyng rooms, etc.: Provded, That n eu of such drawngs, the
photographs may be noted to show the type of securty afforded the openngs n
such rooms by reference to the approprate sheet of pans on fe, whereon such
Informaton s shown. (Sees. 2816, 3176, I. R. C.)
Sec. 183.128. Ppe Lnes n Coors. The ppe nes must be shown on the
pans n the coors n whch they are requred to he panted, as foows:
ack Whsky, gn, rum, or other fnshed sprts.
ue apor, sngngs, hgh wnes, ow wnes, or other
unfnshed sprts.
Red Fermented mash or beer.
Gray Moasses or other unfermented matera
rown Spent beer or sop.
Yeow Fuse o.
Whte Water.
umnum Steam.
Orange r.
Ove green Carbon do de.
(Sees. 2816, 3176, I. R. C.)
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Regs. , 183.5, etc.
Sec. 183.132. evatona Pow Dagrams. evatona fow dagrams (pans)
sha be submtted coverng: (1) dstng matera system, (2) mashng and
fermentng systems, (3) dstng system, and ( ) the cstern room system. Such
dagrams or pans sha ceary depct a equpment In Its reatve operatng se-
quence, and eevaton by foors wth a connectng ppe nes, vaves, fanges
(e cept as provded In secton 183.129), Government ocks, measurng devces, etc.
The eevaton by foors on the dagrams may be ndcated by horzonta nes repre-
sentng foor eves. the fow dagrams as a unt must show the fow of the
dstng matera, and the resutng products, through the ms, mash tubs, fer-
menters, sts, doubers, try bo es, and other equpment, and the depost and
remova of the fnshed sprts from the cstern room. ma|or equpment, fer-
menters, sts, etc., must be dentfed on these pans as to number and use. The
eevatona fow dagrams must be so drawn that a f ed ppe nes, e cept those
Indcated by secton 183.131 may be ready traced from begnnng to end. Other
types of drawngs that ceary depct the nformaton requred heren may be
submtted n compance wth ths secton. (Sees. 2816, 3176, I. R. C.)
Sec. 183.133. Ckrtfcate of ccuracy. The pat and pans sha bear a cer-
tfcate of accuracy n the ower rght-hand corner of each sheet, sgned by the
dster, the draftsman, and the dstrct supervsor, substantay n the foowng
form:
(Name of dster)
( ddress)
pproved
(Date)
ccuracy certfed by:
(Dstrct supervsor)
(Name and capacty for the
dster)
(Draftsman)
, 19 Sheet No
(Date)
(Sees. 2816, 8170, 8176,1. R. C.)
Sec. 183.13 . Revsed Pats and Pans. The sheets of revsed pats and
pans sha bear the same number as the sheets superseded, but w be gven
a new date. ny addtona pats and pans sha be gven a new number n
consecutve order, or w be otherwse numbered and ettered n such manner
as w permt the fng of the pats and pans n proper sequence. (Sees. 2816,
3176,1. R. C.)
Sec. 183.138. Change n Propretorshp. (a) Suspenson.

(2) Regstry of sts. If the busness s to be permanenty dscontnued, fe
Form 26, Regstry of Sts, n trpcate, n accordance wth secton 183.370.

Seo. 183.1 3. Changes n Premses. Where the dstery premses are to be
e tended or curtaed, the dster must fe wth the dstrct supervsor an
amended notce, Form 27- , and an amended pat of the premses as e tended or
curtaed, e cept as heren specfcay authorzed In the case of aternate oper-
atons of the bottng department.. If the pans are affected by the e tenson or
curtament, they must aso be amended. If the dstery Is wthn 600 feet of a
rectfyng pant, the dster must aso fe a speca appcaton n accordance
wth sectons 183.6 and 183.9. The addtona premses covered by an e ten-
son may not be used for dstery purposes, and the porton of the dstery
premses to be e cuded by a curtament may not be used for other than dstery
purposes, pror to approva of the notce, Form 27- . Where an nterna revenue
bonded warehouse contanng a bottng-n-bond department s ocated on the
dstery premses, and the documents requred by Reguatons 6, governng the
aternate operaton of the bottng house as a bottng-n-bond department and
a ta -pad bottng house, are fed, and no change n propretorshp s nvoved,
the fng of addtona notces, Form 27- , coverng changes n the temporary
status thereof from tme to tme w not be requred. (Sees. 2812, 2816, 2819,
2S73, 2CI0 , 3176, 0 1,1. R. C.)
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Regs. , 183.5, etc.
230
Sec. 183.1 . Changes n Constructon and Use. Where a change s to be
made n the constructon of a room or budng not Invovng an e tenson or
curtament of the dstery premses, or where a change s to be made n the
use of any porton of such premses, the dster sha frst secure approva
thereof by the dstrct supervsor pursuant to appcaton, n trpcate, settng
forth specfcay the proposed changes. Upon approva of the appcaton, the
changes w be made under the supervson of a Government offcer, uness they
are of such a nature as, n the opnon of the dstrct supervsor, do not requre
such supervson. The competed changes w be refected n the ne t amended
or annua notce, Form 27- , and amended pans fed by the dster, uness the
dstrct supervsor requres the mmedate fng of an amended notce and
amended pans. (Sees. 2812, 2816,3170,3176,1. R. C.)
Sec. 183.1 5. Indemnty ond Coverng Changes n udngs. If budng
on the dstery premses, or on premses whch have been emnated from the
dstery premses, are to be demoshed or atered n such a manner as to
decrease the vaue of the property, and a en for ta es e sts on such property
under secton 2800(e), I. R. C, the dster, f: (a) the owner of the fee unen-
cumbered, or (6) consents, n accordance wth secton 183.72, are necessary and
have been obtaned, must fe wth the dstrct supervsor an ndemnty bond, Form
1617, In trpcate, n a pena sum equa to the decrease n the vaue of the property:
Provded. That, f such decrease n vaue s ess than 1,000, no ndemnty bond
w be requred. (Sees. 2800(e), 3176,1. R. C.)
S ;. 183.1 6. pprasa. The amount of the decrease n the vaue of the
property sub|ect to the Government s en, whch w be caused by the demoton
or ateraton of budngs, sha be determned by apprasa by two or more com-
petent persons desgnated by the dstrct supervsor. The apprasers sha render
to the dstrct supervsor a report, n dupcate, of ther apprasa, whch sha
Incude nformaton as to the methods empoyed by them n determnng ther
vauatons. The apprasa sha be at the e pense of the dster, uness made by
Government offcers. The dstrct supervsor may dspense wth the forma
apprasa when he has reason to beeve that the vaue of the property concerned
Is ess than , 1,000. (Sees. 2800(e), 3176,1. R. C.)
Sec. 183.1 8. Indemnty ond Coverng Remova of qupment. If dstng
appnrntus or equpment on whch a en has attneed under secton 2800(e).
I. R. C, for ta es on sprts produced whch have not been ta -pad or wthdrawn
for a ta -free purpose, s to be removed from the dstery premses wthout
addng property that w become a f ture n aw of an equa or greater vaue
than the apparatus or equpment to be removed, the dster must fe wth the
dstrct supervsor an ndemnty bond on Form 1017, n trpcate. Such bon
must be n a pena sum equa to the vaue of the apparatus or equpment to be
removed, or equa to the e cess n vaue of the apparatus or equpment to be
removed over the vaue of the property to be substtuted therefor: Provded,
That f such vaue or dfference n vaue, as the case may be, s ess than 1,000,
no ndemnty bond w be requred. The vaue of the dstng apparatus or
equpment to be removed, or the dfference between the vaue of such od appa-
ratus or equpment and the vaue of the new property to be added w be
determned n the manner prescrbed n secton 183.1 6. (Sees. 2800(e), 3176.
I R. C.)
Sec. 183.1 9. mended Notce and Pans Coverng Changes n qupment.
Upon competon of changes In equpment whch materay affect the accuracy
of the Form 27- or pans, the dster must fe an amended notce and amended
pans. Where an amended notce and amended pans are not fed Immedatey
upon competon of mnor changes n equpment, such as genera repars, changes
n ppe nes, or the addton or remova of a tank, the dster must ncude such
changes n the ne t amended or annua notce, and amended pans to be fed
by hm. The Commssoner or the dstrct supervsor may, at any tme, n hs
dscreton, requre the mmedate fng of an amended notce and pans coverng
any change n equpment. (Sees. 2812, 2816, 3170, 3176, I. R. C.)
Sec. 183.152. uafcaton. (a) Where no bonded warehouse on premses


(3) Regstry of sts. Regster the sts on Form 26, In trpcate, n accord-
ance wth secton 183.370, f not prevousy regstered.

Sec. 183.156. Where Operaton of Warehouse on Premses Is Contnued.
(a) Suspenson. Where an nterna revenue bonded warehouse s ocated on
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Regs. , 183.5, etc.
the regstered dstery premses and the regstered dster desres to contnue
to operate the warehouse on such premses whe the dstery s operated
aternatey as a regstered dstery and as a frut dstery or ndustra
acoho pant, he must, upon suspenson of the regstered dstery, compy wth
the provsons of secton 183.155(a) (3) and ( ), and, n addton thereto, the
foowng requrements:

(6) Resumpton. Where operaton of the pant as a frut dstery or ndus-
tra acoho pant has been suspended, and operaton thereof as a regstered
dstery s to be resumed, the regstered dster must compy wth the pro-
vsons of secton 183.155(6) (5), (6), and (7), and, n addton thereto, the
foowng requrements:

Sec. 183.157. Where onded Warehouse s Dscontnued ob mnated
From Regstered Dstery Premses. (a) Suspenson.
(6) Resumpton. Where operaton of the pant as a frut dstery or n-
dustra acoho pant has been suspended, and operaton thereof as a regstered
dstery s to be resumed, the regstered dster must compy wth the pro-
vsons of secton 183.155(6) (5), (6), and (7), and, n addton thereto, the
foowng requrements:

Sec. 183.158. Speca ppcaton. Where a speca appcaton for perms-
son to operate a dstery wthn 600 feet of a rectfyng pant s submtted by
the dster, and such speca appcaton conforms to the requrements of these
reguatons, the dstrct supervsor w cause an nspecton to be made to de-
termne whether the proposed operaton of the dstery wthn 600 feet of the
rectfyng pant may be permtted wthout |eopardy to the revenue. The n-
spector w ascertan whether the appcaton accuratey descrbes the reatve
ocaton of the two premses and a ppe nes and other connectons, f any, be-
tween such premses. The nspector w aso observe the surroundngs, ncudng
a streets, roads, and drveways connectng the two premses, and any cond-
ton whch mght endanger the revenue, and w descrbe the same n hs report.
If the dstrct supervsor fnds, upon consderaton of the nspecton report,
that the dstery may be operated at the desgnated ocaton wthout danger
to the revenue, he w note hs approva on a copes of the speca appcaton.
e w then return one copy of the approved appcaton to the appcant, retan
the orgna for hs fes, and forward the remanng copy, together wth a copy
of the Inspecton report, to the Commssoner. pprova of the speca appca-
ton pertans to the ocaton of the dstery ony, and does not authorze the
operaton thereof. The dstery may not be operated unt the dster s bond
and other quafyng documents requred by aw and these reguatons have
been fed and approved by the Commssoner. If the speca appcaton s
dsapproved, the dstrct supervsor w note hs dsapprova thereon and w
return a copes of such appcaton to the appcant, wth advce as to the
reasons for dsapprova. (Sees. 2819, 3170, 3176, I. R. C.)
Sec. 183.160. Indemnty ond ppcaton. When an appcaton for per-
msson to fe an ndemnty bond n eu of the wrtten consent of the owner
of the dstery premses or apparatus or equpment, or of any mortgagee,
|udgment-credtor, condtona saes vendor, or other person havng a en thereon,
Is submtted by the dster and such appcaton conforms to the requrements
of these reguatons, the dstrct supervsor w cause an nvestgaton to be
made of the facts upon whch the appcaton Is based, and w desgnate two or
more competent persons to make an apprasa of the vaue of the ot or tract
of and on whch the dstery s stuated, the dstery, the budngs, and the
dstng apparatus. The apprasa sha be made as provded n secton 183.1 6.
If the dstrct supervsor fnds, upon consderaton of the apprasa and reports
of nvestgaton, that under the aw and reguatons an Indemnty bond may
propery be accepted n eu of the consent of the owner or enor, and f he s
satsfed that the vauaton paced upon the dstery property by the apprasers
s far, he w note hs approva on a copes of the appcaton. e w then
return one copy of the approved appcaton to the appcant and retan the
orgna for hs fes. e w forward the remanng copy of the appcaton
and copes of the reports of nvestgaton and apprasa to the Commssoner
at the tme of forwardng the ndemnty bond. If the appcaton s dsapproved,
the dstrct supervsor w note hs dsapprova thereon and w return a
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Regs. , 183.5, etc.
232
copes of such appcaton to the appcant wth a statement of the reasons for
dsapprova. (Sees. 2815(b), 3170, 3176, I. . O.)
Sec. 183.169. Dsposton of uafyng Documents. Where the dster s
bond (Form 80), consent (Form 1602), f any, or Indemnty bond fed n eu
thereof, and notce (Form 27- ), are approved by the Commssoner, the dstrct
supervsor w, upon recept of approved copes of such documents from the
Commssoner, as provded n secton 183.176, forward one copy of the dster s
bond, consent or ndemnty bond, notce, pat, pans, and other quafyng docu-
ments, and the orgna copy of the Federa coho dmnstraton ct permt
to the dster, and w retan one copy of such quafyng documents for the
fe of the dster. If the dster s bond, consent, or ndemnty bond s ds-
approved, the dstrct supervsor w, upon recept from the Commssoner of
the dsapproved copes of suc documents and other quafyng documents sub-
mtted therewth, return a copes of the quafyng documents to the propretor,
wth advce as to the reason for dsapprova. (Sec. 3176, I. R. C.)
Sec. 183.172. ppcatons and Repokts Coverng Changes. Where an app-
caton coverng changes n the dstery apparatus or equpment, or n the
constructon or use of a room or budng, s approved by the dstrct supervsor,
he w retan one copy of the appcaton, and forward one copy to the dster
and one copy to the Commssoner; and when reports coverng changes n appa-
ratus and equpment are receved from Government offcers n accordance wth
secton 183.1 7, he w retan one copy and prompty forward one copy to the
Commssoner. Smar dsposton w be made of reports receved from the
dster coverng emergency repars of dstng apparatus and equpment.
Where changes n budngs, apparatus, or equpment are such as to requre the
fng of an ndemnty bond, the dstrct supervsor may approve the appcaton, f
he has recommended approva of the bond, and permt the changes n budngs,
apparatus, or equpment to proceed pendng approva of the bond by the Com-
mssoner. (Sec. 3176, I. R. C.)
Sec. 183.176. uafyng Documents. The Commssoner w revew the
notce, pat, pans, dster s bond (Form 30), consent (Form 1602), f any, or
Indemnty bond fed n eu thereof, and other quafyng documents, ncudng
appcaton for Federa coho dmnstraton ct permt, upon ther recept
from the dstrct supervsor. If the Commssoner approves the dstery con-
structon and equpment, and the notce, pat, pans, dster s bond, consent or
Indemnty bond, f any, and other quafyng documents, he w assgn a regstry
number to the dstery n accordance wth secton 183.177, note hs approva on
a copes of the dster s bond, consent or ndemnty bond, and notce, retan
one copy of the dster s bond, consent or Indemnty bond, and notce, and a
copes of the other quafyng documents, and w return two copes of the
approved dster s bond, consent or ndemnty bond, and notce, to the dstrct
supervsor wth advce as to hs acton on the quafyng documents. If the
Commssoner dsapproves the dster s bond, he w note hs dsappn va
thereon and w return a copes thereof to the dstrct supervsor, accompaned
by the other quafyng d -uments submtted therewth, and a statement of the
reasons for dsapprova of the bond. (Sees. 281 , 2815(b), 3170, 3176, I. R. C.)
Skc. 183.2. (. Rate of Ta . The aw mposes a ta on dsted sprts pro-
duced n, or mported nto, the Unted States, at the rate prescrbed theren, on
each proof gaon, or wne gaon when beow proof, and a proportonate ta at a
ke rate on a fractona parts of such proof or wne gaon, to be pad when
wthdrawn from bond. (Sees. 2S00(a , 3170, 1. R. C.)
Sec. 1R3.370. eostrt on Form 26. very person havng n hs possesson
or custody, or under hs contro, any st or dstng apparatus that Is set up,
must regster the same on Form 26, n trpcate, wth the dstrct supervsor for
the dstrct n whch t s ocated. Sts to be used for the producton of varous
types of dsted sprts may be regstered for dsted sprts. and the specfc
type need not be shown. Thereafter, when the pant Is changed from the pro-
ducton of one type of sprts to another, reregstraton by the same dster w
not be requred. The temporary suspenson of a dstery does not necesstate
reregstraton of the sts. The operaton of a dstery by aternatng pro-
pretors, where no permanent change n ownershp occurs, does not requre
reregstraton of the sts by the propretors. When there s a change n ocaton
or use, or a bona fde change n ownershp of a st, the st must be regstered
to refect the change. The dstrct supervsor w, upon approvng the regstra-
ton of a st on Form 26, retan one copy, forward one copy to the Commssoner,
and return the remanng copy to the dster. The dster w retan hs copy
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233
Regs. , 183.5, etc.
at the dstery avaabe for Inspecton by Government offcers. (Sees. 2810,
3170, 3178, I. R. C.)
Sec. 183. 37. Commssoner May uthorze. The Commssoner may, In hs
dscreton, authorze the Instaaton of a ppe ne for the transfer of dsted
sprts produced under secton 2883, Interna Revenue Code, at a proof n e cess
of 159 degrees, and reduced n the recevng cstern to not more than 159, and
rot ess than 100, degrees proof, from the weghng tank In the cstern room of a
regstered dstery, after ta payment, to storage tanks In a rectfyng pant
for use n rectfcaton and bottng, or to storage or bottng tanks n a ta -pad
bottng house for bottng, when such rectfyng pant or ta -pad bottng house
s contguous to, or s n the mmedate vcnty of, the dstery. The Com-
mssoner w determne from a the crcumstances In each case whether the
rectfyng pant or ta -pad bottng house Is n the mmedate vcnty of the
dstery. (Sees. 2883, 3176, I. R. C.)
Sec. 183. 38. ppcaton. dster who desres to nsta a ppe ne for the
transfer of such sprts to a rectfyng pant or ta -pad bottng house, contguous
to, or n the mmedate vcnty of, the dstery, must fe appcaton, n trp-
cate, wth the dstrct supervsor, showng the reatve postons of the pants
and the propretorshp thereof, and gvng a fu descrpton of the proposed ppe
ne. (Sees. 28S3, 3176,1. R. C.)
Sec. 183. 39. cton on ppcaton. Upon recept of the appcaton, the
dstrct supervsor w make such Inqury as he may deem necessary to deter-
mne the proprety of grantng the permsson sought, and w then forward a
copes of the appcaton to the Commssoner wth hs recommendaton thereon.
Te Commssoner w Indcate hs approva or dsapprova on a copes of the
appcaton and w return two copes to the dstrct supervsor, who w for-
ward one copy to the appcant. Where the appcaton s approved, the ds-
ter w, after nstaaton of the ppe ne, fe amended notce, pat and pans,
descrbng the ppe ne and the fow of sprts n accordance wth these regua-
tons. (Sees. 2883, 3176,1. R. C.)
Sec. 183. 1. ppcaton, Form 179. Where a ppe ne has been Instaed
for the transfer of dsted sprts drect from the weghng tank In the ds-
tery to a rectfyng pant or a ta -pad bottng house, contguous to, or n the
Immedate vcnty of, the dstery, under the provsons of these reguatons,
and the dster desres to transfer such sprts, he sha e ecute appcaton
for the ta payment of such sprts on Form 179, In quadrupcate. The dster
and the storekeeper-ganger sha then proceed n accordance wth the provsons
of sectons 183.2S1, 183.282, and 183.297, respectng the gaugng and wthdrawa
of sprts for ta payment n raroad tank cars, nsofar as the provsons thereof
are appcabe. (Sees. 2S83, 3176,1. R. C.)
Sec. 183. 5. Reease of Sprts for Transfer. When the certfcate of ta -
payment has been aff ed to the weghng tank and canceed, the storekeeper-
gauger w unock the outet vave and permt the dster to transfer the
sprts by ppe ne to the rectfyng pant or ta -pad bottng house named
n the certfcate. The sprts sha be transferred ony under the mmedate
supervson of the storekeeper-gauger. fter the sprts have been transferred,
the storekeeper-gauger w forward one copy of Form 179 and Form 1520 and the
canceed Form 1595 to the dstrct supervsor, retan one copy of Form 179 and
Form 1520, and dever one copy of Form 179 and two copes of Form 1520 to
the dster, who w Immedatey dever one copy of Form 1520 to the rectfer
or propretor of the ta -pad bottng house. (Sees. 2883, 3176, I. R. O.)
Sec. 183. . ttachment of Fokm 20 to Storage Tank. The report of
pauge. Form 1520, devered to the rectfer or propretor of the ta -pad bottng
house by the dster sha be attached to the storage tank n the rectfyng pant
or to the storage tank or bottng tank n the ta -pad bottng house, as the case
may be. The rectfer or propretor sha enter the date and quantty of re-
movas from the tank n the bank space on such Form 1520. The report of
gauge sha be kept on the tank unt such tme as the quantty covered by such
report has been wthdrawn from the tank. The report sha then be fed by
the rectfer or propretor of the ta -pad bottng house, avaabe for nspecton
by Government offcers. The sprts transferred by ppe ne may not be used at
the rectfyng pant or ta -pad bottng house pror to attachment of Form
1520 to the storage tank or bottng tank, as the case may be. (Sec. 3176,1. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
820823 9 16
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Regs. , 183.392a, etc.
23
5. Ths Treasury Decson s ssued under the authorty contaned n
sectons 2800, 2808, 2810, 2812, 281 , 2815, 2816, 2817(b), 2819, 2820,
822, 2823, 2829, 283 , 2835, 2873, 2883, 290 , 3170, 3176, 8180, 325 ,
and 0 1, Interna Revenue Code (26 U. S. C. 2800, 2808, 2810, 2812,
281 , 2815, 2816, 2817(b), 2819, 2820, 2822, 2823, 2829, 283 , 2835, 2873.
2883,290 ,3170,3176,3180,325 , and 0 1).
Fred S. Martn,
ctng Commssoner of Interna Revenue.
pproved October 21,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed In the Federa Regster October 28,19 8)
Reguatons , Sectons 183.392a, 19 8-15-12870
183. 03a, and 183. 03b. T. D. 563
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 1S3.
PRODUCTION OF DISTILL D SPIRITS
mendng Reguatons
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned;
1. On November 1,19 7, a notce of proposed rue makng regardng
produc ton of dsted sprts was puDsned n the Federa Regster
(12 F.R. 7119).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 183.392a, 183. 03a.
and 183. 03b of Reguatons , approved February 28,19 0 (26 CFR,
Part 183), are hereby adopted.
3. These amendments are desgned to provde rues for the report-
ng of transactons n warehouse recepts.
rtce III. Speca (Occupatona) Ta es
Sec. 183.392a. Warehouse Recepts Coverng Dsted Sprts. Snce the
sae of warehouse recepts for dsted sprts s equvaent to the sae of ds-
ted sprts, every propretor of a regstered dstery who ses, or offers for
sae, warehouse recepts for dsted sprts hed n regstered dsteres or
stored n nterna revenue bonded warehouses, or esewhere, ncurs abty to
speca ta as a deaer n quors at the pace where such warehouse recepts are
s,od or offered for sae, and must fe return and pay occupatona ta as provded
n secton 183.392. (Sees. 3176, 3250(a), 325 , 3270, 3271, 3272, I. R. C.)
rtce . Dster s Records and Reports
Sec. S3. 03a. Record of Warehouse Recepts To e ept by Dster.
very propretor of a regstered dstery who ses, or offers for sae, dsted
sprts by warehouse recepts sha keep a separate record, and render a monthy
transcrpt, of a purchases and saes of warehouse recepts, on Form 52-F,
Whoesae Lquor Deaer s Monthy Record and Report of Purchases and Saes
of Warehouse Recepts for Dsted Sprts. There need not be entered on
Form 52-F transactons n warehouse recepts not nvovng the purchase or sae
of dsted sprts, such as the recept from a warehouseman of warehouse recepts
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235
Regs. , 183. 06a
coverng the depost or bottng of sprts n hs warehouse or the surrender of
warehouse recepts for the bottng of the sprts n bond or ther transfer n
bond to another warehouse. ntres on Form 52-F sha be made as ndcated
by the headngs of the coumns and nes of the form and n accordance wth the
nstructons prnted thereon or ssued n respect thereto, and as requred by
these reguatons. The provsons of secton 183. 0 wth respect to the tme of
makng entres, and of secton 183. 07 wth respect to forms to be provded by
users, are hereby made appcabe to Form 52-F. The provsons of secton
183. 05 wth respect to a separate record of sera numbers of cases are hereby
made appcabe to Form 52-F wth respect to sera numbers of packages and
cases purchased or sod by warehouse recepts. The monthy transcrpt on Form
52-F sha be forwarded to the dstrct supervsor on or before the 10th day of
the succeedng month. The physca remova of dsted sprts from the regs-
tered dstery sha contnue to be reported on Form 1598 n accordance wth
the provsons of secton 183. 02. The physca recept and dsposton of dsted
sprts at ta -pad premses sha contnue to be reported on Form 52- or
Record 52, as the case may be, In accordance wth the provsons of secton
183. 03. (Sees. 2857, 2859, 3176, 325 , I. R. C.)
Sec. 183. 03b. Pace Where Forms 52-F Sha e ept. very dster sha
keep Form 52-F at the pace of busness where warehouse recepts are sod or
offered for sae. (Sees. 2857, 2859, 3176, 325 , I. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 2859. 3176, 3250(a), 325 , 3270, 3271, and 3272 of the
Interna Revenue Code (U. S. C, tte 26, sectons 2857, 2859, 3176,
3250(a), 325 , 3270, 3271, and 3272).)
TITL 26 INT RN L R NU C PT R I, SU C PT R C, P RT 183.
PRODUCTION OP DISTILL D SPIRITS
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons ,
Producton of Dsted Sprts, approved February 28, 19 0 (26
CFR, Part 183), those provsons of Treasury Decson 5323 C. .
19 , 695 , approved anuary 5,19 (26 CFR, Part 171), whch per-
tan to reports prepared and fed by propretors of regstered ds-
teres.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the. dmnstratve Pro-
cedure ct (Pubc Law 0 , Seventy-nnth Congress) s unnecessary
n connecton wth the ssuance of these reguatons for the reason that
no change s made n e stng requrements of reguatons.
(Pubshed In the Federa Regster uy 3, 19 8.)
Reguatons , Secton 183. 06a: ddtona
requrements.
19 8-1 -128 9
T. D.5622
mendng Reguatons
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Regs. , 183. 06a
236
3. Reguatons , Producton of Dsted S|. rts, approved Febru-
ary 28,19 0 (26 CFR, Part 183), are hereby amnded by addng a new
secton, 183. 06a, as foows:
rtce . Dster s Records and Reports
Sec. 183. 06a. ddtona Requrements. (a) The propretor of a regstered
dstery sha report, on Form 1598, Part 2, when Record 52 Is kept, on Part 2
and on transcrpt, Form 52- , and when Form 52- Is kept, on Part 2, the name
and address of each consgnee, n the coumn now desgnated Name. In th
coumn now desgnated ddress, there w be reported the name and address
of the person, frm, or corporaton payng (by advancement or rembursement)
ether ta , bottng charge, brokerage fee, handng charge, or cearance fee, n-
dcatng whch are ncuded. The headng of both coumns w be amended
accordngy.
(6) Where the propretor of a regstered dstery shps or devers dsted
sprts to a consgnee on the order of another whoesae quor deaer, detaed
records of the transactons sha be kept (1) on Form 1598, Part 2, by the propretor
of the regstered dstery makng the shpment or devery, (2) on Record 52
by the whoesae quor deaer gvng the order, and (8) on Record 52 by the con-
sgnee f he s a whoesae quor deaer. For e ampe, assumng that the pro-
pretor of regstered dstery ( ) shps or devers the dsted sprts to con-
sgnee (C) on the order of whoesae deaer ( ), entres w be made on the
prescrbed forms as foows:
(1) the propretor of the regstered dstery ( ) w show n hs Form
1598, Part 2, the name and address of whoesae deaer ( ) who ordered the
dsted sprts, as we as the name and address of consgnee (C), the
person to whom the dsted sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show In hs Record 52 that the dsted
sprts were purchased from dster ( ), gvng both the name and address
of ( ), and w at the same tme make an entry showng that the dsted
sprts were shpped or devered by ( ) to consgnee (C), gvng the name
and address of (0) ; and
(3) consgnee (C), If a whoesae quor deaer, w show In hs Record
52 that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from the propretor of regstered dstery ( ), gvng name
and address of both. copy of Form 1598 and transcrpts of Record 52 on
Forms 52- and 52- , requred to be fed wth the dstrct supervsor, w
smary show the detas of such transactons.
(c) Where the propretor of a regstered dstery keeps Record 52, or Form
52- , and s a party to transactons smar to those descrbed n subsecton (6),
he sha make smar entres of such transactons In Record 52, or Form 52- ,
as the case may be; and the transcrpts on Forms 52- and 52- , or 52- ,
respectvey, requred to be fed wth the dstrct supervsor, w kewse show
the detas of the transactons. (Sees. 2859, 3171, 3176, I. R. C.)
. The provsons of Treasury Decson 5323 reatng to propretors
of regstered dsteres are revoked as of the effectve date of ths
Treasury Decson.
5. Ths Treasury Decson sha be effectve upon fng for pubca-
ton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2859, 3171, and 3176 of the Interna Revenue tode (U. S. C,
tte 26, sectons 2859,3171, and 8176).)
Geo. , Schoeneman,
G onvrrmsoner.
pproved une 18, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29,19 8, 8: 6 a. m.)
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237
Regs. 5, 18 .7, etc.
Reguatons 5, Sectons 18 .7, m 19 8-23-12963
T. D.566
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 18 .
PRODUCTION OF R NDY
mendng Reguatons 5
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. 0.
To Dstrct Supervsors and Others Concerned:
1. On ugust 12, 19 8, notce of proposed rue makng, regardng
1he producton of brandy, was pubshed n the Federa Regster (13
F.R. 672).
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ments of sectons 18 .7, 18 .8, 18 .11, 18 .15, 18 .16, 18 .17, 18 .35,
18 . 0. 18 . 1 18 . 2. 1S . 9, 18 .5 , 18 .60, 18 .6 , 18 .65, 18 .66,
18 .07c, 18 .6 d, 18 .67e, 18 .79, 18 .106, 18 .107, 18 .110, 18 .112,
18 .113, 18 .117, 18 .118, 18 .119, 18 .123(a)(2), 18 .128, 18 .129,
18 .130, 18 .131. 18 .133, 18 .13 , 18 .135(a)(3), 18 .139 (a), (b),
18 .1 0(6), 18 .1 1,18 .1 1a, 18 .1 8,18 .150.18 .153,18 .156.18 .2 6,
and 18 .391 of Reguatons 5 (26 CFR, Part 18 ), approved February
28, 19 0, are hereby adopted, and sectons 18 .9, 18 .10, 18 .111,
18 .138(a)(2), 18 .138(6) (3), 18 .155, 18 .155a, and 18 .392 of such
reguatons are hereby revoked.
3. Those amendments are desgned to smpfy certan requrements
reatng to constructon, and the preparaton, fng, and approva of
documents n connecton wth the estabshment and operaton of frut
dsteres. It s not ntended by these amendments to requre ds-
ters to fe addtona pats and pans, or to repant ppe nes, or to
change equpment mmedatey, n cases where the e stng documents,
ppe nes, and equpment conform essentay to the reguatons pror
to these amendments. Upon fng new pats and pans, repantng
pe nes, and nstang equpment, these new requrements must
e observed.
Sec. 18 .7. Wthn 600 Feet of Rectfyng Pant. No frut dster sha
carry on the busness of dstng brandy at a dstance of ess than 600 feet n
a drect ne from a rectfyng pant, e cept when he has been so authorzed by
the dstrct supervsor. The dstrct supervsor may grant such authorty when
he s of the opnon that the revenue w not be endangered thereby. (Sees. 2819,
3170, 3176, I. R. C.)
Sec. 18 .8. Speca ppcaton. person desrng to operate a frut dstery
wthn 000 feet of a rectfyng pant sha fe a speca appcaton, In trpcate,
for such prvege wth the dstrct supervsor. The appcaton sha state the
ocaton of the frut dstery and the rectfyng pant, the dstance between
the premses, the name of the propretor of the rectfyng pant, a descrpton of
any connectng ppe nes, the reason for ocatng the dstery wthn 600 feet
of the rectfyng pant, and any addtona nformaton whch the dstrct
supervsor may requre. The dstrct supervsor w take acton on such appca-
ton n accordance wth the procedure prescrbed In secton 18 .1 1. (Sees. 2819,
3170, 3176, I. R. C.)
Sec 18 .11. Changes Requmng pprova. Where there Is to be a change
n the dstance between a frut dstery and a rectfyng pant ocated wthn
600 feet of each other, as a resut of the e tenson or curtament or other change
of ether premses, a new speca appcaton, In trpcate, must be fed wth
the dstrct supervsor by the propretor of the premses whch s to be e tended
or curtaed. Where a change occurs n the propretorshp of a frut dstery
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Regs. 5, 18 .7, etc.
238
or rectfyng pant ocated wthn 600 feet of each other, the new propretor
sha fe wth the dstrct supervsor a new speca appcaton, n trpcate.
Uness the frut dstery premses are e tended or curtaed as the resut of
such change, the change may be refected n the ne t amended or annua notce.
Form 27 , and pat, fed by the dster. Such new speca appcaton sha
be consdered and dsposed of n accordance wth the procedure prescrbed n
secton 18 .1 1. ( ees. 2819, 3170, 8176, I. R. O.)
Sec. 18 .15. Was. The outsde was of dstery budngs must be securey
and substantay constructed. If wood, corrugated ron, or tn Is used, the
same must be apped over sod sheathng for the frst 12 feet of heght and
over sod sheathng or sheathng spaced not greater than 12 Inches from board
to board for the remanng heght. Where substanta sheet meta s used and
the sheets are weded together n such manner as to consttute a sod wa,
sheathng may be apped n any manner desred. The ceng and was nsde
of the recevng room and brandy depost room must be cased wth matched
tongue and groove boards, uness the use of other matera affordng equa pro-
tecton from access wthout detecton s approved by the Commssoner. (Sec
3170, I. R. C.)
Sec. 18 .16. Roofs. The roofs of dstery budngs must be securey and
substantay constructed. Where corrugated ron or tn Is used, the same must
be apped over sheathng spaced not greater than 12 nches from board to
board. Where substanta sheet meta Is used and the sheets are weded together
n such a manner as to consttute a sod roof, sheathng may be apped n any
manner desred. (Sec. 3176, I. R. C.)
Sec. 18 .17. Doobs. The outsde doors of the dstery budngs must be
securey and substantay constructed and equpped so that they may be securey
ocked. In addton, the doors of recevng rooms, brandy depost rooms, and
other rooms requred to be ocked by secton 18 . 35 must compy wth the foow-
ng requrements:
The outsde doors, and those on whch Government ocks are requred, as
herenafter provded, must be securey constructed of heavy tmber or ron, or
other equay substanta matera. The hnges must be secured by roundheaded
or carrage bots, nutted and rveted or battered on the Insde. nges that
cannot be thus secured must be naccessbe from the outsde and so attached that
they cannot be removed when the doors are cosed. The outsde doors, and those
on whch Government ocks are requred, must be equpped wth hasp and stape
securey fastened on the Insde so that they may be securey ocked. The doors
secured from the Insde must be provded wth a cross bar In the mdde of the
door and, n addton thereto, wth strong and sutabe attachments for the
recepton of ocks. Where there are doube doors, one of them at east must be
provded wth substanta bots at both the top and the bottom. These bots must
be so arranged as to punge Into substanta fastenngs or hoes n the mdde
of the upper and ower ends of the frame when the door s cosed. Fodng
doors of wood or meta, vertca or horzonta sdng doors of wood or meta, and
meta doors of the roer bnd type, must be provded wth substanta cross bars
or bots that punge nto the upper and ower ends or the sdes of the door frame,
so paced as to make the door rgd and secure, uness the doors operate n grooves
or tracks that make them secure. (Sec. 3176,1. R. 0.)
Sec. 18 .35. Constructon of Weghng Tanks. Weghng tanks sha be
constructed of meta and sha be statonary and of unform dmensons from
top to bottom, and each such tank sha be equpped wth a sutabe measurng
devce whereby the contents w be correcty ndcated. The net and outet
ppe connectons of each weghng tank must be ftted wth vaves so constructed
that they can be secured wth Government ocks, and any other openngs n such
tanks must aso be so constructed that they can be cosed and smary ocked.
ach weghng tank sha be mounted on accurate scaes and sha have pany
and egby panted thereon the words Weghng tank, foowed by ts sera
number and the capacty n wne gaons. The beams or das of weghng tank
scaes must ndcate weght n 5-pound graduatons for scaes up to and Incudng
25 tons capacty, In 10-pound graduatons for scaes e ceedng 25 tons capacty
but not e ceedng 60 tons capacty, and n 20-pound graduatons for scaes havng
a capacty of more than 60 tons. The weghng tank may be ocated n the recev-
ng room or brandy depost room, or n some convenent ocaton n the dstery
budng. Sub|ect to the provsons of secton 18 . 0, the weghng tank may
aso be used as a recevng tank. (Sees. 2808. 2823, 8176, I. R. C.)
Sec. 18 . 0. Washwater Recevno Tanks. If carbon do de gas s re-
covered, and the washwater s to be utzed n the manufacture of brandy, there
must be provded a suffcent number of washwater recevng tanks, whch sha
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230
Regs. 5, 18 .7, eto.
be constructed of meta and be of unform dmensons from top to bottom. ach
such tank sha be equpped wth a sutabe measurng devce whereby the actua
contents w be correcty ndcated. There must be panted on each tank the
words Washwater recevng tank, foowed by ts sera number and the
capacty n wne gaons. The outet vave must be equpped for ockng wth a
Government ock. If the washwater s not used n the manufacture of brandy, as
provded by secton 18 .2 0, washwater recevng tanks need not be nstaed.
(Sees. 2829,3178,1. R. C.)
Seo. 18 . 1. Sts. The sts must be of substanta constructon and must
have a cear space of not ess than 1 foot around them. The steam or fue ne
to each st sha be equpped wth a vave so constructed that It may be ocked
wth a Government ock when the dstery Is suspended, as requred by secton
18 .38 . The dran and washout ppes of sts must aso, whenever practcabe,
be equpped wth vaves so constructed that they may be ocked wth Government
ocks. If there Is a furnace under the sts or doubers, the door thereto must,
as provded n such secton, be so constructed that t may be secured wth a
Government ock. There must be a cear space of not ess than 2 feet around
every douber and condenser or worm tank. The douber and worm tank must
be eevated not ess than 1 foot from the foor. very st must be numbered,
commencng wth number 1, and have panted thereon ts desgnated use, such as
eer st, Douber, etc., and ts number and sprt producng capacty n proof
gaons n 2 hours, computed In accordance wth the rues set forth In the
ppend to these reguatons. Where the st s nsuated or the manufacturer s
sera number s otherwse obscured, such number w kewse be panted on the
coverng of the st. (Sees. 2822, 8176, I. R. C.)
Seo. 18 . 2. Genera Requrements for Tanks. tanks used as receptaces
for sprts between the outet of the frst condenser or worm and the recevng
tanks sha be constructed of meta, uness encosed wthn a securey constructed
room equpped for ockng wth a Government ock, n whch case the tanks may
be constructed of wood or concrete. Meta tanks sha be of unform dmensons
from top to bottom. tanks sha be equpped wth a sutabe measurng devce,
conformng to the requrements of secton 18 . 3, whereby the actua contents
w be correcty Indcated. tanks must be so constructed as to permt e am-
naton of every part thereof, and so arranged as to eave an open space of not
ess than 3 feet between the top and the roof or foor above. tanks, such as
ow-wne tanks, sngngs tanks, other unfnshed-sprts tanks, heads and tas
tanks, fuse o tanks, dsted water tanks, and smar equpment sha each
have pany and egby panted thereon Its desgnated use, sera number, and
capacty In wne gaons. Manheads, nets, and outets of the tanks and a
necessary openngs n the dstng apparatus and equpment, e cept coumn
sts, whereby access may be had to the sprts, must be provded wth factes
for ockng wth Government ocks: Provded, That dsted water storage tanks
need not be so equpped uness a ppe ne s connected therewth for the convey-
ance of dsted water to contguous estabshments, as provded n secton 18 . 5.
openngs n tanks and other dstng apparatus and equpment, whch are
not absoutey necessary, and whch can be permanenty cosed wthout nter-
ference wth pant operatons, sha be cosed by brazng, wedng, or otherwse
securey fastenng and seang. Tanks used as receptaces for sprts may be
permanenty connected wth ppe nes, for the conveyance thereto of ar, and
aso dsted water, but the dsted water ppe ne must be aff ed to the top
of the tank, and may not e tend Into the tank. Such ppe nes must be equpped
wth a contro vave whch may be ocked wth a Government ock. Ppe nes
used for the conveyance of ar must aso be equpped wth a check vave ocated
near the pont of entry to the tank In order to effectvey prevent any abstracton
of sprts from the tank. Other ppe nes, e cept those used for the conveyance
of sprts, may not be permanenty connected wth such tanks. (Sees. 2823, 2829,
30 1, 3176, I. R. C.)
Sec. 18 . 9. Recevng Tanks. The dster sha provde a suffcent number
of recevng tanks of adequate capacty, nto whch sha be conveyed a the
brandy produced In the dstery. Such tanks w be ocated n the recevng
room, where such a room Is provded. If no recevng room Is provded, the
dster may, f he so desres, pace recevng tanks n the brandy depost room,
or, f the tanks are constructed of meta, they may be ocated at some pace n
the dstery convenent for drawng off sprts. If the tanks are not constructed
of meta they must be paced In the brandy depost room, uness a recevng room
Is provded. t dsteres where operatons are not such as to requre the day
attendance of a storekeeper-ganger, the recevng and sngngs tanks sha be of
such capacty as w necesstate the vst by a Government offcer not more than
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Regs. 5, 18 .7, eto.
2 0
twce a month to gauge the sprts: Provded, That the dstrct supervsor may
approve tanks of. ess capacty where, by reason of the ocaton of the dstery,
he can assgn a storekeeper-gauger to vst the dstery more often than twce
a month to gauge the brandy, or where the quantty of brandy produced s such as
to make the retenton of 15 days producton In the recevng tanks nadvsabe.
Recevng tanks must be constructed and arranged n conformty wth the requre-
ments of secton 18 . 2, and, n addton thereto, such tanks must be eevated not
ess than 18 nches from the foor and so separated that the Government offcer
may pass competey around each. ach recevng tank sha be equpped wth a
sutabe measurng devce conformng to the requrements of secton 18 . 3.
ach such tank sha have pany and egty panted thereon the words
Recevng tank, foowed by ts sera number and the capacty n. wne gaons.
Ppe nes connected wth recevng tanks must be brazed, weded, or otherwse
secured and seaed to the tanks In such a manner that they cannot be detached
or atered wthout showng evdence of tamperng. Ppe nes for the conveyance
of dsted water, ar, or other substances than sprts may not be permanenty
connected wth recevng tanks, e cept as provded by secton 18 . 2. (Sees.
2823,2829,30 1,3170,8176,1. R. O.)
Sec. 18 .5 . Coors fob Ppe Lnes. The ppe nes n the frut dstery used
for conveyng the foowng substances sha be kept panted In the coors
Indcated:
ack randy or other fnshed sprts.
ue apor, sngngs, hgh wnes and ow wnes, or
other unfnshed sprts.
Red Fermented mash, wne, or other dstng
matera.
Gray Must or other unfermented matera.
rown Sop.
Yeow Fuse o.
Whte Water.
umnum Steam.
Orange r.
Ove green Carbon do de gas.
These coors are Intended for such ppe nes ony and are prescrbed for the
purpose of dstngushng such ppe nes from each other and from a other
pp nes on the premses whch are panted but for whch coors are not pre-
scrbed. The pantng n one of the prescrbed coors, or a coor smar thereto,
of a ppe ne for whch a coor Is not prescrbed s prohbted. Ppe nes for
whch coors are not prescrbed may be panted n sectons of contrastng coors.
(Sees. 2822, 3176,1. R. O.)
Sec. 18 .60. Descrpton of Premses. The ot or tract of and on whch the
dstery Is stuated must be descrbed on Form 27 by courses and dstances,
n feet and Inches, wth the partcuarty requred In conveyances of rea estate.
If the dstery premses consst of two or more ots or parces, the condton
of the tte to whch s not the same, the entre dstery premses sha be
frst descrbed, foowed by a separate descrpton by courses and dstances, n
feet and nches, of each such ot or parce. The contnuty of the dstery
premses must be unbroken, e cept that the premses may be dvded by a pubc
street or hghway, If parts of the premses so dvded abut on such street or
hghway, opposte each other. The premses may be smary dvded by a
raroad rght-of-way, f the raroad s a common carrer. In such cases, each
tract of and consttutng the dstery premses sha be descrbed separatey
on the form. (Sees. 2812, 3176, I. R. C.)
Sec. 18 .6 . Condton of Tte to Premses. The condton of tte to the
premses sha be shown on Form 27 . If the dster Is the owner of the
premses In fee, unencumbered, It sha be so stated. If the dster s not the
owner In fee, unencumbered by any mortgage, |udgment, en, or other encum-
brance of the ot or tract of and on whch the dstery Is stuated, the name
and address of the owner of the fee and of any mortgagee, |udgment-credtor, and
of any person havng a en or encumbrance, and of a pror essees thereon, sha
be stated. Where the wrtten consent of the owner of the fee and of any mort-
gagees, |udgment-credtors, enors, encumbrancers, or essees. Is fed, as pro-
vded n secton 18 .67a, or where an Indemnty bond s fed In eu of such
wrtten consent, as provded n sectons 18 .67d and 18 .67e, such fact, together
wth nformaton as to the knd, date, and amount of the encumbrance and
the baance due thereon, sha be shown on the Form 27 n connecton wth the
statement of the present condton of the tte. If the premses are occuped
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Regs. 6, 18 .7, etc.
under a ease, the name of the owner, the name of the essor, the ength of the
term, and the date of ts e praton, sha be stated. (Sees. 2800(e)(1), 2812,
2815(b), 3176,1. R. O.)
Sec. 18 .65. Condton of Tte to pparatus and qupment. The dster s
tte to, or Interest n, the dstng apparatus and equpment sha be shown on
Form 27 a. If the dster Is not the owner of such apparatus and equpment,
unencumbered by any mortgage, |udgment, en, or other encumbrance, the
name and address of the owner thereof and of any mortgagee, |udgment-credtor,
enor, or encumbrancer, or condtona saes vendor, sha be stated. Where the
wrtten consent of the owner and of the mortgagees, udgment-credtors, enors,
or other encumbrancers, or condtona saes vendors, s fed, as provded In sec-
ton 18 .67a, or where an ndemnty bond s fed n eu of such wrtten consent,
as provded n sectons 18 .67d and 18 .67e, such fact, together wth nformaton as
to the knd, date, and amount of the encumbrance and the baance due thereon, or,
f the apparatus was purchased under a condtona saes contract, or other form of
tte retanng contract, the purchase prce and the baance due sha be shown n
connecton wth the statement of the dster s tte to, or nterest n, the prop-
erty. (Sees. 2800(e) (1), 2812, 2815(b), 8176, I. R. 0.)
Sec. 18 .66. Dstance From .Rectftno Pant or negar Factory. If the
dstery premses are stuated more than 600 feet n a drect ne from nny
premses authorzed to be used for rectfyng sprts, or from a vnegar factory
usng the vaporzng process, such fact sha be stated on Form 27 . If the ds-
tance between the dstery premses and the premses of a rectfyng pant Is ess
than 600 feet n a drect ne, there must be stated n the notce, Form 27 . the
name of the propretor of the rectfyng pant, the e act dstance n feet and
Inches between the dstery and the rectfyng pant, and whether the ocaton
of the dstery wthn such dstance of the rectfyng pant has been approved
by the dstrct supervsor. If such ocaton of the dstery has been approved by
the dstrct supervsor, the date of such approva sha be gven. If the dstance
between the dstery premses and a vnegar factory usng the vaporzng process
Is ess than 000 feet n a drect ne, such fact and the date of the estabshment
of the vnegar factory sha be stated on the form. (Sees. 2812, 2819, 283 , 2835,
3170, 3176, I. R. O.)
Sec. 18 .67c. ppcaton. The appcaton sha contan (1) an accurate
descrpton of the ot or tract of and on whch the dstery s stuated, and of
the dstery, the budngs, and the dstng apparatus and equpment thereon;
(2) a fu and cear statement of the condton of the tte to the premses and
apparatus and equpment, ncudng the name and address of the owner and of
a mortgagees, |udgment-credtors, condtona saes vendors, pror essees, and
other persons havng ens or encumbrances thereon, the knd, date, and amount
of each encumbrance and the baance due thereon, and, n the case of apparatus
and equpment purchased under a condtona saes contract, or other form of tte
retanng contract, the purchase prce and the baance due; and (8) a fu and
cear statement of the reasons why the appcant cannot obtan the prescrbed
wrtten consent. The dstrct supervsor w take acton on such appcaton n
accordance wth the procedure prescrbed n secton 18 .1 1a. (Sees. 2815(b),
3170, 3176, I. R O.)
Sec. 18 .67d. ond, Form 3- . If the appcaton s approved, the dster
sha e ecute bond on Form 3- , ond of Indemnty n Favor of the Unted
States, n trpcate, n conformty wth the appcabe provsons of sectons
18 .83 to 18 .103, ncusve, and fe the same wth the dstrct supervsor. The
penn sum of the bond sha be equa to the apprased vaue of the ot or tract
of and on whch the dstery Is stuated, the dstery, the budngs, and the
dstng apparatus. If, after such bond s fed, the vaue of the dstery
premses, budngs, or dstng apparatus s ncreased by addtona and, bud-
ngs, or dstng apparatus, an addtona bond on such form to cover the ncrease
n vaue w be requred: Provded, That f such ncrease n vaue s ess than
1,000, no addtona bond w be requred. In the event of a faure of bond on
Form 3- the dster w be no onger quafed. The apprasa sha be made
n accordance wth the provsons of secton 18 .07f. (Sees. 2815(b), 3176,
I. R. C.)
Sec. 18 .67e. ond n L|ett of Consent Where Dstery Is Soo for Unted
States. Where a dstery s sod at a |udca or other sae n favor of the
Unted States, the dster may gve bond on Form 3- n eu of the consent of
the person possessng the rght of redempton and of any mortgagee, |udgment-
credtor, enor, pror essee, or other encumbrancer, and be aowed, upon com-
pyng wth a other provsons of aw and these reguatons, to operate the
dstery durng the e stence of the rght of redempton from such sae.
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Regs. 5, 18 .7, etc.
2 2
dster desrng to gve bond In such case sha fe appcaton, n trpcate,
wth the dstrct supervsor for permsson so to do. The appcaton sha contan
a fu and cear statement of the condton of the tte, ncudng the name and
address of the person havng the rght of redempton and of a encumbrancers,
the knd, date, and amount of each encumbrance, the date of the sae and the
date of e praton of the rght of redempton. The pena sum of the bond sha bf
equa to te apprased vaue of the ot or tract of and on whch the dstery
s stuated, together wth the budngs and dstery apparatus. If, after such
bond Is fed, the vaue of the dstery premses, budngs, or dstng apparatus
s Increased by addtona and, budngs, or dstng apparatus, an addtona
bond on such form to cover the Increase n vaue w be requred: Provded,
That, f such ncrease n vaue s ess than 1,000, no addtona bond w be
requred. The apprasa sha be made In accordance wth the provsons of
secton 18 .67f. (Sees. 2815 (b), 8176,I. R C.)
Sec. 18 .79. Statement of Pbooesb. There must be submtted to the dstrct
supervsor wth the frut dster s orgna notce, Form 27 , a statement of
process, n trpcate. Upon any change n the process, a new statement, n
trpcate, must be fed wth the dstrct supervsor who w forward a copes
to the Commssoner n accordance wth secton 18 .1 8. Reference by date to
the current statement of process must be Incorporated n each annua notce.
Form 27 . The statement of process shoud present a step-by-step descrpton
of the mashng, formentng, dstng, purfyng, and refnng processes used
In the producton of each type of brandy. It must show specfcay the knd
and appro mate quantty or proporton of a nonacoho producng materas
or substances added to the dstng matera for the purpose of provdng yeast
food or for nhbtng the acton of wd yeast, or for any other purpose, and
a materas used for purfyng, refnng, or otherwse treatng the sprts.
Sampes of any such matera or substance w be prepared and furnshed to
the dstrct supervsor, upon request, for anayss by Government chemsts.
Materas or chemcas whch are voate and woud reman Incorporated wth
the fnshed brandy after fna dstaton may not be used. (Sees. 3176, 325 (g).
I. R. 0.)
Sec. 18 .106. Preparaton. very pat and pan sha be drawn to scae and
each sheet thereof sha bear a dstnctve tte, enabng ready Identfcaton.
The cardna ponts of the compass must appear on each sheet, e cept the eeva-
tona pans. The mnmum scae of any pat w not be ess than one-ffteth Inch
per foot. ach sheet of the orgna pat and pans sha be numbered, the frst
sheet beng desgnated number 1 and the other sheets numbered n consecutve
order. Pats and pans sha be submtted on sheets of tracng coth, opaque
coth, or senstzed nen. The dmensons of pats and pans sha be 15 by 20
Inches, outsde measurement, wth a cear margn of at east 1 nch on each sde
of the drawng, etterng, or wrtng. Pats and pans may be orgna drawngs,
or reproductons made by the dtto process, or by bue or brown ne thoprnt,
f such reproductons are cear and dstnct. (Sees. 2816, 3176,1. R C.)
Sec. 18 .107. Depcton of Dstery Premses. Pats must show the outer
boundares of the dstery premses by courses and dstances, In feet and nches,
n a coor contrastng wth those used for other drawngs on the pat, and the
pont of begnnng wth respect to ts dstance and bearngs from some near and
we-known andmark, and must contan an accurate depcton of the budng or
budngs comprsng the premses and any drveway, pubc hghway, or raroad
rght-of-way ad|acent thereto or connectng therewth. The depcton of the
premses sha agree wth the descrpton n the notce, Form 27 . If the
dstery premses consst of two or more ots or parces of and the condton
of the tte to whch Is not the same, each such ot or tract sha be separatey
descrbed by courses and dstances, n feet and nches, and such ots or parces
sha be deneated or cross-hatched n contrastng coors. If two or more
budngs are to be used, the desgnated name of each sha be ndcated, and a
ppe nes or other connectons, f any, between the same depcted. Where two
or more budngs are used for the same purpose the name of each such budng
sha ncude an aphabetca desgnaton, begnnng wth , and they sha be so
shown on the pat. frst foor e teror doors of each budng on the premses
w be shown on the pat. cept as provded In secton 18 .116, a ppe nes
eadng to or from the premses, the purpose for whch used and the ponts or
orgn and termnaton w be Indcated on the pat. (Sees. 2816, 3176, I. R C.)
Sec. 18 .110. Foor Pans. The pans sha ncude a foor pan of each foor of
each budng, showng the genera dmensons of the rooms and foors and th
ocaton of a doors, wndows, and other openngs and how such openngs are
protected. apparatus and equpment, e cept ppe nes, must be shown n
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Regs. 5, 18 .7, etc
ther e act ocaton on the foor pans and ther desgnated use ndcated. In the
case of sts, tanks, and smar equpment, the sera number and capacty sha
aso be shown. (Sees. 2816,3176,I. R. C.)
Sec. 18 .112. evatona Pans op udngs. The pans sha aso ncude
an e teror, eevatona vew of each e posure of each budng showng the type of
securty afforded the openngs. The number of stores and the heght of each
story w be ndcated on the eevatona pans. In eu of drawngs, the ds-
ter may submt a photograph of each e posure of each budng n a sze not
smaer than 7 by 9 Inches. The photographs must be n suffcent deta to
ceary depct the budngs from the ground to the roof and must be propery
dentfed. Where photographs are submtted, drawngs must be furnshed to
show the securty afforded the openngs n a rooms requred to be ocked, such
as recevng rooms, brandy depost rooms, etc.: Provded, That n eu of such
drawngs, the photographs may be noted to show the type of securty afforded the
openngs n such rooms by reference to the approprate sheet of pans on fe,
whereon such nformaton s shown. (Sees. 2816,3176,1. R. O.)
Seo. 18 .113. Coors fok Ppe Lnes. The ppe nes must be shown on the
pans In the coors n whch they are requred to be panted, as foows:
ack randy, or other fnshed sprts.
ue apor, sngngs, hgh wnes and ow wnes, or
other unfnshed sprts.
Red Fermented mash, wne, or other dstng
matera.
Gray Must or other unfermented matera.
rown Sop.
Yeow Fuse o.
Whte Water.
umnum Steam.
Orange r.
Ove green Carbon do de gas.
(Sees. 2816,8176,1. R. C.)
8 0.18 .117. evatona Fow Dagrams. evatona fow dagrams (pans)
sha be submtted coverng (1) dstng matera system, (2) mashng and
fermentng systems, (8) dstng system, and ( ) the recevng tank system.
Such dagrams or pans sha ceary depct a equpment n ts reatve operatn.g
sequence and eevaton by foors wth a connectng ppe nes, vaves, fanges
(e cept as provded n secton 18 .11 ), Government ocks, measurng devces,
etc. The eevaton by foors on the dagrams may be ndcated by horzonta
nes representng foor eves. the fow dagrams as a unt must show the
fow of the dstng matera and the resutng products, through the dstng
matera tanks, fermenters, sumps, sts, doubers, try bo es, and other equp-
ment, and the depost and remova of the fnshed sprts from the recevng
tanks and the brandy depost room, f any. ma|or equpment, fermenters,
sts, etc., must be Identfed on these pans as to number and use. The eeva-
tona fow dagrams must be so drawn that a f ed ppe nes, e cept those
ndcated by secton 18 .116 may be ready traced from begnnng to end. Other
types of drawngs that ceary depct the nformaton requred heren may be
submtted n compance wth ths secton. (Sees. 2816, 3176, I. R. C.)
Sec. 18 .118. Certfcate of ccuracy. The pat and pans Sha bear a
certfcate of accuracy n the ower rght-hand corner of each sheet sgned by the
dster, the draftsman, and the dstrct supervsor substantay In the foow-
ng form:
pproved
(Name of dster)
( ddress)
(Date)
ccuracy certfed by
(Dstrct supervsor)
(Name and capacty for the
dster)
(Draftsman)
Frut Dstery No , 19 Sheet No..
(Sees. 2816, 8170, 3176. L . C.)
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Regs. 5, 18 .7, etc.
2
Sec. 18 .119. Rev sed Pats and Pans. The sheets of revsed pats and pans
sha bear the snne number as the sheets superseded but w be gven a new
date. ny addtona pats and pans sha be gven a new number In consecu-
tve order or w be otherwse numbered and ettered n such manner as w
permt the fng of the pats and pans In proper sequence. (Sees. 2816, 3176,
I. R.O.)
Sec. 18 .123. Change n PROPR TO snrp. (a) Suspenson.
(2) Regstry of atMs. If the busness s to be permanenty dscontnued,
fe Form 26, Regstry of Sts, n trpcate, In accordance wth secton 18 .391.

Sec. 18 .128. Changes n Premses. (o) Procedure. Where the premses
of a frut dster are to be e tended or curtaed, the dster must fe wth the
dstrct supervsor an amended notce, Form 27 , and an amended pat of the
premses as e tended or curtaed, e cept as heren specfcay authorzed n
the case of aternate operatons of the bottng department. If the pans are
affected by the e tenson or curtament, they must aso be amended. If the
dstery s wthn 600 feet of a rectfyng pant the dster must aso fe a
speca appcaton n accordance wth sectons 18 .8 and 18 .11. The addtona
premses covered by an e tenson may not be used for dstery purposes, and
the porton of the dstery premses to be e cuded by a curtament may not
be used for other than dstery purposes, pror to approva of the notce, Form
27 . Where an nterna revenue bonded warehouse contanng a bottng-n-
bond department s ocated on the dstery premses, and the documents re-
qured by Reguatons 6, governng the aternate operaton of the bottng house
as a bottng-n-bond department and a ta -pad bottng house are fed, and
no change n propretorshp s nvoved, the fng of addtona notces, Form
27 , coverng changes n the temporary status thereof from tme to tme w
not be requred.
(6) ond, Form S- . In the case of an e tenson of the dstery premses,
f the vaue of such premses Is ncreased by the addton of and, budngs,
equpment, etc., where an ndemnty bond has been fed In eu of consent of
the owner or of any encumbrancer, a new or addtona ndemnty bond on Form
3- must be fed n accordance wth secton 18 .67d.
(c) Consent, Form 1602. Where the dster s the owner n fee unencum-
bered, or has procured the consent of the owner or any encumbrancer, of the
premses, and such premses are e tended to ncude addtona and, budngs,
etc., the dster, f he Is not the owner n fee unencumbered of the e tended
premses (ncudng budngs, etc.), must procure the consent of the owner
or of any encumbrancer of such e tended premses, and the budngs, apparatus,
and equpment thereon, n accordance wth secton 18 .67a, or n eu thereof,
fo an ndemnty bond on Form 3- , n accordance wth secton 18 .67d. (Sees.
2812, 2815(b), 2816, 2819, 2873, 290 , 3170, 8176, 0 1, L R. O.)
Sec. 18 .129. Changes n Constructon and Use. Where a change s to be
made n the constructon of a room or budng not nvovng an e tenson or
curtament of the dstery premses, or where a change Is to be made In the
use of any porton of such premses, the dster sha frst secure approva
thereof by the dstrct supervsor pursuant to appcaton, n trpcate, settng
forth specfcay the proposed changes. Upon approva of the appcaton, the
changes w be made under the supervson of a Government offcer, uness they
are of such a nature as, n the opnon of the dstrct supervsor, do not requre
such supervson. The competed changes w be refected n the ne t amended
or annua notce. Form 27 , and amended pans fed by the dster, uness the
dstrct supervsor requres the Immedate fng of an amended notce and
amended pans. (Sees. 2812, 2816,3170, 3176,1. R. C.)
Sec. 18 .130. Indemnty ond Coverng Changes n udngs. If bud-
ngs on the dstery premses, or on premses whch have been emnated from
the dstery premses, are to be demoshed or atered In such a manner as to
decrease the vaue of the property, and a en for ta es e sts on such property
under secton 2800(e), I. R. C, the dster, f (1) the owner of the fee unen-
cumbered, or (2) consents In accordance wth secton 18 .67a are necessary and
have been obtaned, must fe wth the dstrct supervsor an ndemnty bond,
Form 1617, n trpcate, n a pena sum equa to the decrease In the vaue of the
property: Provded, That, f such decrease n vaue s ess than 1,000, no In-
demnty bond w be requred. (Sees. 2800(e), 3176,1. R. a)
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2 5
Regs. 5, 18 .7, etc.
Sec. 18 .131. pprasa. The amount of the decrease q the vaue of the
property sub|ect to the Government s en whch w be caused by the demoton
or ateraton of budngs sha be determned by apprasa by two or more com-
petent persons desgnated by the dstrct supervsor. The apprasers sha
render to the dstrct supervsor a report, n dupcate, of ther apprasa, whch
sha ncude nformaton as to the methods empoyed by them n determnng
ther vauatons. The apprasa sha be at the e pense of the dster, uness
made by Government offcers. The dstrct supervsor may dspense wth the
forma apprasa when he has reason to beeve that the vaue of the property
concerned s ess than 1,000. (Sees. 2800(e), 8176, I. R. C.)
Sec. 18 .138. Indemnty ond Coverng Remova op qupment. If dstng
apparatus or equpment on whch a en has attached under secton 2800(e),
I. R. C, for ta es on sprts produced whch have not been ta -pad or wthdrawn
for a ta -free purpose, s to be removed from the dstery premses wthout
addng property that w become a f ture n aw of an equa or greater vaue
than the apparatus or equpment to be removed, (1) where the dster s the
owner of the premses n fee unencumbered, whether the property Is reaty or
personaty, or (2) where consents n accordance wth secton 18 .67a are neces-
sary and have been obtaned, whether the property s reaty or personaty, the
dster must fe wth the dstrct supervsor an ndemnty bond on Form 1617,
n trpcate. Such bond must be n a pena sum equa to the vaue of the appa-
ratus or equpment to be removed or equa to the e cess n vaue of the apparatus
or equpment to be removed over the vaue of the property to be substtuted there-
for : Provded, That, If such vaue or dfference n vaue, as the case may be, a
ess than 1,000, no ndemnty bond w be requred. The vaue of the dstng
apparatus or equpment to be removed, or the dfference between the vaue of
such od apparatus or equpment and the vaue of the new property to be added
w be determned n the manner prescrbed n secton 18 .131. (Sees. 2800(e),
8176, I. R. O.)
Sec. 18 .18 . mended Notce and Pans Coverng Changes n qupment.
Upon competon of changes n equpment whch materay affect the accuracy
of the Form 27 or pans, the dster must fe an amended notce and amended
pans. Where an amended notce and amended pans are not fed mmedatey
upon competon of mnor changes In equpment, such as genera repars, changes
n ppe nes, or the addton or remova of a tank, the dster must ncude such
changes n the ne t amended or annua notce and amended pans to be fed by
hm: Provded, That, the Commssoner or the dstrct supervsor may, at any
tme, n hs dscreton, requre the mmedate fng of an amended notce and
pans coverng any change n equpment. (Sees. 2812, 2816, 3170, 8176, I. R. C.)
Sec. 18 .135. uafcaton. (a) Where no bonded warehouse on premses.


(8) Regstry of sts. Regster the sts on Form 26, n trpcate, n accord-
ance wth secton 18 .391, f not prevousy regstered.

Sec. 18 .139. Where Operaton op Warehouse on Premses Is Contnued.
(a) Suspenson. Where an nterna revenue bonded warehouse s ocated on the
frut dstery premses and the frut dster desres to contnue to operate the
warehouse on such premses whe the dstery Is operated aternatey as a frut
dstery and as a regstered dstery or Industra acoho pant, he must, upon
suspenson of the frut dstery, compy wth the provsons of secton 18 .138(a)
(3) and ( ), and, n addton thereto, the foowng requrements:

(ft) Resumpton. Where operaton of the pant as a regstered dstery or
ndustra acoho pant as been suspended and operaton thereof as a frut
dstery s to be resumed, the frut dster must compy wth the provsons
of secton 18 .138(6) a), (5), and (6), and, n addton thereto, the foowng
requrements:

Sec. 18 .1 0. Where onded Warehouse Is Dscontnued or mnated
From Frut Dstery Premses. (a) Suspenson.
(6) Resumpton. Where operaton of the pant as a regstered dstery or
ndustra acoho pant has been suspended, and operaton thereof s to be
resumed as a frut dstery, the frut dster must compy wth the provsons
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Regs. 5, 18 .7, etc. 2 6
of secton 18 .138(6) ( a), (5), and (6), and, n addton thereto, the foowng
requrements:

Seo. 18 .1 1. Speca ppcaton. Where a speca appcaton for permsson
to operate a frut dstery wthn 600 feet of a rectfyng pant s submtted by
the dster, and such speca appcaton conforms to the requrements of these
reguatons, the dstrct supervsor w cause an nspecton to be made to deter-
mne whether the proposed operaton of the dstery wthn 600 feet of the
rectfyng pant may be permtted wthout eopardy to the revenue. The nspector
w ascertan whether the appcaton accuratey descrbes the reatve ocaton
of the two premses and a ppe nes and other connectons, f any, between
such premses. The nspector w aso observe the surroundngs, ncudng a
streets, roads, and drveways connectng the two premses, and any condton
whch mght endanger the revenue, and w descrbe the same n hs report. If
the dstrct supervsor fnds, upon consderaton of the nspecton report, that
the dstery may be operated at the desgnated ocaton wthout danger to the
revenue, he w note hs approva on a copes of the speca appcaton. e
w then return one copy of the approved appcaton to the appcant, retan the
orgna for hs fes, and forward the remanng copy, together wth a copy of the
nspecton report, to the Commssoner. pprova of the speca appcaton
pertans to the ocaton of the dstery ony, and does not authorze the opera-
ton thereof. The dstery may not be operated unt the dster s bond and
other quafyng documents requred by aw and these reguatons have been
fed and approved by the Commssoner. If the speca appcaton s dsap-
proved, the dstrct supervsor w note hs dsapprova thereon and w return
a copes of such appcaton to the appcant, wth advce as to the reason for
dsapprova. (Sees. 2810, 8170, 8176, I. R. O.)
Sec. 18 .1 1a. Indemnty ond ppcaton. When an appcaton for perms-
son to fe an ndemnty bond, Form 3- , n eu of the wrtten consent of the
owner of the dstery premses or apparatus or equpment, or of any mortgagee,
|udgment-credtor, enor, or other person havng an encumbrance thereon, or
condtona saes vendor, Is submtted by the appcant and such appcaton
conforms to the requrements of these reguatons, the dstrct supervsor w
cause an nvestgaton to be made of the facts upon whch the appcaton s
based, and w desgnate two or more competent persons to make an apprasa
of the vaue of the ot or tract of and on whch the dstery s stuated, the
dstery, the budngs, and the dstng apparatus. The apprasa sha be
made as provded n secton 18 .67f. If the dstrct supervsor fnds upon con-
sderaton of the apprasa and reports of nvestgaton that under the Inw and
reguatons an ndemnty bond may propery be accepted n eu of the consent
of the owner or enor, and f he s satsfed that the vauaton paced upon the
dstery property by the apprasers Is far, he w note hs approva on a copes
of the appcaton. e w then return one copy of the approved appcaton to
the appcant and retan the orgna for hs fes. e w forward the remanng
copy of the appcaton and copes of the reports of nvestgaton and apprasa
to the Commssoner at the tme of forwardng the Indemnty bond. If the
appcaton Is dsapproved, the dstrct supervsor w note hs dsapprova
thereon and w return a copes of such appcaton to the appcant wth a
statement of the reasons for dsapprova. (Sees. 2815(b), 3170, 3176, I. R. C.)
Sec. 18 .1 8. pprova of uafyng Documents. If the dstrct supervsor
fnds, upon competon of hs Investgaton and e amnaton of the nspecton
report, that the person seekng to quafy ns a frut dster s quafed to hod
a permt and has comped n a respects wth the requrements of aw and these
reguatons, and f the notce, Form 27 , bond, Form 30 . and consent, Form
1602, or ndemnty bond, Form 3- , If any, fed n eu thereof, may propery be
approved, he w note hs recommendaton for approva on a copes of the
notce, dster s bond, and consent or ndemnty bond (f any), and hs approva
on a copes of the pat, pans, and other quafyng documents, and w forward
a copes of the notce, bond, consent or ndemnty bond (f any) and the orgna
copy of the pat, pans, and other quafyng documents, together wth a copy of
n nspecton reports, to the Commssoner for fna acton. The orgna copy
of the appcaton for permt w be forwarded to the Commssoner wth such
quafyng documents. Tn e Issuance of a permt shoud he wthhed pendng
approva by the Commssoner of the notce, bond, and other quafyng docu-
ments recured under the nterna revenue aws. (Sec. 3176. I. R. C.
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2 7 Regs. 5, 18 .7, etc.
Sec. 18 .150. Dsposton of uafyng Documents. Where notce, Form
27 , bond, Form 30 , and consent, Form 1602 (If any), or Indemnty bond, Form
8- , fed n eu thereof, are approved by the Commssoner, the dstrct supervsor
w, upon recept of approved copes of such documents from the Commssoner,
as provded In secton 18 .156, forward one copy of the notce, bond, consent or
Indemnty bond, pat, pans, and other quafyng documents and the orgna
copy of the Federa coho dmnstraton ct permt to the dster and w
retan one copy of such quafyng documents for the fe of the appcant In hs
offce. If the dster s bond, consent or Indemnty bond s dsapproved, the
dstrct supervsor w, upon recept from the Commssoner of the dsapproved
copes of such documents and other quafyng documents submtted therewth,
return a copes of the quafyng documents to the propretor, wth advce as to
the reason for dsapprova. (Sec. 3176,1. R. O.)
Sec. 18 .153. ppcatons and Reports Coverng Changes. Where an app-
caton coverng changes n the dstery apparatus or equpment, or n the con-
structon or use of a room or budng, Is approved by the dstrct supervsor, he
w retan one copy of the appcaton and forward one copy to the dster and
one copy to the Commssoner, and, when reports coverng changes n apparatus
|nd equpment are receved from Government offcers n accordance wth secton
1S .132, he w retan one copy and prompty forward one copy to the Comms-
soner. Smar dsposton w be made of reports receved from the dster
coverng emergency repars of dstng apparatus and equpment. Where
changes n budngs, apparatus, or equpment are such as to requre the fng of
an Indemnty bond, the dstrct supervsor may approve the appcaton, f he has
recommended approva of the bond, and permt the changes n budngs, appa-
ratus, or equpment to proceed pendng approva of the bond by the Commssoner.
(Sec. 3176,1. R. C.)
Sec. 18 .156. uafyng Documents. The Commssoner w revew the
notce, Form 27 , pat, pans, bond, Form 30 , consent, Form 1602, If any, or
Indemnty bond, Form 3- , fed n eu thereof, and, other quafyng documents,
ncudng appcaton for Federa coho dmnstraton ct permt, upon ther
recept from the dstrct supervsor. If the Commssoner approves the con-
structon and equpment of the dstery and the notce, pat, pans, dster s
bond, consent or ndemnty bond, If any, and other quafyng documents, he w
assgn a regstry number to the frut dstery n accordance wth the provsons
of secton 18 .157, note hs approva on a copes of the dster s bond, consent
or ndemnty bond, and notce, retan one copy of the dster s bond, consent
or Indemnty bond, and notce and a copes of the other quafyng documents,
and w return two copes of the approved dster s bond, consent or ndemnty
bond, and notce, to the dstrct supervsor wth advce as to hs acton on the
quafyng documents. If the Commssoner dsapproves the dster s bond, he
w note hs dsapprova thereon and w return a copes thereof to the dstrct
supervsor, accompaned by the other quafyng documents submtted therewth,
and a statement of the reasons for dsapprova of the bond. (Sees. 281 , 2815 (b),
3170,3176,1. R. C.)
Sec. 18 .2 6. Rate of Ta . The aw mposes a ta on dsted sprts produced
n or Imported nto the Unted States at the rate prescrbed theren on each proof
gaon or wne gaon when beow proof and a proportonate ta at a ke rate
on a fractona parts of such proof or wne gaon, to be pad when wthdrawn
from bond. (Sees. 2800(a), 3176, I. R. C.)
Sec. 18 .391. Regstry on Form 26. very person havng In hs possesson or
custody or under hs contro any st or dstng apparatus that Is set up, must
regster the same on Form 26, n trpcate, wth the dstrct supervsor for the
dstrct n whch t s ocated. Sts to be used for the producton of varous
types of dsted sprts may be regstered for dsted sprts and the specfc
type need not be shown. Thereafter, when the pant s changed from the pro-
ducton of one type of sprts to another, rercgstrnton by the same dster w
not be requred. The temporary suspenson of a dstery does not necesstate
reregstraton of the sts. The operaton of a dstery by aternatng propre-
tors, where no permanent change n ownershp occurs, does not requre reregstra-
ton of the sts by the propretors. When there s a change n ocaton or use
or a bona fde change n ownershp of a st, the st must be regstered to
refect the change. The dstrct supervsor w, upon approvng the regstraton
of a st on Form 26, retan one copy, forward one copy to the Commssoner, and
return the remanng copy to the dster. The dster w retan hs copy at
the dstery avaabe for nspecton by Government offcers. (Sees. 2810. 3170,
3176, I. R. C.)
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Regs. 5, 18 . 1 a, etc. 2 8
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
5. Ths Treasury Decson s ssued under authorty contaned n
sectons 2800, 2808, 2810, 2812, 281 , 2815(b), 2816, 2819, 2822. 2823,
2829, 283 , 2835, 2873, 290 , 3170 3176, 325 (g). and 0 1 of the In-
terna Revenue Code (26 U. S. C., tte 26, sectons 2800, 2808, 2810,
2812, 281 , 2815(b), 2816, 2819, 2822, 2823, 2829, 283 , 2835, 2873. 290 .
3170, 3176, 325 (g) ,a d 0 1).
Fred S. Martn,
ctng Commssoner of Interna Revenue.
pproved October 21,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed In the Federa Regster October 28, 19 8)
Reguatons 5, Sectons 181. 1 a, 18 . 22a, and 19 8-15-12871
18 . 22b. T. D. 5635
TITL 26 INT RN L R NU C PT R I, SD C PT R C, P RT 18 .
PRODUCTION OF R NDY
mendng Reguatons 5
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1,19 7, a notce of proposed rue makng regardng
producton of brandy was pubshed n the Federa Regster (12 F. R
7119).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 18 . 1 a, 18 . 22a.
and 18 . 22b of Reguatons 5, approved February 28,19 0 ( 26 CFR,
Part 18 ), are hereby adopted.
3. These amendments are desgned to provde rues for the reportng
of transactons n warehouse recepts.
rtce . Speca (Occupatona) Ta es
Sec. 18 . 1 a. Warehouse Recepts Coverno Dsted Sprts. Snce the
sae of warehouse recepts tor dsted sprts s equvaent to the sae of ds-
ted sprts, every propretor of a frut dstery who ses, or offers for sae,
warehouse recepts for dsted sprts hed n frut dsteres or stored n
nterna revenue bonded warehouses, or esewhere, ncurs abty to speca ta
as a deaer n quors at the pace where such warehouse recepts are sod or
offered for sae, and must fe return and pay occupatona ta as provded In
secton 18 . 1 . (Sees. 3176, 3250 (a), 325 , 3270, 3271. 3272, I. R. C.)
rtce II. Dster s Records and Reports
Sec. 18 . 22a. Record of Warehouse Recepts To e ept by Dster.
very propretor of a frut dstery who ses, or offers for sae, dsted sprts
by warehouse recepts sha keep a separate record, and render a monthy trans-
crpt, of a purchases and saes of warehouse recepts on Form 52-F, Whoesae
Lquor Deaer s Monthy Record and Report of Purchases and Saes of Ware-
house Recepts for Dsted Sprts. There need not be entered on Form 52-F
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2 9
Regs. 5, 18 . 25a
transactons n warehouse recepts not nvovng the purchase or sae of dsted
sprts, such as the recept from a warehouseman of warehouse recepts coverng
the depost or bottng of sprts n hs warehouse or the surrender of warehouse
recepts for the bottng of the sprts n bond or ther transfer n bond to another
warehouse. ntres on Form 52-F sha be made ns ndcated by the headngs
of the coumns and nes of the form and n accordance wth the nstructons
prnted thereon or ssued n respect thereto, and as requred by these reguatons.
The provsons of secton 18 . 23 wth res ect to the tme of makng entres
and of secton 18 . 20 wth respect to forms to be provded by users, are hereby
made appcabe to Form 52-F. The provsons of secton 18 . 2 wth respect to
a separate record of sera numbers of cases are hereby made appcabe to Form
52 F wth respect to sera numbers of packages and cases purchased or sod by
warehouse records. The monthy transcrpt on Form 52-F sha be forwarded
to the dstrct supervsor on or before the 10th day of the succeedng month. The
physca remova of dsted sprts from the frut dstery sha contnue to be
reported on Form 15 n accordance wth the provsons of secton 18 . 18. The
physca recept and dsposton of dsted sprts at ta -pnd premses sha
contnue to be reported on Form 2- or Record 52, as the case may be, n accord-
ance wth the provsons of secton 18 . 22. (Sees. 2857, 2859, 3176. 325 , I. R. C.)
Sec. 18 . 22b. Pace Whebe Form 52-F Sha e ept. very dster sha
keep Form 52-F at the pace of busness where warehouse recepts are sod or
offered for sae. (Sees. 2857,2859,3170,325 ,1. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 2850, 3176, 3250(a), 325 , 3270, 3271. and 3272 of the
Interna Revenue Code (U. S. C, tte 2G, sectons 2857, 2859, 3176,
3250(a), 325 ,3270,3271, and 3272).)
Geo. . Schoeneman,
Commssoner.
pproved une 25, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster uy 3, 19 8)
Reguatons 5, Secton 181. 25a: ddtona 19 8-1 -12850
requrements. T. D. 5623
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 18 .
PRODUCTION OF R NDY
mendng Reguatons 5
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons 5,
Producton of randy, approved February 28, 19 0 (26 CFR, Part
18 ), those provsons of Treasury Decson 5323 C. . 19 , 695 , ap-
proved anuary 5, 19 (26 CFR, Part 171), whch pertan to reports
prepared and fed by propretors of frut dsteres.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve
Procedure ct (Pubc Law 0 , Seventy-nnth Congress) s unneces-
820823 19 17
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Regs, o, 18 . 25a
250
sary n connecton wth the ssuance of these reguatons for the reason
that no change s made n e stng requrements of reguatons.
3. Reguatons 5, Producton of randy, approved February 28.
19 0 (26 CFR, Part 18 ), are hereby amended by addng a new secton,
18 . 25a, as foows:
rtce II. Dster s Records and Reports
Sec. 18 . 25a. ddtona Requrements. (a) The propretor of a frut ds-
tery sha report, on Form 15, Part 2, when Record 52 s kept, on Part 2 and
on transcrpt, Form 52- , and when Form 52- s kept, on Part 2, the name and
address of each consgnee, n the coumn now desgnated Name. In the coumn
now desgnated ddress, there w he reported the name and address of he
person, frm, or corporaton payng (by advancement or rembursement) ether
ta , bottng charge, brokerage fee, handng charge, or cearance fee, ndcatng
whch nre ncuded. The headng of both coumns w be amended accordngy.
(6) Where the propretor of a frut dstery shps or devers dsted sprts
to a consgnee on the order of another whoesae quor deaer, detaed records of
the transactons sha be kept (1) on Form 15, Part 2, by the propretor of the
frut dstery makng the shpment or devery, (2) on Record 52 by the whoe-
sae quor deaer gvng the order, and (3) on Record 52 by the consgnee f he s
a whoesae quor deaer. For e ampe, assumng that the propretor of frut
dstery ( ) shps or devers the dsted sprts to consgnee (C) on the order
of whoesae deaer ( ), entres w be made on the prescrbed forms as foows:
(1) the propretor of the frut dstery ( ) w show n hs Form 15,
Part 2. the name and address of whoesae deaer ( ) who ordered the s-
ted sprts, as we as the name and address of consgnee (C), the person to
whom the dsted sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from dster ( ), gvng both the name and address
of ( ), and w at the same tme make an entry showng that the dsted
sprts were shpped or devered by ( ) to consgnee (CI gvng the name
and address of (O); and
(3) consgnee (C), If a whoesae quor deaer, w show In hs Record 52
that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from the propretor of frut dstery ( ), gvng name and
address of both. copy of Form 15 and transcrpts of Record 52 on Forms
52- and 52- , requred to be fed wth the dstrct supervsor, w smary
show the detas of such transactons.
(c) Where the propretor of a frut dstery keeps Record 52. or Form 52- .
and Is a party to transactons smar to those descrbed In subsecton (6). he
sha make smar entres of such transactons n Record 52, or Form . 2- . as the
case may be; and the transcrpts on Forms 52- and 52- , or 52- , respectvey,
requred to be fed wth the dstrct supervsor, w kewse show the detas of
the transactons. (Sees. 2857, 3170. I. R. C.)
. The provsons of Treasury Decson 5323 reatng to propretors
of frut dsteres are revoked as of the effectve date of ths Treasury
Decson.
5. Ths Treasury Decson sha be effectve upon fng for pubca-
ton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857 and 3176 of the Interna Revenue Code (U. S. C. tte
26, sectons 2857 and 3176).)
Geo. . Schoeneman,
Commssoner.
pproved une 18,19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29, 1 ) 8, 8: 0 a. m.)
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251
Regs. 6, 188.18, etc.
Reguatons 6, Sectons 188.18, tc. vtdr-be vbtro
T. D.5668
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 188.
OTTLING OF DISTILL D SPIRITS IN OSD
mendng Reguatons 6
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. G.
To Dstrct Supervsors and Others Concerned:
1. On ugust 12, 19 8, notce of proposed rue makng, regardng
the bottng of dsted sprts n bond, was pubshed n the Federa
Regster (13 F. R. 677).
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ments of sectons 188.18, 188.30, 188.31, 188.32, 188.33, 188.3 , 188.5 ,
188.97, 188.115, 188.12 , and 188.126 of Reguatons 6 (26 CFR, Part
188), approved September 19,19 0, are hereby adopted.
3. These amendments are desgned to provde standard graduatons
for beams of weghng tanks; to smpfy requrements reatng to
the aternate operatons of bottng departments of nterna revenue
bonded warehouses for bottng dsted sprts n bond and bottng
dsted sprts after remova from bond; to provde for the bottng
of dfferent ots of dsted sprts n bond at the same tme, under
certan condtons; to aow warehousemen to botte dsted sprts
of any dster s producton n bond under a trade name of the
warehouseman, f the warehouseman has produced and warehoused
sprts n such trade name; and to factate the procurement of
stamps. It s not the purpose of the amendments to requre the n-
staaton of addtona weghng tanks where such weghng tanks
conform wth the reguatons pror to these amendments.
Sec. 188.18. Weohng Tanks. Where weghng tanks are used for dumpng,
reducng, or bottng sprts, such tanks sha be constructed of meta and sha
be statonary and of unform dmensons from top to bottom, and each such tank
sha be equpped wth a sutabe measurng devce whereby the contents w
be correcty ndcated. ach weghng tank sha be mounted on accurate scaes,
and sha have pany and egby panted thereon the words Weghng tank,
n addton to Its desgnated use, sera number, and capacty n wne gaons, n
accordance wth the provsons of secton 188.16 or secton 18S.17, as the case
may be. The beams or das of weghng tank scaes must ndcate weght n
5-pound graduatons for scaes up to and ncudng 25 tons capacty, n 10-pound
graduatons for scaes e ceedng 25 tons capacty, but not e ceedng 60 tons
capacty, and n 20-pound rraduatons for scaes havng a capacty of more
than 00 tons. (Sees. 2825), 2903, 290 , 3176, I. R. C.)
Sec. 188.30. asc uafcaton Reqttbed. The bottng-n-bond department
of an nterna revenue bonded warehouse may be operated aternatey for
bottng dsted sprts n bond under these reguatons and bottng dsted
sprts after remova from bond, n accordance wth Reguatons 11 (26 CFR,
Part 189). The basc quafcaton for the estabshment of each premses sha
be n accordance wth appcabe provsons of Reguatons 10 (26 CFR, Part
185), Reguatons and 5 (20 CFR, Parts 183 and 18 ), where appcabe, and
Reguatons 11 (26 CFR, Part 189). Where t s proposed to operate an estab-
shed bottng-n-bond department temporary as a ta -pad bottng house, t
w be necessary to fe (1) quafyng documents curtang the bonded premses
to e cude the bottng department, (2) quafyng documents estabshng the
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Regs. 6, 188.18, etc
252
ta -pad bottng house, and (3) a banket consent of surety, Form 1533, by
the prncpa and surety, e tendng the terms of bond, Form 1571, to cover the
aternate use of the bottng-n-bond department as a ta -pad bottng house.
Such banket consent may be e ecuted In the foowng form:
To contnue In effect the sad bond, notwthstandng the e cuson of the
bottng-n-bond department from tme to tme for use temporary as a
ta -pad bottng house, n accordance wth notce, Form 0 , fed by the
prncpa.
The basc quafyng documents havng once been fed by the propretor and
approved by the Commssoner, the operatng status of the bottng department,
that s, for bottng n bond or temporary as ta -pad bottng, sha be approved
bv the dstrct supervsor on Form 0 , In accordance wth secton 1SS.32.
(Sees. 2871, 290 , 3170, 3176, 0 1, I. R. C.)
Sec. 1 8.31. pprova Requred efore Resumpton. When t s desred to
resume operatons of the bottng-n-bond department foowng the suspenson
of operatons as a ta -pad bottng house, authorty therefor must be obtaned
from the dstrct supervsor on Form 0 before actua resumpton of operatons.
(Sees. 2003, 290 , 3176, I. . O.)
Seo. 188.32. Procedure. (a) Suspenson. Where the propretor of an n-
terna revenue bonded warehouse desres to suspend operatons of hs bottng-
n-bond department n order that t may be operated temporary as a ta -pad
bottng house, he must compete the bottng of a sprts, and remove such
botted sprts from the bottng-n-bond department, and upon suspenson of the
bottng-n-bond department, compy wth the foowng requrements:
(1) Notce, Form 0-b. Fe wth the dstrct supervsor, Form 0 , ottng-
n- ond Notce, n trpcate, for authorty to suspend bottng-n-bond opera-
tons and to use the premses temporary as a ta -pad bottng house. The
form sha be e ecuted n accordance wth the Instructons prnted thereon, and
dsposed of n accordance wth secton 188.38.
(2) Communcatng doors to he cosed. Cose and ock, and keep ocked, the
communcatng doors (f any) between the bottn|Mn-bond department and the
storage porton of the warehouse, n accordance wth secton 188.6.
(b) Resumpton. Where the premses have been operated temporary as a
ta -pad bottng house and the propretor desres to resume operatons thereof
as a bottng-n-bond department of the nterna revenue bonded warehouse, he
must compy wth the foowng requrements:
(1) Notce, Form. Ifh. Fe wth the dstrct supervsor Form 0 , n trp-
cate, for authorty to suspend ta -pad bottng house operatons and resume
bottng-n-bond operatons. The form sha be e ecuted n accordance wth
nstructons prnted thereon, and dsposed of n accordance wth secton 188.38.
(2) Competon of bottng. Compete a bottng of sprts, and remove such
sprts from the ta -pad bottng house pror to suspenson of operatons. (Sees.
2871, 290 . 3170, 3170, 0 1, . R. C.)
Sec. 188.33. Genera. The propretor must botte dsted sprts n bond
under hs rea name or the trade name n whch the warehouse s operated:
Provded, That f the propretor s aso a dster and has produced and ware-
housed sprts under a trade name, he may, under such trade name, botte
such sprts, and sprts produced by other dsters, upon compance wth the
foowng requrements:
(a) Permt. The botter must be n possesson of a Federa coho dmn-
straton ct basc permt authorzng the bottng and abeng of dsted sprts
under the trade name.

Sec. 188.3 . Procedure ppcahe. The provsons of Reguatons 10 (26 CFR,
Part 185), respectng acton by the dstrct supervsor and Commssoner, respec-
tvey, n connecton wth the estabshment, and changes subsequent to estabsh-
ment, of nterna revenue bonded warehouses, are appcabe to bottng-n-bond
departments of such warehouses: Provded, That the dstrct supervsor may,
upon the fng of the documents requred by sectons 188.30 and 188.32, authorze
the change from bottng In bond to ta -pad bottng, and vce versa. (Sees.
2871, 200 , 3170, 3176, 0 1,1. R. C.)
Sec. 188.5 . Sprts n Process of ottng. Ta -pad and unta -pad sprts,
or sprts botted for e port and sprts botted for domestc purposes, may not
be n the bottng-n-bond department at the same tme.
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253
Regs. 6, 188.18, etc.
(a) Snge bottng room. Where the bottng-n-bond department conssts of
a snge bottng room, sprts of two or more dsters, sprts of two or more
seasons or years producton, sprts produced by the same dster n two or
more trade names, or at dfferent dsteres by the same dster, or two or
more knds of sprts, may not be n the process of bottng n the same bottng
room of the bottng-n-bond department at the same tme: Provded, That where
one ot of sprts s n the process of bottng, another ot, or ots, may be dumped
and reduced and hed n ocked tanks unt the process of bottng of the frst ot
has been competed. The process of bottng w be regarded as compete for
the purpose of ths secton when the botted sprts have been paced n the cases
and the cases cosed: Provded further. That the propretor sha not dump more
sprts than can be botted e pedtousy.
(6) cepton. The restrcton n paragraph (a) hereof aganst havng two
or more ots of dfferent sprts n process of bottng n the same bottng room
at the same tme, sha not appy where two or more compete bottng unts are
nstaed, and bottng operatons are so conducted as to prevent any commngng
of dfferent ots of sprts n process of bottng. (Sees. 2903, 290 , 3176, I. R. C.)
Sec. 188.97. Shpment of Stamps. Where the stamps are to-be shpped, the
coector w-forward the stamps to the storekeeper-ganger named on the Form
03 by regstered ma or e press. The e pense of forwardng the stamps w be
borne by the propretor. The coector may furnsh the stamps drecty to the
propretor for mmedate devery to the storekeeper-gauger n accordance wth
secton 188.06. The storekeeper-gauger w enter on Form 1606 a botted-n-
bond stamps receved from the coector. stamps n the custody of the store-
keeper-gauger w be kept by hm n the Government cabnet. (Sees. 2903, 200 ,
3176, I. R. C.)
Sec. 188.115. St|pebvson Requred. rebottng, reabeng, and restamp-
ng of sprts must be conducted In a bottng-n-bond department under the super-
vson of a storekeeper-ganger: Provded, That the dstrct supervsor may
authorze the reabeng or restampng of sprts In an nterna revenue bonded
warehouse not havng a bottng-n-bond department where space and factes for
such actvtes are avaabe. Sprts of two or more dsters, or sprts pro-
duced at dfferent dsteres, or produced under two or more trade names by the
same dster, or of dfferent seasons or years producton or bottng, may not be
recondtoned at the same tme, and rebottng operatons must be conducted at
a tme when no other sprts are n the process of bottng. (Sec. 3176, I. R. C.)
Sec. 188.12 . uafcaton of Propretor. Whenever the propretor desres
to botte or abe dsted sprts under a trade name, he must procure approva
of such name n the manner prescrbed by secton 18S.33 pror to bottng or
abeng sprts under such name. (Sees. 290.3, 290 , 3176, I. R. C.)
Sec. 1S8.126. Rottno. efore bottng dsted sprts n bond under an
approved trade name, the propretor w e ecute Form 1515, ppcaton to otte
Dsted Sprts n ond, n trpcate, n accordance wth secton 18S.100, and
show n the approprate pace on the form the name under whch the sprts are
to be botted. (Sees. 2903, 290 , 3176,1. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after ts pubcaton n the Federa Regster.
5. Ths Treasury Decson s ssued under the authorty contaned n
sectons 2829. 2871, 2903, 290 , 3170, 3176, and 0 1, Interna Revenue
Code (26 U. S. C. 2829, 2871, 2903,290 , 3170, 3176, and 0 1).
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved November 16,19 8.
Thomas . Ltnch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster November 20. 19 8)
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Regs. 6, 188.89
25
Reguatons 6, Secton 188.89: Fberboard 19 8-21-129 :
cases. T. I). 5656
TITL 26 INT RN L R NU . C PT R I, SF C PT R C, P RT 188.
OTTLING OF DISTILL D SPIRITS (OT R T N LCO OL) IN OND
mendng Reguatons 6
Treasury Department,
Offce of Commssoner of Interna Revenue.
Washngton 2-5, D. C.
To Dstrct Supervsors and Others Concerned:
1. On une 10, 19 8, notce of proposed rue makng, regardng
constructon of fberboard cases for use n packng botted-m-bond
dsted sprts, was pubshed n the Federa Regster (13 F. R. 3121).
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ment of secton 188.89 of Reguatons 6 (26 CFR, Part 188), approved
September 19,19 0, s hereby adopted.
3. The purpose of ths amendment s to enumerate the Federa
specfcatons whch sha be appcabe to the constructon of fber-
board cases sutabe for packng dsted sprts botted n bond:
to emnate requrements whch may be nconsstent therewth; and
to restate requrements for ners and parttons, and the seang of
cases for shpment. Copes of Federa Specfcatons LLL- 631
and LLL- -636 may be procured from the Superntendent of Docu-
ments. Washngton 25, D. O, for the sum of 5 cents each.
Sec. 188.89. Fberboard Cases. (a) Requrements. Sprts botted n bond
may be paced n cases (bo es) constructed of sod fberboard, snge and doube
wa corrugated fberboard, one-pece stye, meetng the appcabe requrements
of rue 1, Consodated Freght Cassfcaton ; rue 18, Offca press Cass-
fcaton ; Federa Specfcatons LLL- -631 for corrugated bo es, e cept that
-fute corrugated sheets specfed theren may not be used; and Federa Specf-
catons LLL- -636 for sod fber bo es: Provded, That the cases need not be
sub|ected to the drop test requrements of such Federa specfcatons. In add-
ton, the requrements of paragraphs (6) and (c) hereof sha appy.
(6) Lners and parttons. The top, bottom, and sdes of the cases sha be
ned wth doube-faced corrugated board conformng to the requrements of
paragraph (a) hereof. cept as otherwse provded heren, the cases sha
aso contan parttons separatng each botte. Such parttons sha be tghty
fttng, touchng the top, bottom, and a sdes of the case, and made of the
same board as the ners for the top, bottom, and sdes. The nteror packng of
pads, ners, or parttons s not requred where the bottes are paced n
ndvdua doube-faced corrugated cartons meetng the requrements of para-
graph (a) hereof. cusve of ners, nteror packng other than the type
specfed heren may be used where equa protecton to the sprts w be
afforded.
(c) Securng cases for shpment. The top and bottom of the case sha be
secured by gung the entre nner surface of the nner faps to the top and
bottom ners, and the entre nner surface of the outer faps to the nner faps
wth scate of soda, or an equay effcent adhesve: Provded, That contaners
seaed wth automatc seang machnes are not requred to have the nner faps
gued to the top and bottom pads or ners. In eu of gung, the top and bottom
of the case may be secured wth meta fastenngs or stapes, or sttchng wre
made of stee, treated to resst rust, and not ess than one-haf of an nch ong.
The stapes or sttches sha be spaced not more than 2 nches apart, sha pass
through a the peces to be fastened, and sha be cnched on the nsde.
(Sees. 2905, 3176, I. R. C. (26 U. S. C. 2905, 3170).)
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255
Regs. 10, 185.9, etc.
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2905 and 3176, Interna Revenue Code (26 U. S. C. 2905 and
3176).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved September 17, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster September 2 ,19 8)
Reguatons 10, Sectons 185.9, tc. 19 8-25-12988
T. D.5669
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 188
W R OUSING OF DISTILL D SPIRITS
mendng Reguatons 10
Treasuet Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. On September 9,19 8, notce of proposed rue makng, regardng
the warehousng of dsted sprts, was pubshed n the Federa
Regster (13F.R. 5239).
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ments of sectons 185.9, 185.10, 185.28, 185.78, 185.79, 185.81, 185.82,
185.83,185.88,185.89,185.96,185.97,185.99, and 185.231 of Reguatons
10 (26 CFR, Part 185), approved May 20, 19 0, are hereby adopted.
3. These amendments are desgned to smpfy requrements reatng
to (1) constructon and equpment and changes theren, (2) aternate
operaton of bottng departments of nterna revenue bonded ware-
houses for bottng dsted sprts n bond and bottng after remova
from bond, and (3) the preparaton and fng of quafyng docu-
ments, and for other purposes. It s not ntended by these amendments
to requre warehousemen to fe addtona pats and pans, or to change
equpment, mmedatey, n cases where the e stng documents and
equpment conform essentay to the reguatons pror to these amend-
ments. Upon fng new pats and pans and nstang new equpment,
these new requrements must be observed.
Sec. 185.9. Was. The was of warehouse budngs or rooms must be
securey and substantay constructed. If wood, corrugated ron, or tn s used,
the same must be apped over sod sheathng for the frst 12 feet of heght,
and over sod sheathng, or sheathng spaced not greater than 12 nches from
board to board, for the remanng heght. Where substanta sheet meta s
used, and the sheets are weded together n such a manner as to consttute a
sod wa, sheathng, f used, may be apped n any manner desred. (Sees.
2873, 3176, I. R. O.)
Sec. 185.10. Roofs. The roofs of warehouse budngs must be securey and
substantay constructed. Where corrugated ron or tn s used, the same must
be apped over sheathng spaced not greater than 12 Inches from board to
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egs. 10, 185.9, etc.
256
board. Where substanta sheet meta s used, and the sheets are weded to-
gether In such manner as to consttute a sod roof, sheathng, f used, may be
apped n any manner desred. (Sees. 2873, 3176, I. R. C.)
Sec. 185.28. Constructon of Weghng Tanks. Weghng tanks provded for
weghng dsted sprts n an Interna revenue bonded warehouse sha be con-
structed of meta, and sha be statonary and of unform dmensons from top
to bottom. ach such tank sha be equpped wth a sutabe measurng devce
whereby the contents w be correcty ndcated. ach weghng tank sha e
mounted on accurate scaes, and sha have pany and egby panted thereon
the words Weghng tank, foowed by ts sera number and capacty n wne
gaons. The beams or das of weghng tank scaes must Indcate weght n
5-pound graduatons for scaes up to, and ncudng, 25 tons capacty. In 10-pound
graduatons for scaes e ceedng 25 tons capacty, but not e ceedng 60 tons
capacty, and n 20-pound graduatons for scaes havng a capacty of more than
60 tons. The net and outet ppe connectons of each weghng tank must be
ftted wth vaves so constructed that they can be secured wth Government ocks,
and any other openngs n such tanks must aso be so constructed that thev can
be cosed and smary ocked. (Sees. 2873, 3176, I. R. C.)
Sec. 185.78. Preparaton. very pat and pan sha be drawn to scae, and
each sheet thereof sha bear a dstnctve tte and the compete name and ad-
dress of the propretor, enabng ready dentfcaton. The cardna ponts of
the compass must appear on each sheet, e cept those of eevatona pans. The
mnmum scae of any pat w not be ess than one-ffteth nch per foot. ach
sheet of the orgna pat and pans sha be numbered, the frst sheet beng desg-
nated number 1, and the other sheets numbered n consecutve order. Pats and
pans sha be submtted on sheets of tracng coth, opaque coth, or senstzed
nen. The dmensons of pats and pans sha be 15 by 20 nches, outsde
measurement, wth a cear margn of at east 1 nch on each sde of the drawng,
etterng, and wrtng. Pats and pans may be orgna drawngs, or reproduc-
tons made by the dtto process, or by bue or brown ne thoprnt, f such
reproductons are cear and dstnct. (Sees. 2873,3176,1. R. C.)
Sec. 185.79. Depcton of Warehouse Premses. Pats must show the outer
boundares of the warehouse premses by courses and dstances, n feet and nches.
In a coor contrastng wth those used for other drawngs on the pat, and the
pont of begnnng wth respect to ts dstance and bearngs from some near and
we-known andmark must be shown. The pat must aso contan an accurate
depcton of the budng, or budngs, comprsng the premses, and any drve-
way, pubc hghway, or raroad rght-of-way ad|acent thereto, or connectng
therewth. The depcton of the premses on the pat shoud agree wth the
descrpton thereof n the appcaton. Form 27-D. If the premses are separated
by a pubc hghway or raroad rght-of-way, and the tracts of and comprsng
the premses, or parts thereof, abut on such hghway or rght-of-way opposte
each other, the dfferent tracts w be depcted separatey by courses and
dstances, n feet and nches, and outned n a coor contrastng wth those used
for other drawngs on the pat. If two or more budngs are to be used, they
must be shown n ther reatve postons and the aphabetca desgnaton of each
ndcated. If the warehouse conssts of a room or foor of a budng, an outne
of the budng, the precse ocaton, and the dmensons of the room or foor, and
the means of ngress from and egress to a pubc street or yard, sha be shown.
frst foor e teror doors of each budng w be shown on the pat. cept
as provded n secton 185.87, a ppe nes eadng to or from the premses, the
purpose for whch used, and the ponts of orgn and termnaton, w be ndcated
on the pat. (Sees. 2S73, 3176.1. R. C.)
Sec. 185.81. Foor Pans. The pans sha ncude a foor pan of each foor
of each budng, showng the genera dmensons of the rooms and foors, and
the ocaton of a doors, wndows, and other openngs, and how such openngs
are protected. If the constructon of a foors n a snge budng s dentca,
a typca foor pan may be fed n eu of a separate pan for each foor.
storage tanks, weghng tanks, and other tanks used n connecton wth the
recept, storage, wthdrawa, or bottng of dsted sprts, must be shown n
ther e act ocaton on the foor pans, and ther desgnated use, sera numbers,
and capacty ndcated. Other equpment of a permanent nature and a areas
occuped by racks ntended for storage of packages sha be shown. Ppe nes
may aso be shown, f desred. (Sees. 2873.3176, I. R. C.)
Sec. 185.82. evatona Fow Dagrams. evatona fow dagrams (pans)
sha be submtted coverng the fow of sprts from the tme of recept on the
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257
Regs. 10, 185.9, etc.
premses, the depost n storage tanks, and the remova therefrom. Such da-
grams sha ceary depct a equpment n ts reatve operatng sequence, and
eevaton by toors, wth a connectng ppe nes, vaves, fanges, measurng
devces, and attachments for Government ocks. The eevaton by toors on the
dn grans may be ndcated by horzonta nes representng foor eves.
ma|or equpment, such as storage tanks and weghng tanks, must he dentfed
on these pans as to number and use. The eevatona fow dagram must be so
drawn that a f ed ppe nes, e cept those ndcated by secton 185.87, may be
ready traced from begnnng to end. Other types of drawngs that ceary
depct the nformaton requred heren may be submtted n compance wth ths
secton. (Sees. 2873, 3176, I. R. C.)
Sue. 185.83. evatona Pans of udngs. The pans sha aso ncude nn
e teror, eevatona vew of each e posure of each budng or room, showng the
type of securty afforded the openngs. The number of stores and the heght of
each story w be ndcated on the eevatona pans. In eu of drawngs, the
warehouseman may submt a photograph of each e posure of each budng n a
sze not smaer than 7 by 9 nches. The photographs must he n suffcent deta
to ceary depct the budngs from the ground to the roof, and must be propery
dentfed. Where photographs are submtted, drawngs must be furnshed to
show the securty afforded openngs wthn 12 feet of the ground : Provded, That
n eu of such drawngs, the photographs may be noted to show the typ of
securty afforded the openngs by reference to the approprate sheet of pans on
fe, whereon such nformaton s shown. (Sees. 2873, 3176, I. It. C.)
.Sec. 185.88. Certfcate of ccuracy. The pat and pans sha bear a certf-
cate of accuracy n the ower rght hand corner of each sheet, sgned by the
propretor, the draftsman, and the dstrct supervsor, substantay n the fo-
owng form:
(Name of warehouseman)
( ddress)
pproved
(Date)
ccuracy certfed by:
(Dstrct supervsor)
(Name and capacty for the propretor)
(Draftsman)
IRRW No , 19 Sheet No
(Sees. 2873, 3176, I. It. C.)
Sec. 185.89. Revsed Pats and Pans. The sheets of revsed pats and pans
sha bear the same number as the sheets superseded, but w be gven a new
date. ny addtona pats and pans sha be gven a new number n consecutve
order, or w be otherwse numbered and ettered In such manner as w permt
the fng of the pats and pans n proper sequence. (Sees. 2873, 3170, I. R. C.)
Sec. 185.90. Changes n Premses. Where the premses are to be e tended or
curtaed, the propretor must fe wth the dstrct supervsor an nmended app-
caton, Form 27-D, and an amended pat of the premses as e tended or curtaed,
e cept ts heren specfcay authorzed n the case of aternate operatons of the
bottng department. If the pans are affected by the e tenson or curtament,
they must aso be amended. The addtona premses covered by an e tenson may
not he used for bonded warehouse purposes, and the porton of the warehouse
premses to be e cuded by curtament may not be used for other than warehouse
purposes pror to approva of the appcaton, Form 27-D, pat, and pans, f
requred, fed n connecton therewth. Where an nterna revenue bonded ware-
house contans a hottng-n-bond department, and the documents requred by
Reguatons 0 (20 ( FR. Part 188), governng the aternate operaton of a bottng
house as a bottng-n-bond department and a ta -pad bottng house, are fed,
and no change n propretorshp s nvoved, the fng of addtona appcatons,
Form 27-D, coverng changes n the temporary status thereof from tme to tme,
w not be requred. Where a warehouse budng on dstery premses, on
whch a en for ta es has attached under secton 28f0(e. I. It. C, s demoshed
or atered, the provsons of Reguatons and 5 (20 ( FR, Parts 1S3 and 18 ),
reatve to the fng of Indemnty bonds, w be foowed. (Sees. 2873, 3176,
. r. a
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Regs. 10, 185.22a, etc
258
Seo. 185.97. Changes n Constructon and Use. Where a change Is to be
made In the constructon of a room or budng not nvovng an e tenson or
curtament of the warehouse premses, or where a change s to be made n th--
use of any porton of such premses, the propretor sha frst secure approva
thereof by the dstrct supervsor pursuant to appcaton, In trpcate, settng
forth specfcay the proposed changes. Upon approva of the appcaton, the
changes w be made under the supervson of a Government offcer. The com-
peted changes w be refected n the ne t amended appcaton, Form 27-D, and
amended pans fed by the warehouseman, uness the dstrct supervsor requres
the mmedate fng of an amended appcaton and amended pans. (Sees. 2873,
3170, I. R. C.)
Sec. 18.r).99. mended Notce and Pans Coverng Changes n qupment.
Upon competon of changes n equpment whch materay affect the accuracy
of the Form 27-D or pans, the propretor must fe an amended notce and
amended pans. Where an amended notce and amended pans are not fed
Immedatey upon competon of mnor changes n equpment (such as genera
repars, changes n ppe nes, or the addton or remova of a tank), the pro-
pretor must ncude such changes n the ne t amended appcaton and pans
fed by hm: Provded, That the Commssoner or the dstrct supervsor may,
at any tme n hs dscreton, requre the mmedate fng of an amended appca-
ton and pans coverng any change n equpment. (Sees. 2873, 3176, I. R. C.)
Sec. 185.231. Rate of Ta . The aw mposes a ta on dsted sprts produced
n, or Imported nto, the Unted States, at the rate prescrbed theren, on each
proof gaon, or wne gaon when beow proof, and a proportonate ta at a ke
rate on a fractona parts of such proof or wne gaon, to be pad when wth-
drawn from bond. (Sees. 2800 (a), 3176,1. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
5. Ths Treasury Decson s ssued under authorty contaned n
sectons 2800(a), 2873, and 3176, Interna Revenue Code (U. S. C,
Tte 26, sectons 2800(a), 2873, and 3176).
Geo. . Sohoeneman,
Commssoner of Interna Revenue.
pproved November 16,19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster November 20, 10 8)
Reguatons 10, Sectons 185.22a, 185. 2, 19 8-1 -12851
and 185. 79a. T. D. 5630
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 185.
W R OUSING OF DISTILL D SPIRITS
mendng Reguatons 10
Treasury Depahtment,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. On pr 9. 19 8, notce of proposed rue makng, regardng the
estabshment o off-premses rooms for the storage of ta -pad ds-
ted sprts or wnes botted or packaged especay for e port was
pubshed n the Federa Regster (13 F. R. 1933).
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259
Regs. 10, 185.22a, etc.
2. No ob|ectons to the rues havng, been receved, the foowng
added sectons 185.22a and 185. 79a and the amendment of secton
185. 2 of Reguatons 10, approved May 20,19 0 (20 CFR, Part 185),
are hereby adopted:
Sec. 185.22a. Off-premses port Storage Room. If the propretor of an
Interna revenue bonded warehouse ocated at a port of e portaton ntends to
store, pendng reease for drect e portaton or use as suppes on vesses or
arcraft, tu -pad dsted sprts or wnes botted or packaged especay for
e port wth beneft of drawback under the provsons of Reguatons 11 (26
CFR, Tart 189), Reguatons 15 (26 CFR, Part MO), and Reguatons 28 (2t CFR.
Part 176), a separate room for the storage-of such products e cusvey must
be provded off the bonded premses. The room must be contguous to the
bonded premses and be constructed of substanta, sod materas. wndows,
doors, or other openngs must be so constructed that they may be securey ocked
or fastened from the nsde, e cept the entrance door, whch must be so con-
structed that t may be securey ooked from the outsde of the room wth a
Oovernment sea ock. sgn must be paced over the entrance door of the
room bearng the words Off-premses port Storage Room. The depost of
dsted sprts and wnes n such room, and the wthdrawa thereof, sha be
effected n accordance wth provsons of Reguatons 28 ( 20 CFR. Part 176).
(Sec. 3170(b), I. R. C.)
Sec. 18 ). 2. mended and Suppkmenta ppcatons. mended and sup-
pementa appcatons on Form 27-P may be e ecuted n skeeton form, e cept
as to the tems amended or suppemented. other tems whch are correcty-
set forth n pror appcatons, and n whch there has been no change snce the
ast precedng appcaton, may be Incorporated n the amended or suppementa
appcaton by reference to the respectve appcaton prevousy fed. Such
ncorporaton by reference sha be made by enterng for each such tem n the
space provded therefor the statement No change snce fng Form 27-1), Sera
No. (the number beng nserted), foowed by the date of the form.
very propretor of an nterna revenue bonded warehouse ocated at a port
of e portaton and desrng to estabsh an off-premses e port storage room,
as authorzed by secton 185.22a, sha fe a suppementa appcaton therefor
on Form 27-D, gvng the ocaton and descrpton of the room. (Sec. 3170(b),
I. R. C.)
Sec. 185. 70a. Record and Report of Transactons at Off-prembks port
Storage Room. very propretor of an nterna revenue bonded warehouse who
mantans an off-premses e port storage room at whch ta -pad dsted sprts
and wnes botted or packaged especay for e port are hed pendng e portaton
or use as suppes on vesses or arcraft sha keep a record of a such products
receved and dsposed of. The transactons sha he recorded on the date on
whch they occur and a summary made at the end of the month. transcrpt
of the record sha be prepared and forwarded to the dstrct supervsor on or
before the 10th day of the succeedng month. Form 52- (Monthy Record and
Report of Importer or Propretor of Ta -Pad Premses) sha be used, upon
modfcaton of the tte of the form and headngs of the coumns to serve the
purpose, n preparng such record and report. (Sec. 3170(b), I. R. C.)
3. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Secton 3179(b), I. R. C. (U. S. C, tte 26, secton 3179(b).)
Geo. . Schoeneman,
Commssoner.
pproved une 18, 1918.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster une 30, 10 8)
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Regs. 10, 185. 63a, etc. 260
Reguatons 10, Sectons 185. 63a, 185. 75a, and 19 8-15-12872
185. 75b. T. D. 5636
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 185.
W R OUSING OF DISTILL D SPIRITS
mendng Reguatons 10
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 5, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1, 19 7, a notce of proposed rue makng regard-
ng warehousng of dsted sprts was pubshed n the Federa Reg-
ster (12 F. R. 7120).
2. fter eonsderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 185. 63a, 185. 75a,
and 185. 75b of Reguatons 10, approved May 20,19 0 (26 CFR. Part
185), are hereby adopted.
3. These amendments are desgned to provde rues for the report-
ng of transactons n warehouse recepts.
rtce I . Speca (Occupatona) Ta es
Seo. 185. 63a. Warehouse Recepts Coverng Dsted Sprts. Snce the
sae of warehouse recepts for dsted sprts s equvaent to the sae of ds-
ted sprts, every propretor of an nterna revenue bonded warehouse who
ses, or offers for sae, warehouse recepts for dsted sprts stored n nterna
revenue bonded warehouses, or esewhere, ncurs abty to speca ta as a
deaer n quors at the pace where such warehouse recepts are sod or offered
for sae, and must te return and pay occupatona ta as provded n secton
185. 63. (Sees. 3176, 3250(a), 325 , 3270, 3271, 3272, I. R. C.)
rtce L1I. Records and Reports of Propretor
Skc. S5. 75a. Record of Warehouse Uecepts To e ept by Warehouse-
man. very propretor of an nterna revenue bonded warehouse who ses,
or offers for sae, dsted sprts by warehouse recepts sha keep a separate
record, and render a monthy transcrpt, of a purchases and saes of warehouse
recepts on Form 52-F, Whoesae Lquor Deaer s Monthy Record and Report
of Purchases and Saes of Warehouse Recepts for Dsted Sprts. There need
not be entered on Form 52-F transactons n warehouse recepts not nvovng the
purchase or sae of dsted sprts, such as the Issuance by the warehouseman
of warehouse recepts coverng the depost or bottng of sprts n hs warehouse
or the recept of warehouse recepts surrendered for the bottng of the sprts n
bond or ther transfer n bond to another warehouse. ntres on Form 52-F sha
be m;de as ndcated by the headngs of the coumns and nes of the form and
n accordance wth the nstructons prnted thereon or ssued n respect thereto
and as requred by these reguatons. The provsons of secton 185. 76 wth re-
spect to the tme of makng entres, and of secton 185. 79 wth respect to forms to
be provded by users, are hereby made appcabe to Form 52-F. The provsons of
secton 185. 77 wth respect to a separate record of sera numbers of cases are
hereby made appcabe to Form 52-F wth respect to sera numbers of pack-
ages and cases purchased or sod by warehouse recepts. The monthy transcrpt
on Form 52-F sha be forwarded to the dstrct supervsor on or before the 10th
day of the succeedng month. The physca remova of dsted sprts from
the nterna revenue bonded warehouse sha contnue to be reported on Form
52-C n accordance wth the provsons of secton 185. 7 . The physca recept
and dsposton of dsted sprts at ta -pad premses sha contnue to be re-
ported on Form 52- or Record 52, as the case may be, n accordance wth the
provsons of secton 185. 75. (Sees. 2857, 2859, 3176, 325 , I. R. C.)
Sec. 185. 75b. Pace Where Form 52-F Sha b ept. very propretor of
an nterna revenue bonded warehouse sha keep Form 52-F at the pace of
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261
Regs. 10, 185. 78a
busness where warehouse recepts are sod or offered for sae. (Sees. 2857,
2Sr)9, 3176, 325 ,1. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 2859, 3176, 3250(a), 325 , 3270, 3271, and 3272 of the
Interna Revenue Code (U. S. C, tte 20, sectons 2857, 2859, 3176,
3250(a), 325 , 3270, 3271, and 3272).)
Geo. . Scoeneman,
Commssoner.
pproved une 25,19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster uy 3,19 8)
Reguatons 10, Secton 185. 78a: ddtona 19 8-1 -12852
requrements. T. D. 502
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 185.
W R OUSING OF DISTILL D SPIRITS
mendng Reguatons 10
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 5, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
10, Warehousng of Dsted Sprts, approved May 20, 19 0 (26
CFR, Part 185), those provsons of Treasury Decson 5323 C. .
19 , 695 , approved anuary 5,19 (26 CFR, Part 171), whch per-
tan to reports prepared and fed by propretors of nterna revenue
bonded warehouses.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve
Procedure ct (Pubc Law 0 , Seventy-nnth Congress) s unneces-
sary n connecton wth the ssuance of these reguatons for the reason
that no change s made n e stng requrements of reguatons.
3. Reguatons 10. Warehousng of Dsted Sprts, approved
May 20, 19 0 (20 CFR, Part 185), are hereby amended by addng a
new secton, 185. 78a, as foows:
rtce I. Records and Repopts of Propretor
R MO LS FROM INT RN L R NU OND D W R OUS
Sec. 185. 78a. ddtona Requrements. (a) The propretor of an nterna
revenue bonded warehouse sha report, on Form 52-C, when Record 52 s kept,
on Part 2 and on transcrpt, Form 52- , and when Form 52- s kept, on Part
2, the name and address of each consgnee, n the coumn now desgnated
Name. In the coumn now desgnated ddress, there w be reported the
name and address of the person, frm, or corporaton payng (by advancement or
rembursement) ether ta , bottng charge, brokerage fee, handng charge, or
cearance fee, ndcatng whch are ncuded. The headng of both coumns w
be amended accordngy.
(b) Where the propretor of an nterna revenue bonded warehouse shps or
devers dsted sprts to a consgnee on the order of another whoesae quor
deaer, detaed records of the transactons sha be kept (1) on Form 52-C
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Regs. 11, 189.7, etc.)
262
by the propretor of the nterna revenue bonded warehouse makng the shp-
ment or devery, (2) on Record 52 by the whoesae quor dener gvng the
order, and (3) on Record 52 by the consgnee f he s a whoesae quor deaer.
For e ampe, assumng that the propretor of nterna revenue bonded ware-
house ( ) shps or devers the dsted sprts to consgnee (C) on the order
of whoesae deaer ( ), entres w be made on the prescrbed forms as foows:
(1) the propretor of the nterna revenue bonded warehouse ( ) w
show In hs Form 52-C the name and address of whoesae deaer ( ) who
ordered the dsted sprts, as we as the name and address of consgnee
(C), the person to whom the dsted sprts are actuay shpped or
devered ;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from warehouseman ( ), gvng both the name and
address of ( ), and w at the same tme make an entry showng that the
dsted sprts were shpped or devered by ( ) to consgnee (C), gvng
the name and address of (C) ; and
(3) consgnee (C), If a whoesae quor deaer, w show n hs Record 52
that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from the propretor of nterna revenue bonded warehouse
( ), gvng name and address of both. copy of Form 52-C and transcrpts
of Record 52 on Forms 52- and 52- , requred to be fed wth the dstrct
supervsor, w smary show the detas of such transactons.
(c) Where the propretor of an nterna revenue bonded warehouse keeps
Record 52, or Form 52- , and s a party to transactons smar to those
descrbed n subsecton (6), he sha make smar entres of such transactons
In Record 52, or Form 52- , as the case may be; and the transcrpts on Forms
52- and 52- , or Form 52- , respectvey, requred to be fed wth the dstrct
supervsor, w kewse show the detas of the transactons. (Sees. 2S57, 2S- 9.
3176,1. R. C.)
. The provsons of Treasury Decson 5323 reatng to propretors
of nterna revenue bonded warehouses are revoked as of the effectve
date of ths Treasury Decson.
5. Ths Treasury Decson sha be effectve upon fng for pubca-
ton n the Federa Regster.
(Ths Treasury Decson s ssued under the authortv contaned n
sectons 2857, 2859. and 3176 of the Interna Revenue Code (U. S. C,
tte 26, sectons 2857,2859, and 3176).)
G O. . SC O N M .
Comnh oner.
pproved une 18. 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29, 19 8. 8 : 6 a. m.)
Reguatons 11, Sectons 189.7, tc. 19 8-25-12989
T. D. 5671
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 189.
OTTLING OF T -P ID DISTILL D SPIRITS
mendng Reguatons 11
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. On September 9, 19 8, notce of proposed rue makng regardng
the bottng of ta -pad dsted sprts, was pubshed n the Federa
Regster (13 F. R. 52 0).
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263
Regs. 11, 189.7, etc.
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ments of sectons 189.7, 189.1 , 189.16, 189.22, 189.35. 189.36, 189.38,
189.39,189. 0,189. 3, 189. . 189. 8, 189.58. 189.62, 189.69, and 189.100
of Reguatons 11 (26 CFR, Part 189), approved May 20, 19 0, .are
hereby adopted.
3. These amendments are desgned to provde standard graduatons
for beams of weghng tanks; to smpfy requrements deang wth
the preparaton, fng, and consderaton of certan documents re-
qured for the quafcaton and operaton of ta -pad bottng houses;
to estabsh procedure for the recept of dsted sprts by ppe ne
from a dstery contguous to, or n the mmedate vcnty of, a ta -
pad bottng house, for bottng; and to factate procurement of
stamps. It s not ntended by these amendments to requre propretors
of ta -pad bottng houses to fe addtona pats and pans, or to
change equpment, mmedatey, n cases where the e stng documents
and equpment conform essentay to the reguatons pror to these
amendments. Upon changng the premses or equpment, and fng
new pats and pans, these new requrements must be observed.
Sec. 189.7. udngs or Rooms. The ta -pad bottng house must be .so con-
structed and equpped as to be sutabe for the bottng of sprts. cept as
provded n secton 189.9, and as to necessary openngs for the passage of
approved dsted sprts, utty and smar ppe nes, ns provded by these
reguatons, Reguatons (20 CFR, Part 183), and Reguatons 15.(20 CFR,
Part 190), the room or budng must be competey separated from contguous
budngs or rooms by sod, unbroken parttons and oors of substanta con-
structon. If the ta -pad bottng house s n the same budng n whch s
ocated an nterna revenue bonded warehouse or rectfyng pant, the two
premses must have no means of nteror communcaton wth each other, e cept
by approved ppe nes, and as specfcay provded heren. Where a ta -pad
bottng house has heretofore been estabshed under the same roof or n the
same budng wth an nterna revenue bonded warehouse or a rectfyng pant,
wth nteror communcaton between the two premses, t may contnue to oper-
ate n such ocaton f the revenue w not be |eopardzed. When a bottng-n-
bond department s operated temporary as a ta -pad bottng house, as provded
by these reguatons and Reguatons 6 (26 CFR, Part 188), communcaton be-
tween the bottng house and warehouse wthn the budng may contnue.
(Sees. 2871, 3170, I. R. C.)
Sec. 189.1 . Weghng Tanks. Where weghng tanks are used for gaugng
sprts, such tanks sha be constructed of meta, and sha be statonary and
of unform dmensons from top to bottom. ach such tank sha be equpped
wth a sutabe measurng devce whereby the contents w be correcty ndcated.
ach weghng tank sha be mounted on accurate scaes, and sha have pany
and egby panted thereon the words Weghng tank, foowed by ts sera
number and capacty n wne gaons. The beams or das of weghng tank
scaes must ndcate weght n 5-pound graduatons for scaes up to, and ncud-
ng, 25 tons capacty, n 10-pound graduatons for scaes e ceedng 25 tons
capacty, but not e ceedng 60 tons capacty, and In 20-pound graduatons for
scaes havng a capacty of more than 60 tons. (Sees. 2829, 2871, 3170, I. R. C.)
Sec. 189.16. Stoka e Tanks. If dsted sprts are receved n tank ears or
by pps ne, sutabe storage tanks must be provded wthn whch to store uch
sprts, uness the sprts are run drecty nto bottng tanks as provded n
secton 189.58. ach storage tank sha be constructed of meta, and sha be
of unform dmensons from top to bottom. ach such tank sha be mounted on
accurate scaes, or equpped wth a sutabe measurng devce whereby the
actua contents w be correcty ndcated. There sha be panted on each tank
the words Storage tank, foowed by ts sera number and capacty n wne
gaons. Stopcocks must be provded and so arranged as to contro competey
the fow of sprts, both nto and out of the tank. sutabe hoard sha be
provded on each storage tank for the attachment of Forms 1520 and 1 0, as
herenafter prescrbed. (Sees. 2829, 2871. 3170, I. R. C.)
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Regs . 1, 189.7, etc.
26
Sec. 189.22. Ppe Lnes. Ppe nes used for the conveyance of ta -pad rect-
fed sprts from bottng tanks n a contguous rectfyng pant to bottng tanks
n the ta -pad bottng house, must be constructed, secured, panted, and marked
n accordance wth the requrements of Reguatons 15 (26 CFR, Part 190). Ppe
nes used for the conveyance of ta -pad dsted sprts from the cstern room
of a dstery to the bottng tanks or storage tanks n the ta -pad bottng
house, must be constructed, secured, panted, and marked n accordance -wth the
requrements of Reguatons (26 CFR, Part 183). Ppe nes used for the
conveyance of dsted water to contguous estabshments operated under the
Interna revenue aws and reguatons, must be ndependent ones, wthout any
connecton wth any other ppe, tank, vesse, or utens on the ta -pad bottng
house premses, e cept the dsted water storage tank: Provded, That where
dsted water s to be so conveyed from two or more dsted water storage
tanks, the ppe ne may be connected wth such tanks by permanent manfod
connectons. Such ppe nes must be constructed of meta, and e posed to vew
throughout ther entre engths. The meta ppe nes n the ta -pad bottng
house used for conveyng the foowng substances sha be kept panted n the
coors Indcated:
ack Sprts.
Whte Water.
umnum Steam.
Orange r.
Purpe Refrgerants.
These coors are ntended for such ppe nes ony, and are prescrbed for the
purpose of dstngushng such ppe nes from each other, and from a other
ppe nes on the premses whch are panted, but for whch coors are not
prescrbed. The pantng n one of the prescrbed coors, or a coor smar
thereto, of a ppe ne for whch a coor s not prescrbed, Is prohbted. Ppe
nes for Whch coors are not prescrbed may be panted n sectons of contrastng
coors. (Sees. 2829, 2871, 3176,1. R. C.)
Sec. 189.35. Preparaton. very pat and pan sha be drawn to scae, and
each sheet thereof sha bear a dstnctve tte, enabng ready Indentfcaton.
The cardna ponts of the compass must appear on each sheet, e cept the eeva-
tona pans. The mnmum scae of any pat w not be ess than one-ffteth
nch per foot. ach sheet of the orgna pat and pans sha be num red.
the frst sheet beng desgnated number 1, and the other sheets numbered n
consecutve order. Pats and pans sha be submtted on sheets of tracng
coth, opaque coth, or senstzed nen. The dmensons of pats and pans
sha be 15 by 20 nches, outsde measurement, wth a cear margn of at east
one nch on each sde of the drawng, etterng, and wrtng. Pats and pans
may be orgna drawngs, or reproductons made by the dtto process, or by
bue or brown ne thoprnt, f such reproductons are cear and dstnct. (Sees.
2816, 3176,1. R. C.)
Sec. 189.36. Depcton or Premses. Pats must show the outer boundares
of the ta -pad bottng house premses, n feet and nches, n a coor contrastng
wth those used for other drawngs on the pat, and must contan an accurate
depcton of the budng or budngs comprsng the premses, and any drve-
way, pubc hghway, or raroad rght-of-way ad|acent thereto or connectng
therewth. The depcton of the premses sha agree wth the descrpton In
the notce, Form 27- . If the premses are separated by a pubc hghway or
raroad rght-of-way, and the tracts of and comprsng the premses, or parts
thereof, abut on such hghway or rght-of-way opposte each other, the dfferent
tracts w be depcted separatey, n feet and nches. If two or more budngs
are to be used, the desgnated name of each sha be ndcated, and a ppe
nes or other connectons, f any, between the same depcted. Where two or
more budngs are used for the same purpose, the name of each such budng
sha ncude an aphabetca desgnaton, begnnng wth and they sha be
so shown on the pat. frst foor e teror doors of each budng on the prem-
ses w be shown on the pat. If the ta -pad bottng house conssts of a room
or a foor of a budng, an outne of the budng, the precse ocaton and dmen-
sons of the room or foor, and the means of ngress from, and egress to, a pubc
street or yard sha be shown. cept as provded n secton 1S9. 2, a ppe
nes eadng to or from the premses, the purpose for whch used, and ponts
of orgn and termnaton w be ndcated on the pat. (Sees. 2S71, 3176,
I. R. C.)
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265
Regs. 11, 189.7, etc.
Sec. 189.38. Foob Pans. The pans sha ncude a foor pan of each foor
of each budng, showng the genera dmensons of the rooms and foors, and
the ocaton of a doors, wndows, and other openngs, and how such openngs
are protected. If a porton of a budng s used, such as a room or foor, the
foor pans w Incude ony that porton, and sha aso show the means of
ngress and egress to the street. apparatus and equpment must be shown
n ther e act ocaton on the foor pans and ther desgnated use ndcated.
Ppe nes may be shown, f desred. In the case of water sts, tanks, and
smar equpment, the sera number and capacty .sha aso be shown. (Sees.
2871,3176, I. R. C.)
Sec. 189.39. evatona Fow Dagrams. evatona fow dagrams (pans)
sha be submtted coverng the ow of sprts from the tme of recept on the
premses unt the cased sprts are removed from the bottng room. Such
dagrams or pans sha ceary depct a equpment n ts reatve operatng
sequence and eevaton by foors, wth a connectng ppe nes, vaves, fanges,
measurng devces, and attachments for Government ocks. The eevaton by
foors on the dagrams may be ndcated by horzonta nes representng foor
eves. ma|or equpment, such as dump tanks, bottng tanks, fters, etc.,
must be dentfed on these pans as to number and use. The eevatona fow
dagram must be so drawn that a f ed ppe nes, e cept those ndcated by
secton 189. 2, may be ready traced from begnnng to end. Other types of
drawngs that ceary depct the nformaton requred heren may be submtted
n compance wt ths secton. (Sees. 2871, 317(, I. R. C.
Sec. 189. 0. Ppe Lnes to Rectfyng Pant oh Dstery. The pans sha
show ppe nes, f any, connectng the ta -pad bottng house wth a rectfyng
pant, or wth the cstern room of a dstery, for the transfer of ta -pad ds-
ted sprts for bottng. The pans w show the reatve ocaton of the bottng
house and the dstery or rectfyng pant, and aso the bottng tank or storage
tank to whch such ppe nes are connected. (Sees. 2871, 3176, I. R. C.)
Sec. 189.13. Certfcate of ccuracy. The pat and pans sha bear a cer-
tfcate of accuracy n the ower rght hand corner of each sheet sgned by the
propretor, the draftsman, and the dstrct supervsor, substantay n the fo-
owng form:
(Name of propretor)
pproved ( ddress)
(Date)
ccuracy certfed by :
(Dstrct supervsor)
(Name and capacty for the propretor)
(Draftsman)
TP No
, 19 Sheet No.
(Date)
(Sees. 2871, 3170, I. R. C.)
Sec. 189. . Revsed Pats and Pans. The sheets of revsed pats and pans
sha bear the same number as the sheets superseded, but w be gven a n w
date. ny addtona pats and pans sha be gven a new number n consecu-
tve order, or w be otherwse numbered and ettered n such manner as w
permt the fng of the pats and pans n proper sequence. (Sees. 2871, 3170,
r. r. c.)
Sec. 189. 8. Phocf| urp; ppcabe. The acton by the dstrct supervsor n
connecton wth the estabshment, and changes subsequent to estabshment, of
ta -pad bottng houses w be n accordance wth the procedure, nsofar as
appcabe, prescrbed by the reguatons governng the estabshment, and
changes subsequent to estabshment, of the propretor s dstery, nterna rev-
enue bonded warehouse, ndustra acoho pant, or ndustra acoho bonded
warehouse: Provded, That where a bottng-n-bond department s operated
aternatey as a ta -pad bottng house, the dstrct supervsor may authorze
change n operatons n accordance wth Reguatons 0 (20 CFR, Part 188).
(Sees. 2871,3170, I. R. C.)
820823 19 18
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Regs. 11, 189.7, etc.
266
Sec. 180.58. Depost n ottng ouse. When sprts are receved, the same
must be deposted n the ta -pad bottng house. When dsted sprts are
receved at a ta -pad bottng house n a raroad tank car, or by ppe ne
from a dstery contguous to, or n the mmedate vcnty of, the ta -pad
bottng house, the same must be transferred or conveyed nto storage tanks,
uness the sprts are transferred or conveyed drecty from the tank car or
ppe ne to bottng tanks. Dsted sprts may be shpped n tank cars to a
ta -pad bottng bouse ony where the bottng house s equpped wth sutabe
raroad sdng factes. (Sees. 2871, 3176,1. . C.)
Sec. 189.62. Dsposton of Gauge eport. When dsted sprts receved
n a tank car or by a ppe ne from a dstery are run nto a storage tank, the
report of gauge, Form 1520, n the case of sprts other than acoho, and Form
1 0 n the case of acoho, sent to the propretor of the ta -pad bottng house
by the shpper, sha be attached to such storage tank. The propretor sha
enter the date and quantty of removas from the storage tank n a bank space
on the report of gauge. The report of gauge sha be kept on the tank unt such
tme as the quantty covered by such report has been wthdrawn from the tank.
The report sha then be fed by the propretor, avaabe for nspecton by Gov-
ernment offcers. If the dsted sprts are transferred drecty from the tank
car or by a ppe ne from the dstery, nto a bottng tank, the propretor sha
make a note to that effect on the report of gauge and fe t. The requrements
of ths secton sha not precude bottng of the dsted sprts pror to recept
of Forms 1520 or 1 0 when the dsted sprts are receved bv tank car. (Sees.
2871, 3176, I. . C.)
Sec. 189.69. Unstamped Sprts. When a stamp has been ost or mutated by
accdent so that the requred porton thereof cannot be returned, an affdavt
settng forth a the facts n the case w be made by the propretor and attached
to each copy of Form 230. Where sprts receved n tank cars bearng certf-
cate of ta payment, Form 1595, or sprts receved by ppe ne from the cstern
room of a dstery, or rectfed sprts by ppe ne from a contguous rectfyng
pant, or where sprts n stamped bottes are to be dumped, an e panatory state-
ment w be made n the coumns provded for the descrpton of stamps on
Form 230, as Form 1595, Sera No. , dated , heretofore
submtted, or Form 1520, dated , ppe ne transfer on Form 1595. Sera
No. , or See Form 237, S/N , dated , or In
stamped bottes, as the case may be. (Sees. 2871. 3176, I. . C.)
Sec. 189.100. Shpment of Stamps. Where the stamps are to be shpped, the
coector w forward the stamps to the Government offcer by regstered ma
or e press. The e pense of forwardng the stamps by regstered ma or e press
w be borne by the propretor. The coector may furnsh the stamps drecty
to the propretor for mmedate devery to the Government offcer n accordance
wth secton 189.99a. (Sec. 3176, 1. . C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after ts pubcaton n the Federa Regster.
5. Ths Treasury Decson s ssued under the authorty contaned
n sectons 2816, 2829, 2871, and 3176, Interna Revenue Code (26
U. S. C. 2816, 2829, 2871, and 3176).
Geo. . Schoe eman,
Commssoner of Interna Revenue.
pproved November 19, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa egster November 25. 19 8)
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267 Regs. 11, 189.132a, etc.
Reguatons 11, Sectons 189.132a, 189.132b. and 19 8-15-12873
189.1 3a. T. D. 5637
TITL 26 INT RN L R NU . C PT R I SU C PT R C, P RT 189.
OTTLING OF T -P ID DISTILL D SPIRITS
mendng Reguatons 11
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1,19 7, a notce of proposed rue makng regardng
bottng of ta -pad dsted sprts was pubshed n the Federa
Regster (12 F. R. 7120).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 189.1 3a, 189.132a,
and 189.132b of Reguatons 11, approved May 20, 19 0 (26 CFR,
Part 189), are hereby adopted.
3. These amendments are desgned to provde rues for the report-
ng of transactons n warehouse recepts.
rtce I . Speca (Occupatona) Ta es
Sec. 189.1 3a. Warehouse Recepts Coverng Dsted Spkts. Snce the
sae of warehouse recepts for dsted sprts s equvaent to the sae of ds-
ted sprts, every propretor of a ta -pad ( ttng house who ses, or offers for
sae, warehouse recepts for dsted sprts stored In nterna revenue bonded
warehouses, or esewhere, ncurs abty to speca ta as a deaer n quors
at the pace where such warehouse recepts are sod or offered for sae, and
must fe return and pay occupatona ta as provded n secton 189.1 3. (Sees.
2803, 2871, 3176, 3250(a), 325 , 3270, 3271, 3272, I. R. C.)
rtce . Propretor s Records and Reports
Sec. 189.132a. Record of Warehouse Recepts To e ept by Propretor.
very propretor of a ta -pad bottng house who ses, or offers for sae, ds-
ted sprts by warehouse recepts sha keep a separate record, and render a
monthy transcrpt, of a purchases and saes of warehouse recepts on Form
52-F, Whoesae Lquor Deaer s Monthy Record and Report of Purchases and
Saes of Warehouse Recepts for Dsted Sprts. There need not be entered
on Form 52-F transactons n warehouse recepts not nvovng the purchase or
nae of dsted sprts, such as the recept from a warehouseman of warehouse
recepts coverng the depost or bottng of sprts n hs warehouse or the sur-
render of warehouse recepts for the bottng of the sprts n bond or ther
transfer n bond to another warehouse. ntres on Form 52-F sha be made
as ndcated by the headngs of the coumns and nes of the form and In accord-
ance wth the nstructons prnted thereon or ssued n respect thereto, and as
requred by these reguatons. The provsons of secton 189.133 wth respect to
the tme of makng entres, and of secton 189.136 wth respect to forms to be
provded by users, are hereby made appcabe to Forn, 52-F. The provsons
of secton 189.13 wth respect to a separate record of sera numbers of cases
are hereby made appcabe to Form 52-F wth respfct to sera numbers of
packages and cases purchased or sod by warehouse recepts. The monthy
transcrpt on Form 52-F sha be forwarded to the dstrct supervsor on or
before the 10th day of the succeedng month. The physca remova of dsted
sprts from the ta -pad bottng houso sha contnue to be reported on Form
52-D n accordance wth the provsons of sectons 189.131. The physca recept
and dsposton of dsted sprts at the contguous whoesae quor deaer
room not used e cusvey for products botted nt the ta -pad bottng house
sha contnue to be reported on Record 52 In ac-ordance wth the provsons of
secton 189.132. (Sees. 2803, 2857, 2858, 2871, 3176, 325 , I. R. C.)
G
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Regs. 11, 189.135a
268
Sec. 189.132b. Pace Where Fobm 52-F Sha e ept. very propretor of
a ta -pad bottng house sha keep Form 52-F at the pace of busness where
warehouse recepts are sod or offered for sae. (Sees. 2803, 2857, 2858, 2S71,
3176, 325 , I. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2803, 2857. 2858, 2871, 3176, 3250(a), 325 , 3270, 3271, and
3272 of the Interna Revenue Code (U. S. C., tte 26, sectons 2803,
2857, 2858, 2871, 3176, 3250(a), 32: , 3270, 3271, and 3272).)
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 189.
OTTLING OF T -P ID DISTILL D SPIRITS
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngto 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
11. ottng of Ta -Pad Dsted Sprts, approved May 20. 19 0
(26 CFR, Part 189). those provsons of Treasury Decson 5323 C. -
19 , 695 , approved anuary 5,19 (26 CFR, Part 171), whch per-
tan to reports prepared and fed by propretors of ta -pad bottng
houses.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve Pro-
cedure ct (Pubc Law 0 , Seventy-nnth Congress) s unnecessary
n connecton wth the ssuance of these reguatons for the reason
that no change s made n e stng requrements of reguatons.
3. Reguatons 11, ottng of Ta -Pad Dsted Sprts, ap-
proved May 20, 19 0 (20 CFR, Part 189), are hereby amended by
addng a new secton, 189.135a, as foows:
Sec. 189.135a. ddtona Requrements. (a) The propretor of the ta -
pad bottng house sha report, on Form 52-D, Part 3, and when Record 52 s
kept, on Part 2 and on transcrpt. Form 52- , the name and address of each
consgnee, n the coumn now desgnated Name. In the coumn now desgnated
ddress. there w be reported the name and address of the person, frm, or
corporaton payng (by advancement or rembursement) ether ta , bottng
charge, brokerage fee, handng charge, or cearance fee, ndcatng whch are
ncuded. The headng of both coumns w be amended accordngy.
(6) Where the propretor of a ta -pad bottng house shps or devers ds-
ted sprts to a consgnee on the order of another whoesae quor deaer, de-
taed records of the transactons sha be kept (1) on Form 52-D by the pro-
pretor of the ta -pad bottng house makng the shpment or devery, (2) on
Reguatons 11, Secton 189.135a: ddtona
requrements.
19 8-1 -12853
T. D. 5625
mendng Reguatons 11
rtce . Propretor s Records and Reports
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269 Regs. 15, 190.159a. etc.
Record 52 by the whoesae quor deaer gvng the order, and (3) on Record
52 by the consgnee f he s n whoesae quor deaer. For e ampe, assumng
that the propretor of ta -pad bottng house ( ) shps or devers the dsted
sprts to consgnee (C) on the order of whoesae deaer ( ), entres w be
made on the prescrbed forms as foows:
(1) the propretor of the ta -pad bottng house ( ) w show n hs
Form 52-D the name and address of whoesae deaer ,( ) who ordered the
dsted sprts, as we as the name and address of consgnee (C), the par-
son to whom the dsted sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from whoesae deaer ( ), gvng both the name
and address of ( ), and w at the same tme make an entry showng that
the dsted sprts were shpped or devered by ( ) to consgnee (C),
gvng the name and address of (C) ; and
(3) consgnee (C), f a whoesae quor deaer, w show n hs Record
52 that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from the propretor of ta -pad bottng house ( ), gvng
name and address of both. copy of Form 52-D and transcrpts of Record
52 on Forms 52- and 52- , requred to be ted wth the dstrct supervsor,
w smary show the detas of such transactons.
(c) Where the propretor of a ta -pad bottng house keeps Record 52 and s
a party to transactons smar to those descrbed n subsecton (6), he sha
make smar entres of such transactons n Record 52; and the transcrpts on
Forms 52- and 52-I, requred to be fed wth the dstrct supervsor, w
kewse show the detas of the transactons. (Sees. 2803, 2857, 2871, 3176,
I. R. C.)
. The provsons of Treasury Decson 5323 reatng to propretors
of ta -pad bottng houses are revoked as of the effectve date of ths
Treasury Decson.
5. Ths Treasury Decson sha be effectve upon fng for pub-
caton n the F edera Regster.
(Ths Treasur Decson s ssued under the authorty contaned n
sectons 2803, 2857. 2871, and 3176, of the Interna Revenue Code
(U. S. C, tte 26, sectons 2803, 2857, 2871, and 3176).)
Geo. . Schoe eman,
Commssoner.
pproved une 18, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29, 19 8, 8 : 6 a. m.)
Reguatons 15, Sectons 190.159a, 190. 29a, and 19 8-15-1287
190. 29b. T. D. 5638
TITL 26 INT RN L R NU . C PT R I. SI C PT R C, P RT 190.
R CTIFIC TION OP SPIRITS ND WIN S
mendng Reguatons 15
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1,19 7, a notce of proposed rue makng regardng
rectfcaton of sprts and wnes was pubshed n the Federa Regs-
ter (12 F. R. 7121).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 190.159a, 190. 29a, and
G
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Regs. 15, 190.159a, etc.
270
190. 29b of Reguatons 15, approved May 20, 19 0 ( 26 CFR, Part
190), are hereby adopted.
3. These amendments are desgned to provde rues for the report-
ng of transactons n warehouse recepts.
rtce II. Speca (Occupatona) Ta es
Sec. 190.159a. Warehouse Recepts Coverng Dsted Sprts. Snce the
sae of warehouse recepts for dsted sprts s equvaent to the sae of ds-
ted sprts, every propretor of a rectfyng pant who ses, or offers for sae,
warehouse recepts for dsted sprts stored n nterna revenue bonded ware-
houses, or esewhere, ncurs abty to speca ta as a deaer n quors at the
pace where warehouse recepts are sod or offered for sae and must fe return
and pay occupatona ta as provded n secton 190.159. (Sees. 2S01, 3176,
3250(a), 325 , 3270, 3271, 3272, I. R. C.)
rtce I . Rectfer s Records and Reports
Sec. 190. 29a. Record of Warehouse Recepts To e ept by Rectfer.
very propretor of a rectfyng pant who ses, or offers for sae, dsted sprts
by warehouse recepts sha keep a separate record, and render a monthy tran-
scrpt, of a purchases and saes of warehouse recepts on Form 52-P, Whoe-
sae Lquor Deaer s Monthy Record and Report of Purchases and Saes of Ware-
house Recepts for Dsted Sprts. There need not be entered on Form 52-F
transactons In warehouse recepts not nvovng the purchase or sae of dsted
sprts, such as the recept from a warehouseman of warehouse recepts coverng
the dewst or bottng of sprts n hs warehouse or the surrender of warehouse
recepts for the bottng of the sprts n bond or ther transfer n bond to
another warehouse. ntres on Form 52-F sha be made as ndcated by the
headngs of the coumns and nes of the form and n accordance wth the nstruc-
tons prnted thereon or ssued n respect thereto, and as requred by these
reguatons. The provsons of secton 190. 30 wth respect to the tme of makng
entres, and of secton 190. 37 wth respect to forms to be provded by users, are
hereby mnde appcabe to Form 52-F. The provsons of secton 190. 31 wth
respect to a separate record of sera numbers of cases are hereby made appcabe
to Form 52-F wth respect to sera numbers of packages and cases purchased
or sod by warehouse recepts. The monthy transcrpt on Form 52-F sha be
forwarded to the dstrct supervsor on or before the 10th day of the succeedng
month. The physca remova of dsted sprts from the rectfyng pant sha
contnue to be reported on Form 5 n accordance wth the provsons of secton
190. 27. The physca recept and dsposton of dsted sprts at the contguous
whoesae quor deaer room not used e cusvey for products botted at the
rectfyng pant sha contnue to be reported on Record 52 n accordance wth the
provsons of secton 190. 28. The physca recept and dsposton of dsted
sprts at the rectfer s noncontguous whoesae quor deaer premses sha
contnue to be reported on Record 52 n accordance wth the provsons of secton
190. 2 .). (Sees. 2801, 2857, 2S5S, 3176, 325 , I. R C.)
Sec. 190. 29b. Pace Where Form 52-F Sha f. ept. very propretor
of a rectfyng pnnt sha keep Form 52-F at the pace of busness where ware-
house recepts are sod or offered for sae. (Sees. 2801, 2857, 2858, 3170, 325 ,
I. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2801, 2857, 2858, 3176, 3250(a), 325 , 3270, 3271, and 3272
of the Interna Revenue Code (U. S. C, tte 26, sectons 2801, 2857,
2858, 3176, 3250(a), 325 , 3270, 3271, and 3272).)
Geo. . Schoeneman,
Commssoner.
pproved une 25, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster uy 3, 19 8)
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271
Regs. 15, 190. 3 a
Reguatons 15, Secton 190. 3 a: ddtona
requrements.
19 8-1 -1285
T. D.5626
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 190.
R CTIFIC TION OF SPIRITS ND WIN S
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 5, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
15, Rectfcaton of Sprts and Wnes, approved Mav 20, 1910 (26
CFR, Part 190) those provsons of Treasury Decson 5323 C. . 19 ,
695 , approved anuary 5, 19 (26 CFR, Part 171), whch pertan
to reports prepared and fed by propretors of rectfyng pants.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve
Procedure ct (Pubc Law 0 , Seventy-nnth Congress) s un-
necessary n connecton wth the ssuance of these reguatons for the
reason that no change s made n e stng requrements of reguatons.
3. Reguatons 15. Rectfcaton of Sprts and Wnes. approved
May 20, 19 0 (26 CFR, Part 190), are hereby amended by addng a
new secton, 190. 3 a, as foows:
Sec. 190. 3 a. ddtona Requrements. (a) The propretor of the rect-
fyng pant sha report, on Form 5, Part 5, and when Record 52 s kept, on
Part 2 and on transcrpt. Form 52- , the name and address of each consgnee,
In the coumn now desgnated Name. In the coumn now desgnated ddress,
there w he reported the name and address of the person, frm, or corporaton
payng (by advancement or rembursement) ether ta , bottng charge, brokerage
fee, handng charge, or cearance fee, ndcatng whch are Incuded. The vd-
ng of both coumns w be amended accordngy.
(6) Where the propretor of a rectfyng pant shps or devers dsted sprts
to a consgnee on the order of another whoesae quor deaer, detaed records
of the transactons sha be kept (1) on Form 5 by the propretor of the
rectfyng pant makng the shpment or devery, (2) on Record 52 by the whoe-
sae quor deaer gvng the order, and (3) on Record 52 by the consgnee f he
s a whoesae quor deaer. For e ampe, assumng that the propretor of
rectfyng pant ( ) shps or devers the dsted sprts to consgnee (C) on
the order of whoesae deaer ( ), entres w be made on the prescrbed forms
as foows:
(1) the propretor of the rectfyng pant ( ) w show n hs Form 5
the name and address of whoesae deaer ( ) who ordered the dsted
sprts, as we as the name and address of consgnee (C), the person to whom
the dsted sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from rectfer ( ), gvng both the name and ad-
dress of ( ), and w at the same tme make an entry showng that the
dsted sprts were shpped or devered by ( ) to consgnee (C), gvng
the name and address of (C) : and
(3) consgnee (C), f a whoesae quor deaer, w show n hs Record
52 that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from the propretor of rectfyng pant ( ), gvng name and
address of both. copy of Form 5 and transcrpts of Record 52 on Forms
52- and 52- , requred to be fed wth the dstrct supervsor, w smary
show the detas of such transactons.
(o) Where the propretor of a rectfyng pant keeps Record 52 and s a party
to transactons smar to those descrbed n subsecton (6), he sha make smar
mendng Reguatons 15
rtce I . Rectfeb s Records and Reports
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Regs. 18, 102.7, etc.
272
entres of such transactons n Record 52; and the transcrpts on Forms 52-
and 52- , requred to be ted wth the fstrct supervsor, w kewse show
the detas of the transactons. (Sees. 2801 (e) (1), 2855, 2859, 3176, I. R. C.)
. The provsons of Treasury Decson 5323 reatng to propretors
of rectfyng pants are revoked as of the effectve date of ths Treasury
Decson.
5. Ths Treasury Decson sha be effectve upon fng for pub-
caton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned
n sectons 2801(e) (1), 2855, 2859. and 3176. of the Interna Revenue
Code (U. S. C, tte 26, sectons 2801(e) (1), 2855, 2859, and 3176).)
G O. . SC O NF.M N,
C ommssan er.
pproved une 18,19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 20, 19 8, 8: 7 a. m.)
Reguatons 18, Sectons 192.7, tc. 19 8-20-1293
T. D.565
TITL 20 INT RN L R NU . C PT R I, SU C PT R C, P RT 192.
F RM NT D M LT LI UOR
mendng Reguatons IS
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. On une 10. 19 8, notce of proposed rue makng regardng the
producton of fermented mat quor was pubshed n the Federa
Regster (13 F. R. 3121).
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ments of sectons 192.7. 192.13, 192.16, 192.22. 192.2 , 192.25, 192.26,
192.27, 192.31, 192.33, 192. 1, 192. 6, 192.76 to 192.81, ncusve, 192.87,
192.89, 192.92(a), 192.9 , 192.95, 192.96. 192.107, 192.111, 192.118.
192.125, 192.127, 192.129, 192,130, 192.1 6, 192.1 9, 192.150, 192.175,
192.18 , 192.185, 192.187, 192.191, 192.195, 192.196, 192.201, 192.20 .
192.207,192.209,192.22 ,192.252,192.259,192.260, and 192.263 of Regu-
atons 18 (26 CFR, Part 192), approved May 20, 19 0, are hereby
adopted.
3. These amendments are desgned to smpfy the procedure reat-
ng to the producton, remova, bottng, storage, and e portaton of
fermented mat quor.
Sec. 102.7. rewery udngs. rewery budngs must be securey con-
structed of substanta, sod materas. If there are budngs used n the con-
duct of another busness (e cept as herenbefore authorzed) ad|onng the
budng on the brewery premses, such other budngs must be entrey sepa-
rated from the brewery budngs by substanta, sod, and unbroken was from
the ground to the roof n a drect, vertca ne. If beer s conveyed from the
brewery to the bottng house by ppe ne, the brewery premses must be ad-
|acent or contguous to the bottng house premses. If the brewery and the
hottng house are ad|onng, there sha be no nteror communcaton between
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273
Regs. 18, 192.7, etc.
the two premses, and such premses must be separated by sod and unbroken
was, e cept for authorzed conduts, tunnes, and ppe nes. (Sees. 3157, 3176,
I. R. C.)
Sec. 192.13. Other Ppe Lnes. If t s necessary that ppe nes for refrger-
aton, for heatng purposes, or hot water for washng tanks, bottes, etc., pass
from the brewery to the bottng house, such ppes must be nstaed n such a
manner that thev cannot be used for conveyng fermented mat quor to the
bottng house. (Sec. 3157, 3176, I. R. C.)
Sec. 192.16. Tanks and ats. ach statonary tank, vat, cask, or other
contaner used, or ntended for use, as a receptace for wort or beer, n con-
necton wth the operaton of the brewery, sha be ocated In the brewery
budng and be constructed of sutabe materas. ach such tank, vat, cask,
or other contaner sha be permanenty marked to show ts desgnated use, such
as Fermentng tank, Storage tank, Settng tank, etc., and ts sera number
and capacty In barres of 31 gaons. Tanks that are used for a dua purpose,
such as fermentng and storage, w be desgnated to ndcate both usages.
such tanks or other contaners sha be equpped wth a sutabe measurng
devce so that the actua contents thereof may be determned, e cept thnt n
eu of equppng each tank or contaner wth an ndvdua measurng devce,
the brewer may use meters, portabe gauge gasses, or other sutabe measurng
devce, whereby the contents of the tank or other contaner may be correcty
ascertaned. (Sees. 2829, 3176, I. R. C.)
Sec. 192.22. Locaton and Instaaton. The meters w be ocated on the
brewery premses: Provded. That the dstrct supervsor may approve the oca-
ton of the bottng meters on the bottng house premses upon estabshment
by the brewer of a good and suffcent reason therefor, and the supervsor s
satsfed that the structua arrangement of the ppe nes and meter w permt
an accurate measurement of the fermented mat quor transferred for bottng.
ach bottng meter must be Instaed n such manner that a beer transferred
to the bottng house w pass through the meter. The beer ne from the brew-
ery to the bottng house must be brazed, sweated, or weded to a companon
fange whch sha be ftted to the net fange of the meter when the meter Is
ocated on the bottng house premses, and to the outet fange of the meter when
the meter s ocated on the brewery premses. These connectng fanges w
be boted and seaed wth Government cap seas. Meters must be provded for
rackng, and each meter nstaed as near as possbe to the racker tank n
such manner that a beer movng nto the rackng machne w pass through
the meter. The beer ne from the meter to the racker tank must be brazed,
sweated, or weded to fanges whch are ftted to the fanges on the outet sde
of the meter and aso to the racker tank at the pont of entrance. These con-
nectng fanges at the meter and the racker tank w be boted and seaed wth
Government cap seas. (Sees. 2.S29. 3157, 3176, I. R. C.)
Sec. 192.2 Cap Seas Paced on Meters. Pror to approva of the nstaa-
ton of the meter, the Inspector sha remove a manufacturer s seas and repace
them wth Government cap seas. The nspector sha enter on an approprate
record the sera number of each Government cap sea paced on the meter,
together wth the sera number of the meter to whch attached. ach entry
w be dated and ntaed by the nspector. The record sha be retaned n
the Government cabnet. (Sees. 2829, 3176, I. R. C.)
Sec. 192.25 Inspecton of Meter. Upon notce from the brewer that the
meter has been receved, the supervsor sha assgn an Inspector, or Inspectors,
to supervse ts nstaaton. When the nspector s satsfed that the meter s
propery nstaed and ppe connectons made n accordance wth the requre-
ments of the reguatons, he sha test the meter by the use of a master meter,
and determne that t Is operatng wthn the toerance prescrbed by the meter
specfcatons. The Inspector w report to the supervsor n wrtng, whch
sha be accompaned by the nspector s report of the master meter test. The
meter must not be used unt such test has been made. (Sees. 2829, 3176,
I. R. C.)
Sec. 192.26 Repars and d|ustment. When necessary n the opnon of the
supervsor, or upon request of the brewer, the supervsor w deta an nspector
to supervse the dsmantng and reassembng of the meter for the purpose of
ceanng or repar. If the meter cannot be repared or a repacement meter
Instaed wthout deay, the Inspector w, upon remova of the meter, cause the
open beer ne to be cosed by ockng the cut-off vave wth a Saght sea ock
or aff ng a Government cap sea. When the repars are competed or a new
meter Instaed, the Inspector w test the repared or newy nstaed meter wth
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Regs. 18, 192.7, etc.
27
a master meter. Mnor repars to the counter mechansm, such as ceanng to
factate readng, w not necesstate a master meter check. The offcer w
report on the record referred to n secton 192.2 , the remova and use of cap
seas. The nspector w destroy a removed cap seas n a manner suffcent
to prevent ther further use. report w be made, n trpcate on Form 13S,
of any master meter check occasoned by repars and ad|ustment One copy
w be gven to the brewer, one fed n Government cabnet at the brewery, and
one copy forwarded to the dstrct supervsor. The use of any meter must be
dscontnued whenever t appears that the revenue w be |eopardzed by the
contnued use of such meter. (Sees. 2829, 3170, I. R. C.)
Sec. 192.27. Factes fob Meter Test. The brewer w provde adequate
factes for master meter tests of a reguary nstaed meters. The ppe
nes to a meters w contan removabe sectons or other factes, propery
secured, to permt the nstaaton of the master meter cose to, and In seres
wth, the brewer s meter. The ppe nes w aso contan an arrangement of
vaves and bypass nes for nsertng the Government meter and makng the
test wthout nterferng wth pumpng operatons, uness the brewer eects to
stop operatons for the meter tests n eu of makng such nstaatons. U
such nstaatons must conform wth the requrements of secton 192.22. (Sees.
2829. 3176, I. R. C.)
Sec. 192.31. Descrpton of Premses. The ot or tract of and on whch the
brewery s stuated, and the ot or tract of and on whch the brewery bottng
house s stuated, must be separatey descrbed on Form 27-C by courses, and
dstances, n feet and nches, wth the partcuarty requred n conveyances of
rea estate. The contnuty of the brewery premses and the bottng house
premses must be unbroken, e cept that the contnuty w not be consdered as
broken where the premses are dvded by a pubc street or hghwny, f the
parts of the premses so dvded abut on such street or hghway opposte each
other. The same s true where the premses are so dvded by a raroad
rght-of-way, f the raroad s a common carrer. In such cases, each tract
of and consttutng the brewery and the bottng house premses sha be
descrbed separtey on the form. Nothng n ths secton sha be construed
to prevent the separaton of the brewery bottng house nto two or more parts
or sectons for bottng, or storage of beer botted n the brewery bottng
house, provded the bottng house premses conform wth the requrements of
secton 102 7. (Sees. 3155(a), 3176, I. R. C.)
Sec. 192.33. Descrpton of pparatus and qupment. The brew kettes,
mash tubs, fermentng tanks, storage tanks, and other ma|or equpment used n
the producton of fermented mat quor w be descrbed separatey as to use,
sera number, and capacty, n barres of 31 gaons, as specfcay requred by
Form 27-C and the nstructons thereon. tanks, bottng apparatus, and other
ma|or equpment n the bottng house used for bottng fermented mat quor
must be descrbed n the notce, separatey, as to use, sera number, and. n
the case of funks, capacty n barres of 31 gaons. (Sees. 3155(a), 3170,1. R. C.)
Sec. 192. 1. Trade Name Certfcate.
(a) ottng under trade name. Where a brewer ntends to botte beer under
a trade name, or names, other than the name tnder whch the brewery or bottng
house s quafed to o erate, he must ncude such trade name n Form 27-C
for that purpose, furnsh the trade name certfcate, or statement n eu thereof
requred by ths secton, and obtan approprate certfcates of abe approva or
certfcates of e empton from abe approva In any case where Reguatons No.
7, ssued under the Federa coho dmnstraton ct, s appcabe. (Sees.
3155(a), 3170, I. R. C.)
Sec 192. 6. Pena Sum. The pena sum of a brewer s bond to cover the manu-
facture of fermented mat quors must be equa to the amount of the ta as
prescrbed by aw, whch, n the opnon of the dstrct supervsor of the dstrct
n whch the brewery s ocated, the brewer w be abe to pay durng any one
month; that s to say, the ma mum quantty of fermented quors that, n hs
opnon, w actuay be ta pad at sad brewery durng any one month: Provded,
That the pena sum of any such bond sha not e ceed 100,000 nor be ess than
1,000. (Sees. 3155(b), 3176, I. R. C.)
Sec. 192.76. Preparaton. very pat and pan sha be drawn to scae and
each sheet thereof sha bear a dstnctve tte, enabng ready dentfcaton,
and sha show the cardna ponts of the compass. The mnmum scae of any
pat w be not ess than one-ffteth nch per foot. ach sheet of the pat and
pans sha be numbered, the frst sheet beng desgnated number 1, and the other
sheets numbered n consecutve order. Pats and pans sha be submtted on
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Regs. 18, 192.7, etc.
sheets of tracng coth or senstzed nen. The dmensons of pats and pans
sha be 15 by 20 nches outsde measurement, wth a cear margn of at east 1
nch on each sde of the drawng, etterng, and wrtng. Pats and pans may
be orgna drawngs, or reproductons made by the dtto process, or by bue or
brown ne thoprnt, If such reproductons are cear and dstnct. (Sec. 3176,
1. R. C.)
Sec. 192.77. Descrpton of rewery and ottng ouse Premses. Pats
must show separatey the outer boundares of the brewery and bottng house
premses by courses and dstances, In feet and nches, and the pont of begnnng
wth respect to ts dstance and bearngs from some near and we-known and-
mark, and must contan an accurate depcton of the budng, or budngs, com-
prsng the premses and any drveway, pubc hghway, or raroad rght-of-way
ad|acent thereto or connectng therewth. The brewery and bottng house
premses must be shown n contrastng coors or by a egend such as cross
hatchng, a broken ne, etc. If the premses are separated by a pubc hghway,
or a raroad rght-of-way, and the tracts of and comprsng the premses, or
parts thereof, abut on such hghway, or rght-of-way, opposte each other, the
dfferent tracts w be descrbed separatey by courses and dstances, In feet
and nches. If two or more budngs are used, the desgnated name of each
w be ndcated and a passageways and other openngs, f any, and a con-
nectng ppe nes used for the conveyance of fermented mat quor between
the same depeted. ppe nes and other connectons between the brewery
premses and other premses must be ndcated on the pat and Identfed as to
use. Where two or more budngs re used for the same purpose, the name of
each budng sha ncude an aphabetca desgnaton, begnnng wth , and
they sha be so shown on the pat. rst foor doors of each budng on the
premses w be shown on the pat. (Sec. 3170, I. R. C.)
Sec. 192.78. Pans. Pans w Incude a foor pan of each foor of each
budng actuay used n connecton wth the manufacture, packagng, and
bottng of fermented mat quor, or other authorzed actvty, Indcatng the
genera dmensons of the rooms and foors. The ocaton of doors, wndows,
and other openngs w be shown. The appro mate ocaton and sera num-
bers of brew kettes, mash tubs, fermentng tanks, settng tanks, storage tanks,
and other ma|or apparatus, and equpment used n the producton of fermented
mat quor must be shown or ndcated on the pan by drawng or wordng. For
e ampe, where a number of tanks are ocated n a room, the appro mate oca-
ton of each tank may be shown on the pan by crce or square, and the knd and
sera number of the tank Indcated wthn the crce or square, or esewhere on
the pan, or the fact that the tanks are ocated wthn the room may be ndcated
by wordng, gvng the knds and sera numbers of the tanks. (Sec. 3176,
I. R. C.)
Sec. 192.79. Conduts or Ppe Lnes. The condut or ppe ne used for the
transfer of fermented mat quor from the brewery to the bottng house w
be shown In red on the pat, and the detas of constructon, the manner of
securng same, and the ocaton of meters and Government ocks w be shown.
other ppe nes connectng the brewery and bottng house w be shown
on the pat and w be desgnated as to use. The drecton of fow of fermented
mat quor through the ppe nes must be ndcated by arrows on the pat
(Sees. 3157, 3176, L R. C.)
Sec. 192.80. Certfcate of ccuracy. The pat and pans sha bear a cer-
tfcate of accuracy n the ower rght-hand corner of each sheet sgned by
the brewer, the draftsman, and the dstrct supervsor, substantay n the
foowng form:
(Name of brewer)
( ddress)
pproved
(Date)
(Dstrct supervsor)
ccuracy certfed by :
(Name and capacty for the brewer)
(Date)
(Sec. 3176, I. R. C.)
(Draftsman)
19 Sheet No
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Regs. 18, 192.7, etc.
276
Sec. 192.81. Revsed Pats and Pans. The sheets of revsed pats and pans
sha bear the same number as the sheets superseded, but w be gven a new date.
ny addtona pats and pans sha be gven a new number n consecutve order,
or w be otherwse numbered and ettered n such manner as w permt the
fng of the pats and pans n proper sequence. (Sec. 3176,1. R. C.)
Sec. 192.87. Changes n Stockhoders, Offcers, and Drectors of Corpora-
ton. The sae or transfer of the capta stock of a corporaton operatng a
brewery does not consttute a change n the propretorshp of the brewery.
owever, where the sae or transfer of capta stock resuts n a change n the
contro or management of the busness, or where there s any change n the offcers
or drectors, the brewer must gve notce thereof, n trpcate, to the dstrct
supervsor wthn 5 days of such change. Mere changes n stockhoders of
corporatons not consttutng a change n contro need not be so reported. The
dstrct supervsor must, n the case of changes n offcers or drectors, be furnshed
e tracts, n trpcate, of the mnutes of the meetngs showng the eecton of the
new offcers wthn 5 days after such eecton. (Sec. 317G, I. R. C.)
Sec. 192.89. Speca Ta Stamps. Where there s a change n propretorshp
of the brewery, the successor must procure the requred speca ta stamps:
Provded. That where a change n propretorshp occurs by reason of the wth-
drawa of one or more members of a partnershp, the speca ta stamp, or stamps,
may be vadated f, wthn 30 days after the wthdrawa, there s fed wth the
coector of nterna revenue an amended return on Form 11, showng the requred
nformaton regardng the remanng partner or partners. The speca ta
stamp, or stamps, must aso be forwarded to the coector for approprate
endorsement of the change n the partnershp. (Sees. 3176, 3250, I. R. C.)
Sec 192.92. Change n Locaton.
(a) Speca ta . Where there has been a change n ocaton, the brewer must,
wthn 30 days after such change s made, fe wth the coector of nterna
revenue an amended return on Form 11 coverng the new ocaton of the premses;
otherwse, new speca ta stamps must be purchased. The speca ta stamp,
or stamps, must be forwarded to the coector for endorsement of the change n
ocaton. (Sees. 3176, 32f0, 3278, 3280. I. R. C.)
Sec. 192.9 . Changes n Constr cton and Use. Where a change s to be made
n the constructon or use of a room, or budng, that w affect the accuracy of
Form 27-C and pat or pans, the brewer sha frst secure approva thereof by the
dstrct supervsor pursuant to appcaton, n trpcate, settng forth specfcay
the proposed changes. Upon competon of the changes, the brewer w compv
wth the provsons of secton 192.96. (Sec. 3176,1. R. C.)
Sec. 192.95. Changes n qupment. Where changes are to be made n brewery
equpment that affect the accuracy of Form 27-C and pat or pans, the brewer
sha frst secure approva thereof by the dstrct supervsor pursuant to appca-
ton, n trpcate, settng forth specfcay the proposed changes: Provded, That
emergency repars comng under ths category of changes may be made wthout
pror approva of the dstrct supervsor. Where such emergency repars are
made, the brewer w fe mmedatey a report thereof, n trpcate, wth the ds-
trct supervsor. (Sec. 3176,1. R. C.)
Sec 192.96. mended Notce and Pats ob Pans. Where changes have oc-
curred under secton 192.9 or 192.95, amended notce and pat or pans w be
fed on or before May 1 to refect the changes made durng the precedng caendar
year. The dstrct supervsor may requre the mmedate fng of such documents
upon competon of changes that materay affect the accuracy of the e stng
Form 27-C and pat or pans. (Sec. 3176,1. R. C.)
Sec 192.107. Dsposton of uafyng Documents. Where the bond or con-
sent of surety s approved by the dstrct supervsor, he w forward the orgna
copy of the bond, and the orgna copy of the notce, pat, pan, and other quafy-
ng documents, together wth a copy of a nspecton reports, to the Commssoner,
one copy of the bond, notce, pat, pans, and other quafyng documents to the
brewer and w retan one copy of such quafyng documents for the fe of such
brewer, and w authorze the brewer to commence operatons. The documents
returned to the brewer w be fed In proper order and made avaabe for nspec-
ton durng ordnary busness hours. If the bond or consent of surety s dsap-
proved by the dstrct supervsor, a copes thereof sha be returned to the prn-
cpa, and the surety or suretes sha be notfed of such acton. The dstrct
supervsor w prompty advse the Commssoner fuy respectng the dsapprova
of any bond by hm. If the bond or consent of surety has been dsapproved, the
dstrct supervsor w return a copes of other quafyng documents to the
appcant, or brewer. (Sec. 3176,1. R. C.)
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277
Regs. 18, 1927, etc.
Sec. 192.111. Revew of Documents. The Commssoner w revew the
quafyng documents, and determne that they are propery e ecuted, and n
conformty wth the requrements of aw and refatons concernng constructon
and estabshment. If such documents are not n conformty wth the above
requrements, the Commssoner w return a copes to the dstrct supervsor,
wth the necessary Instructons for correcton. ( Sec. 3176, I. R. C.)
Sec. 192.118. Speca Ta . rewers are requred to pay. wthn the caendar
month n whch they commence operatons, the speca ta requred by secton
3250(c), Interna Revenue Code. Speca ta es sha become due on the 1st day
of uy n each year, or on commencng any trade or busness on whch such
ta s mposed. In the former case, the ta s reckoned for 1 year: and n the
atter, t s reckoned proportonatey from the 1st day of the month n whch
the abty to speca ta commenced, to, am ncudng, the 30th day of une
foowng. (Sees. 3176, 3250(c) (1), 3271(b), I. R. C.)
Sec 192.125. een Ta Rate. beer, ager beer, ae, porter, and other
smar fermented quors, contanng one-hat of 1 per centum, or more, of
acoho by voume, brewed or manufactured and sod, or removed for consumpton
or sae, by whatever name such quors may be caed, are sub|ect to the ta
prescrbed by secton 3150(a), Interna Revenue Code, for every barre contan-
ng not more than 31 gaons, and at a ke rate for any other quantty, or for
the fractona parts of a barre authorzed and defned by aw, to be coected
under the provsons of e stng aw. (Sees. 3150(a), 3176, I. R. C.)
Sec 192.127. Method of Ta Payment. The ta on fermented quor s re-
qured by aw to be pad by the owner, agent, or superntendent of the brewery
or premses n whch t s made, and must be pad by stamp and at the tme
and n the manner specfed by the reguatons n ths part. (Sees. 3150(b),
3176. I. R. C.) .
Sec. 192.129. More Than One rewery Owned by the Same Person. Where
two or more breweres are owned and operated by the same person, frm, or
corporaton, barres or kegs wth the name of the brewer and the ocaton of
one or more of such breweres branded or embossed thereon or Indented theren
may he used for the remova of ta -pad fermented mat quor from the premses
of a such breweres: Provded, Whenever a barre or keg so branded s fed
wth ta -pad fermented mat quor for remova, a abe, showng the ocaton
(cty and State) of the brewery at whch the fermented mat quor was pro-
duced, s securey aff ed thereon. If more than one such brewery s ocated
In the same cty, such abe sha show the ocaton by street number, ctv, and
State. (Sees. 3155(f), 3176, I. R. C.)
Sec 192.130. Reranded arres. No wooden barre or keg whch has been
rebranded across the staves, and no wooden barre or keg whch has the name of
more than one manufacturer branded thereon, may be used by a brewer as a
contaner for fermented quor: Provded, That the remova and repacement
of one or more staves by the brewer whose name and address was orgnay
so branded on a barre or keg sha not be deemed to be a rehrandng: nd pro-
vded further, That where wooden barres or kegs are sod by one brewer to
another, or are sod under court order, the brands on such barres or kegs
may, upon appcaton to, and approva of, the dstrct supervsor, be scraped
and the barres or kegs rebranded by the purchasng brewer, and n the case of
meta barres or kegs, the orgna marks may be covered by a meta pate so
weded nto the barre as to become an ntegra part thereof. Where a brewer
has dscontnued busness, the successor may compy wth the provsons of ths
secton by pacng addtona marks and brands on the barres and kegs, n accord-
ance wth secton 192.128. whch ndcate the successorshp, wthout removng
the marks and brands of the predecessor. (Sees. 3155(f), 3176, I. R. C.)
Sec. 192.1 6. eer Transferred to ottng ouse by Ppe Lne. Suffcent
stamps to cover the ta payment of a fermented mat quor to be transferred
to the bottng house each day must be on hand at the brewery. The brewer w
make a day report on Form 139, n trpcate, of a beer run through the meter
for bottng. The day report w be prepared before the cose of the busness
day ne t succeedng the day on whch the transactons occur. Report of meter
readngs w be made from the contnuous counter. t the tme of makng hs
report on Form 139, the brewer w cance the number of beer stamps correspond-
ng to the quantty of beer metered for ta payment, n the manner prescrbed
for the canceaton of stamps for barres or kegs of fermented mat quor. The
set-back counter may be used by the brewer for checkng contnuous counter
readngs, and upon competon of the day s run for bottng, It must be set at
zero. The brewer w attach the canceed stamps to one copy of Form 139,
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Regs. 18, 192.7, ttc
278
to be devered to the nspector who vsts the brewery and takes the meter
readng. One copy of each Form 139 w be attached to Form 103 by the brewer,
and w be transmtted by hm to the dstrct supervsor. The thrd copy w
be retaned by the brewer as a part of hs Government record to be kept avaabe
for nspecton by offcers of ths ureau. The nspector, havng satsfed hmsef
by an nspecton of the stamps that they are suffcent to cover the ta dne on
the beer passed through the meter for ta payment as Indcated by Form 139,
and that they have been propery canceed by the brewer, w, In the presence
of the brewer, further cance and deface the stamps so devered, by drvng
through them a de or punch, n such manner as to cut from the center of each
stump a pece thereof not ess than one-haf nch square, and w sgn the recept
on the three copes of Form 139. The meter w be read and Forms 139, wth
canceed stamps attached, w be coected from the brewer by any nspector
vstng the brewery to make a master meter check, or any speca Inspecton, or
on monthy nspecton. (Sees. 3157(a), 3176, I. R G.)
Sec. 192.1 9. Contaners and Records. rewer s yeast, n qud or sod
form, contanng not ess than 10 percent sods (as determned by the methods
of anayss of the mercan Socety of rewng Chemsts), may be removed
from the brewery n barres, tank wagons, or other sutabe contaners, or by
ppe ne. If removed In contaners, the contaners must bear abes gvng
the name and ocaton of the brewery, and the words rewer s yeast. If
removed by ppe ne, the ppe ne w be ndcated on the pat and descrbed
In the Form 27-C, and the premses recevng the product w be sub|ect to n-
specton by Government offcers durng ordnary busness hours. The brewer
must keep records open for nspecton by Government offcers showng the
quantty and date of remova, and the name and address of the consgnee.
rewer s yeast may be removed for sae to other brewers for use n the manu-
facture of beer and to other concerns (ncudng off-premse pants of brew-
ers) for the preparaton of stock foods and medcna products, or for any-
other egtmate purposes. (Sees. 3158. 3176,1. R. C.)
Sec. 192.150. Mat Srup. Records sha be kept by the brewer of a mat
and mat srup removed from the brewery. Such records must show the. quan-
tty of each ot removed, together wth the name and address of the person
to whom shpped or devered. The records must be avaabe for Inspecton
by Government offcers. (Sees. 3158, 3176, I. R. C.)
Sec. 192.175. Temporary Storage. undevered beer returned to a brew-
ery may be hed n temporary storage. Returned beer hed In temporary stor-
age must be kept competey segregated from a other beer, dentfed as re-
turned beer, and stored n such manner as to be mmedatey accessbe to Gov-
ernment offcers. The stamps on barres of returned beer must reman nract
whe n temporary storage. Such beer must he removed from the brewery pror
to the remova of other beer of the same knd or type, e cept that for the pur-
pose of refrgeraton the remova of such returned beer may be postponed for
a perod not e ceedng 5 days, after the frst devery of beer of the same knd
or type, such perod to be e cusve of Sundays and hodays. Uness so re-
moved, the beer w no onger be consdered as beng n temporary storage
and must be re-turned to genera brewery stock, n whch event the stamps
on the barres must be destroyed and new stamps aff ed when the beer s agan
removed from the brewery. Refund or credt for such stamps destroyed can-
not be aowed. (Sec. 3176.1. R. C.)
Sec 192.1S . amnaton of eer. The Inspector w e amne the beer to
determne (a) ts condton, (6) that t s unsaabe, and (c) the apparent
reason for ts havng become unsaabe. e w verfy the quantty to be destroyed
or returned to the brewery. The nspector w take sampes of the unsaabe
beer, seected at random from severa of the ots accumuated, and determne
the percent of acoho by voume. Sampes of beer smar to that whch s beng
destroyed or returned to the brewery w be seected from the brewery storage
vats and the acohoc content determned for comparson wth the tests of
sampes of unsaabe beer. ny other tests of the unsaabe beer w be made
by the nspector that w ad In verfyng the statements In the brewer s affdavt.
(Sees. 3153, 3176, I. R. C.)
Sec. 192.185. Requrements for ccumuaton n Tanks. rewers may accu-
muate n cabrated tanks provded especay for that purpose any fermented
mat quor whch has not been removed from the bottng house and whch s
unsaabe by reason of ts condton. record w be kept of the quantty of
fermented mat quor deposted n the tanks each day, and a record of the
bottng from whch the unsaabe beer was accumuated. The day record
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279
Regs. 18, 192.7, etc.
w show the bang, acohoc content by voume, and amount of each type
botted, and w be submtted In support of the affdavt made under secton
102.181. The brewer w ascertan the bang and acohoc content of the
accumuated beer to be offered for nspecton, and w make approprate compu-
tatons by comparson wth the average bang and acohoc content of I e
beer botted day durng the coecton perod to determne the actua amount
of unsaabe beer coected, upon whch refund may be camed, and the amount
of water that may have been ncdentay ntroduced nto the tank, for whch
refund s not aowabe. The nspector w take approprate sampes of the
fermented mat quor for use n determnng the bang and percent of acoho
and whether the beer s unsaabe. e w aso make such e amnaton of the
brewng and bottng records as may be necessary to verfy the brewer s affdavt
and supportng data. (Sees. 315 , 3176, I. R. C.)
Sec. 192.187. Copy to Commssoner. The orgna of the nspector s report,
together wth one copy of the brewer s affdavt, w be forwarded by the dstrct
supervsor to the Commssoner, accompaned by a statement settng forth the
dstrct supervsor s vews as to the proprety of aowng the cam for refund of
the ta pad on the unsaabe beer. (Sees. 315 , 3176, I. It. C.)
Sec. 192.191. Cams fob Refund. Cams for refund of ta on fermented mat
quor destroyed n the bottng house or returned to the brewery because of the
fermented mat quor beng unsaabe w be fed on Form 813, n dupcate.
Cams must be fed wth the dstrct supervsor of the dstrct where the brewery
s ocated wthn 90 days after the cose of the month wthn whch such
destructon of the fermented mat quor, or the return thereof to the brewery
for use as brewng matera, occurred. cam sha be deemed to have been
fed when t s devered to, and receved by, the offce of the proper dstrct
supervsor. The dstrct supervsor w certfy the cam as to the tota amount
of ta pad on the fermented mat quor n queston, and w forward the cam
to the Commssoner wth the papers referred to n secton 192.187. (Sees. 315 ,
3176, I. R. C.)
Sec. 192.195. ecobd of eek otted for port. efore the cose of busness
of the busness day ne t succeedng the day on whch beer s removed from the
brewery to the bottng house and botted for e port, the brewer w enter the
quantty so botted n Form 139 at the ne entted Less ta -free transfers.
The brewer w wrte n ths ne the words otted for e port. (Sees.
3153(b), 3176. I. R. C.)
Sec. 192.196. Form 1626. Record w be kept by the brewer on Form 1626
of a fermented mat quor botted for e port. ntres must be made n ths
record before the cose of busness of the busness day ne t succeedng the day on
whch the transactons occur. The brewer w attach one copy of Form 1626 to
each copy of Form 103 rendered by hm to the supervsor and one copy to the
Form 1(13 retaned by hm at the brewery. (Sees. 3153(b), 3176, I. R. C.)
Sec. 192.201. Marks on Contaners. ach keg, barre, shppng case, crate, or
other package contanng fermented mat quor to be e ported under these regu-
atons n ths part, wthout the payment of ta , must pany and egby show
the brewer s name and address, and the words Fermented Mat Lquor for
port Lot No. n etters and fgures of not ess than three-fourths of
an nch n heght. The ot number assgned must correspond wth the brewer s
sera number of the Form 1689. (Sees. 3153(b), 3176, I. R. C)
Sec. 192.20 . Detas on Form 1689. ach appcaton on Form 1689 w be
gven a sera number by the brewer, begnnng wth number 1. On uy 1
of each year, he sha begn a new seres, commencng wth number 1. The
detas requred by the appcaton must be fed n competey and egby by
the brewer. The name of the carrer that s, vesse or vehce on whch shp-
ment w be carred from the e teror mts of the Unted States uness known
to the brewer, w be fed n by the agent of the brewer at the port of e porta-
ton, who w sgn the request for customs nspecton as e porter. (Sees.
3153(b), 3176, I. R. C.)
Sec. 192.207. amnaton hy Inspector.- Upon recept of Forms 1689 from
the supervsor, the Inspector w verfy the quantty of fermented mat quor to
be e ported. In verfyng the contents of the contaners of fermented mat
quor, the nspector w e amne a representatve number of such contaners
or w use any other method of nspecton whch w reasonaby dscose that
the contents of the contaners are as represented by the Form 1689, and that
the contaners are propery marked and abeed. (Sees. 3153(b), 3176, I. R. C.)
Sec. 192.209. Change of Consgnee. Where, after nspecton of an e port
shpment, but before remova, the brewer, for good and suffcent reasons, desres
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Regs. 18, 192.7, etc.
2S0
to change the name and address of the consgnee, he w forward the two copes
of Form 1689, eft wth hm by the nspector, wth a etter to the dstrct super-
vsor for correcton, endorsement, and return. Where a change of consgnee
s desred after remova of the fermented mat quor, the dstrct supervsor may
authorze such change and notfy the approprate coector of customs. (Sees.
3153(b), 317(5, I. R. C.)
Sec. 192.22 . Shortage n Foregn Landng. If a shortage s reported, the
dstrct supervsor sha enter credt for the actua quantty, f any, receved at
the foregn port as ndcated by the evdence of andng, and sha report prompty
for assessment the amount of the ta due on the shortage. If shortages are
dscosed n more than one e port shpment of a brewer, a the shortages reported
durng a month may be ncuded n a consodated assessment to be reported
at the cose of the month. (Sees. 3153(b), 3176, I. R. C.)
Sec. 192.252. Labes. ottes or cans contanng cerea beverages not ta abe
as fermented quors are requred to have a abe settng forth the foowng
nformaton:
a) Name of the brewer.
(6) The ocaton of the brewery by cty and State, or street number, cty,
and State, f the brewer operates more than one brewery n the same cty.
(c) Dstnctve name of the beverage, f any.
(d) Nonta abe as fermented quor under Federa aw. The abe may
contan other statements desred by the brewer If they are not Inconsstent
wth the requrements of ths secton.
(Sec. 3176, I. R. C.)
Sec. 192.259. Form 103 ach brewer sha keep Form 103, Monthy Record
of Transactons nt rewery, or ts equvaent n book form, reportng thereon
the quantty of each knd of matera receved and used n the producton of
fermented mat quor, the amount of fermented mat quor produced there-
from, the amount of fermented mat quor removed from the brewery premses,
and other nformaton requred by the reguatons n ths part, and by the nes
and nstructons on the form. The materas brewed eac day and the fermented
quor produced therefrom, sha be reported on such record as of the caendar
day durng whch the brews were started. There sha aso be reported as a
speca debt n the Summary of Fermented Mat Lquor of Form 103, the
quantty of water, f any, used n ad|ustng the bang or acohoc content of the
fermented mat quor after remova from the settng tanks. The entres sha
be made before the cose of the busness day ne t succeedng the day on whch
the transactons occur. Monthy returns of the operatons of such pants on
Form 103 sha he made not ater than the 10th day of each month for the pre-
cedng month. Such returns sha be made n trpcate. ach copy sha be
duy sworn to or affrmed. Two copes sha be forwarded to the supervsor, who
sha forward one to the Commssoner n accordance wth nstructons on the
form. The remanng copy w be retaned by the brewer and fed as a per-
manent record, so as to be avaabe for nspecton at any tme wthn the suc-
ceedng years. (Sees. 3155(c), 3171(a), 3176, I. R. C.)
Sec. 192.260. Day Saes Record. ach brewer must keep at the brewery, and
avaabe for nspecton at a tmes, a day saes record, showng n deta the
number and knd of packages, such as hogsheads, barres, haf-barres, cases, etc.,
of fermented mat quor and cerea beverages sod or removed, the names and
addresses of the purchasers, and the amounts sod to each such purchaser. The
saes records w be hed avaabe for nspecton for a perod of years. (Sec.
3176, I. R. C.)
Sec. 192.263. Form 1689. ppcaton w be made on Form 16S9 for the
remova of fermented mat quor from a brewery, or from the bottng house of
a brewery, for use as suppes on vesses and arcraft. (Sec. 3176, I. R. C.; sec.
3. 55 Stat. 602 (19 U. S. C. Supp., 1309).)
. Sectons 192.197, 192.205,192.206,192.208, 192.21 to 192.218, n-
cusve, 192.221 to 192.223, ncusve, and 192.258(b) are amended by
strkng out Form 550 wherever t appears theren, and substtutng
therefor Form 1689.
5. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2829, 3150, 3153, 315 , 3155, 3157, 3158, 3176, 3250, 3271, 3278,
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281
Regs. 18, 192.270, etc.
and 3280, Interna Revenue Code (26 U. S. C. 2829, 3150, 3153, 315 ,
3155, 3157, 8158, 3176, 3250, 3271, 3278, and 3280) and secton 3 (55
Stat. 602; 19 U. S. C. Supp. 1309).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved September 8, 19 8.
. . Foey, r.,
ctng Secretary of the Treasury.
(Pubshed In the Federa Regster September 15, 19 8)
Reguatons 18, Sectons 192.270,192.271, and 19 8-17-12909
192.272. T. D. 56 8
TITL 26 INT RN L R NU C PT R I, SUISC PT R C, P RT 192.
F RM NT D M LT LI UOR
mendng Reguatons 18
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. The ct of uy 3, 19 8 (Pubc Law 899, ghteth Congress
page 32 , ths uetn ), amendng secton 315 of the Interna Rev-
enue Code reads n part as foows:
That causes (1), (2), (8), ( ), and (5) of secton 315 (a) of the
Interna Revenue Code are hereby redesgnated ( ), ( ), (C), (D), and
( ), and secton 315 (a) of such code s further amended by strkng
out (a) owance. and nsertng n eu thereof the foowng:
(a) owance.
(1) Unsaabe products .
Sec 2. Secton 315 (a) of such code s further amended by addng at
the end thereof the foowng:
(2) Loss. The Commssoner sha make refund, or In eu
thereof, f he so eects, aow credt to a brewer n the amount of
ta pad by such brewer on any beer, ager beer, ae, porter, or other
smar fermented mat quor manufactured by such brewer whch
was ost n hs bottng house through breaknge or eakage or n the
process of fng, cappng, pasteurzng, or abeng, upon the fng
of a cam therefor by the brewer and proof by hm to the satsfac-
ton of the Commssoner that such beer, ager beer, ae, porter, or
other smar fermented mnt quor was fuy ta -pad and that no
refund or credt was made or aowed therefor under paragraph (1)
to ths subsecton. Refund or credt under ths paragraph for such
oss durng any caendar month sha not e ceed an amount equa to
2 per centum of the ta pad by hm on a boor, nger beer, ae,
porter, or other smar fermented mat quor removed by hm dur-
ng such caendar month from hs brewery to hs bottng house.
Sec. 3. Secton 315 (b) of such code s amended to read as foows:
(b) Tme fob Fng Cam. No cam under the provsons of sub-
secton (a) sha be aowed uness fed wthn nnety days after the cose
of the month wthn whch such destructon or return to the brewery for
use as brewng matera, or oss, occurred.
Sec. . The amendment made by secton 2 sha be appcabe ony wth
respect to beer, ager beer, ae, porter, or other smar fermented mat
quor whch s ost after the frst day of the month n whch fas the date
of the enactment of ths ct.
820823 9 19
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Regs. 18, 5 192.270, etc. 282
2. Notce and pubc procedure under secton (a) of the dmns-
tratve Procedure ct, approved une 11, 19 6, are found to be m-
practcabe and contrary to the pubc nterest n connecton wth the
ssuance of these reguatons for the reason that under the aw cams
may be fed on osses sustaned n the month of uy, 19 8, and regua-
tons shoud be avaabe at the earest practcabe date for the
gudance of brewers desrng to fe such cams. For the same reasons
these reguatons are made effectve upon pubcaton n the Federa
Regster.
3. Pursuant to the foregong provsons of aw and secton 3176,
Interna Revenue Code (U. S. C, tte 26, secton 3176), Reguatons
18 (26 CFR, Part 192) are hereby amended by addng rtce I
and sectons 192.270,192.271, and 192.272:
rtce I . Ta -Pad eeb Lost
Sec. 192.270. Cams. ach brewer desrng to obtan refund of ta on beer
ost In hs bottng house after uy 1, 19 8, through breakage or eakage or
n the process of fng, cappng, pasteurzng, or abeng sha fe a cam on
Form 8 3, n dupcate, wth the dstrct supervsor, coho Ta Unt, for the
dstrct In whch the premses are ocated. The cam must be fed wthn 90
days after the cose of the month wthn whch the oss occurred. cam sha
be deemed to have been fed when t Is devered to the offce of the proper
dstrct supervsor and by that offce receved. Ony one cam may be fed for
each month s osses at a bottng house (uness there Is a change In propretor-
shp, n whch event each propretor w fe a separate cam) and osses f r
two or more months may not be consodated In a snge cam. The brewer
sha mantan commerca records to substantate aegatons made n the cam,
and such records sha be avaabe for nspecton by offcers of the ureau of
Interna Revenue. (Sees. 315 and 3176,1. R. C.)
Sec. 192.271. Infobmaton to be Shown n Cam. ach cam shaU set forth
the partcuar cause or causes of the oss; that the beer nvoved was fuy ta -
pad ; and that the beer was not ncuded n a prevous cam for osses or n a
cam for refund of ta on spoed beer. The brewer sha n addton show
In the cam:
(a) the quantty of buk ta -pad beer In the bottng house at the be-
gnnng of the month;
(6) the quantty of ta -pad beer receved from the brewery;
(c) the tota of debt tems;
(d) the quantty of ta -pad beer botted;
(e) the quantty of ta -pad beer accumuated In tanks and destroyed or
returned to the brewery In the presence of an Inspector;
(/) the quantty of buk ta -pad beer ost durng the month through the
cause or causes stated n the cam;
(g) the quantty of buk ta -pad beer remanng on hand at the cose
of the month;
(ft) the tota of credt tems.
If the cam Incudes osses of ta -pad beer sustaned In the bottng house after
bottng, the brewer sha show n a separate statement:
(a) the quantty of botted ta -pad beer on hand In the bottng house at
the begnnng of the month;
(6) the quantty of ta -pad beer botted;
(c) the tota of debt tems;
(d) the quantty of botted ta -pad beer removed;
(e) the quantty of botted ta -pad beer destroyed or returned to the
brewery under supervson of an nspector;
(f) the quantty of botted ta -pad beer ost;
(g) the quantty of botted ta -pad beer on hand at the cose of the month;
(ft) the tota of credt Items.
Such other debt or credt tems as are necessary to dscose a baanced account
of a transactons n ether buk or botted ta -pad beer shoud aso be shown
In the statements. uanttes shoud be stated In terms of barres. Where ta
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283 Regs. 20, 19 .27(a), etc.
on the aggregate quantty of beer ost durng the month e ceeds 2 percent of the
ta pad on a beer removed durng the caendar month from the brewery to the
bottng house, the amount of refund camed shoud not e ceed 2 percent of
the ta so pad. owever, where the ta on the beer ost does not e ceed 2
percent of the ta so pad, the amount of refund camed shoud be based upon
the actua amount of ta -pad beer ost. Snce the aw authorzes refund wth
respect to beer ost after uy 1, 19 8, cams coverng osses sustaned n uy,
19 8, sha show uanttes on hand at the begnnng of busness on uy 2. 19 8
(nstead of quanttes on hand at the begnnng of the month), and transactons
occurrng on uy 1, 19 8, sha not be ncuded n the statement of transactons.
(Sees. 315 and 3176, I. R. C.)
Sec. 192.272. cton by Dstbct Supervsor. Upon recept of cam for refund
the dstrct supervsor w e amne t to determne whether the camant has
furnshed the requred data and w make such nvestgaton as he may deem
necessary. The dstrct supervsor w then forward the orgna cam, Form
8 3, and reated papers to the Commssoner wth such comment and recom-
mendaton as he sha deem pertnent. The dupcate copy of the cam and
copes of reated papers w be retaned n the offce of the dstrct supervsor.
(Sees. 315 and 3176, I. R. C.)
. Ths Treasury Decson sha be effectve upon pubcaton n the
Federa Regster.
(Sectons 315 and 3176 of the Interna Revenue Code (26 U. S. C,
tte 26, sectons 315 and 3176).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved uy 29, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster ugust , 19 8)
Reguatons 20, Sectons 19 .27(a), tc. 19 8-15-12875
T. D. 5639
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 19 . .
W OL S L ND R T IL D L RS IN LI UORS
mendng Reguatons 20
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, ard Others
Concerned:
1. On March 2 , 19 8, a notce of proposed rue makng regardng
whoesae and reta deaers n quors was pubshed n the Federa
Regster (12 F. R. 156 ).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng amended sectons 19 .27(a), 19 .75
(a) and (b), 19 .76, and 19 .78, and added paragraph (e) to secton
19 .75 and secton 19 .78a of Reguatons 20, approved une 6, 19 0
(26 CFR, Part 19 ), are hereby adopted.
3. These amendments are desgned to provde the foowng rues
for the reportng of transactons n warehouse recepts:
(a) Prescrbes Form 52-F, Whoesae Lquor Deaer s Monthy
Record and Report of Purchases and Saes of Warehouse Recepts
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Regs. 20, 19 .27(a), eta 28
for Dsted Sprts, for keepng a record and submttng to the
dstrct supervsor a monthy report of a purchases and saes of
warehouse recepts for dsted sprts, n eu of record 52, Whoesae
Lquor Deaer s Record, and monthy transcrpts, Forms 52- and
52- , Whoesae Lquor Deaer s Monthy Report, and Form 338,
Whoesae Lquor Deaer s Monthy Report (Summary of Forms
52- and 52- ), now prescrbed by Treasury Decson 5571 C. .
19 7-2, 220 , approved uy 8. 19 7. Record 52 and Forms 52- ,
52- , and 338 w, after the effectve date of the proposed reguatons,
be used by whoesae deaers n quors soey for recordng and report-
ng the physca recept and remova of dsted sprts.
(b) empts the whoesae quor deaer from enterng on Record
52 the sera numbers of cases receved (n addton to the sera num-
bers of cases removed from the premses, e empted by the present
reguatons), and from reportng on Form 52-F, the sera numbers
of packages and cases represented by warehouse recepts purchased
and the sera numbers of packages represented by warehouse recepts
sod (n addton to the sera numbers of cases represented by ware-
house recepts sod, e empted by the present reguatons), provded
the whoesae deaer n quors mantans a separate record of such
nformaton avaabe for nspecton by nterna revenue offcers.
(c) Provdes that n eu of the name and address of the person
from whom the sprts were receved, or to whom they were sent,
there w be shown the name and address and the regstry number and
State, or permt number, of the consgnor, or consgnee, as the case
may be, for the frst shpment, or recept, respectvey; and for other
shpments or recepts durng such month there need be shown ony the
regstry number and State, or permt number, of each such consgnor,
or consgnee. The whoesae deaer n quors w contnue to report
the name and address on every shpment to or from reta deaers n
quors. (Recepts from such reta deaers n quors are sub|ect to
the restrctons m secton 5 of the Federa coho dmnstraton
ct (27U. S. C.205).)
(d) empts the whoesae deaer n quors from enterng on Rec-
ord 52 the name of the dster, rectfer, or botter of the dsted
sprts receved or sent, provded he mantans a separate record of
such names avaabe for nspecton by nterna revenue offcers, but
the regstrv number or permt number and the State or country must
be reported on Record 52.
rtce . Speca Ta es
Sec. 19 .27. Warehouse Recepts Coverng Sprts. (a) Snce the sae of
warehouse recepts for dsted sprts Is equvaent to the sae of dsted sprts,
every person who ses, or offers for sae, warehouse recepts for dsted sprts
hed n regstered or frut dsteres or stored In nterna revenue bonded ware-
houses, customs bonded warehouses, or esewhere, Incurs abty to speca ta
as a deaer In quors at the pace where such warehouse recepts are sod, or
offered for sae, and must fe return and pay occupatona ta as provded In
secton 19 . 0, uness e empted by the provsons of sectons 19 .66, 19 .67, 19 .63,
19 .69, 19 .70, and 19 .78. (Sees. 8176, 3250(a), 825 , 3270, 3271, 8272, I. R. G)
rtc e . Mantenance of Records and Postng of Sgns
She. 19 .75. Records To e ept ry Whoesae Lqt-or Deaers. (a) cept
as provded n paragraph (e) of ths secton, every whoesae deaer In quors
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285 Regs. 20, 19 .27(a), etc.
who ses dsted sprts sha keep Record 52, Whoesae Lquor Deaer s
Record, and render monthy transcrpts, Forms . )2- and 52- , Whoesae
Lquor Deaer s Monthy Report, and Form 338, Whoesae Lquor Deaer s
Monthy Report (Summary of Forms 52- and 52- ), of the physca recept
and dsposton of dsted sprts by hm. Day entres sha be made on
Record 52 of a dsted sprts receved and dsposed of, as Indcated by the
headngs of the coumns and nes of the form and the Instructons prnted
thereon or ssued In respect thereto, and as requred by. these reguatons, not
ater than the cose of busness of the day on whch the transactons occur:
Provded, That where the whoesae deaer n quors keeps a separate record,
such as nvoces, of the remova of dsted sprts, showng the remova data
requred to be entered on Record 52, day entres of the remova of dsted sprts
may be made on Record 52 not ater than the cose of busness of the foowng
busness day, provded such separate record s approved by the dstrct supervsor.
(6) cept as provded n paragraph (e) of ths secton, every whoesae
deaer n quors who ses, or offers for sae, dsted sprts by warehouse
recepts sha keep a separate record, and render a monthy transcrpt, of a
purchases and saes of warehouse recepts, on Form 52-F, Whoesae Lquor
Deaer s Monthy Record and Report of Purchases and Saes of Warehouse Re-
cepts for Dsted Sprts. There need not be reported on Form 52-F trans-
actons n warehouse recepts not nvovng the purchase or sae of dsted sprts,
such as the recept from a warehouseman of warehouse recepts coverng the
depost or bottng of the sprts n hs warehouse or the surrender of warehouse
recepts for the bottng of the sprts n bond or ther transfer n bond to another
warehouse. ntres on Form 52-F sha be made as ndcated by the headngs of
the coumns and nes of the form and the nstructons prnted thereon or ssued
n respect thereto, and as requred by these reguatons. The provsons of para-
graph (a) of ths secton wth respect to the tme of makng entres, and of sec-
ton 19 .81 wth respect to forms to be provded by users, are hereby made upp-
cnbe to Form 52-F. , The monthy transcrpt on Form 52-F sha be forwarded to
the dstrct supervsor on or before the 10th day of the succeedng month. (Sees.
2 57, 285S, 3176, :(25 , I. R. C.)
Sec. 19 .75. (c). The propretor of an ndustra acoho pant or ndustra
acoho bonded warehouse sha keep records n hs capacty as a whoesae
deaer n quors n accordance wth Reguatons 3, Industra coho (26 CFR,
Part 182). The propretor of a regstered dstery sha keep records n hs
capacty as a whoesae deaer n quors In accordance wth Reguatons ,
Producton of Dsted Sprts (26 CFR, Part 1831. The propretor of a
frut dstery sha keep records n hs capacty as a whoesae deaer n quors
n accordance wth Reguatons 5, Producton of randy (26 CFR, Part 18 ).
The propretor of an nterna revenue bonded warehouse sha keep records n
hs capacty as a whoesae deaer In quors n accordance wth Reguatons 10,
Warehousng of Dsted Sprts (20 CFR, Part 185). The propretor of a
ta -pad bottng house sha keep records n hs capacty as a whoesae deaer
In quors n accordance wth Reguatons 11, ottng of Ta -pad Dsted
Sprts (26 CFR, Part 189). The propretor of a rectfyng pant sha keep
records n hs capacty as a whoesae deaer n quors n accordance wth
Reguatons 15. Rectfcaton of Sprts and Wnes (20 CFR, Part 190). n m-
porter sha keep records n hs capacty as a whoesae deaer n quors n
accordance wth Reguatons 21, Importaton of Dsted Sprts and Wnes
(26 CFR, Part 191). ny person brngng dsted sprts nto the Unted States
from Puerto Rco or the rgn Isands sha keep records n hs capacty as a
whoesae deaer n quors t accordance wth Reguatons 2 , Lquors and
rtces from Puerto Rco and the rpn Isands (26 CFR, Part ISO). (Sees.
2857, 2858, 3176, 325 , I. R. C.)
Sec. 19 .76. Sep abate Records. (a) Where more than one shpment of ds-
ted sprts s receved from the same consgnor durng any mc.nth, there w
be entered on Record 52 for the frst shpment receved the name and address of
such consgnor, foowed by the regstry number (preceded by approprate dent-
fyng symbos) and the State of the consgnor s pant or warehouse (for e -
ampe, IR W- - y.) or, n the case of shpments receved from whoesae quor
deaers or mporters, the permt number of the consgnor (for e ampe, 3-1-123 ).
For the remanng shpments receved from such consgnor durng the month,
there may be entered n the coumn desgnated Name such regstry number or
permt number, as the case may be, and the name and address of the consgnor
may be omtted. Lkewse, where more than one shpment of dsted sprts
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Regs. 20, 19 .27(a), eta 286
Is sent to the same consgnee durng any month, there w be entered on Record 52
for the frst shpment made the name and address of such consgnee foowed
by the regstry number or permt number of the consgnee. For the remanng
shpments made to such consgnee durng the month, there may be entered n
the coumn desgnated Name such regstry number or permt number, as the
case may be, and the name and address of the consgnee may be omtted. Where
the consgnor or consgnee s a reta deaer n quors, the name and address
must be entered on Record 52 for each shpment receved or sent
(6) The name of the person by whom the dsted sprts were dsted, rect-
fed, or botted need not be entered on Record 52 provded the propretor keeps
at hs pace of busness a separate record of such nformaton, avaabe for
Inspecton by nterna revenue offcers. The regstry number or permt number
must be entered n coumn 5 and the State or country n coumn 6.
(c) Sera numbers of cases of dsted sprts receved, or dsposed of, need
not be entered on Record 52, and the sera numbers of packages and cases pur-
chased or sod by warehouse recepts need not be entered on Form 52-F, pro-
vded that the whoesae deaer n quors keeps at hs pace of busness a sepa-
rate record, showng such sera numbers, wth necessary dentfyng data, n-
cudng the date of the physca recept or dsposton of dsted sprts and the
name and address of the person from whom receved or to whom sent, and the
date of purchase or sae of warehouse recepts and the name and address of the
purchaser or seer, as the case may be, and provded further, that the keepng
of such record s approved by the dstrct supervsor.
( t) The separate records prescrbed by paragraphs (6) and (c) of ths secton
may be kept n book form (ncudng oose-eaf books) or may consst of com-
merca papers, such as nvoces or bs. Such books, nvoces, and bs sha
be preserved for a perod of years and n such manner that the requred n-
formaton may be ready ascertaned therefrom, and, durng such perod, sha
be avaabe durng busness hours for nspecton and the takng of abstracts
therefrom by nterna revenue offcers. If a record n book form s kept, entry
sha be made on such separate record not ater than the cose of busness of the
day on whch the transactons occur. The deaer sha note on Record 52, and
on Form 52-F, n the coumn for reportng sera numbers, Sera numbers
shown on commerca record per authorty, dated (Sees. 2857,
2858, 3176, 325 ,1. R. C.)
Sec. 19 .78. Pace Where Record 52 Sha e ept. (a) cept as provded
n paragraph (( ) of ths secton, the whoesae deaer n quors sha keep
Record 52 at the pace of busness covered by hs whoesae quor deaer speca
ta stamp, f sprts are receved and sent out from such premses. (Sees. 2857,
2858, 3176, 325 , I. R. C.)
Sec. 19 .78a. Pace Where Form 52-F Sha e ept. very whoesae
deaer n quors sha keep Form 52-F at the pace of busness where warehouse
recepts are sod or offered for sae. (Sees. 2857, 2858, 3176, 325 , I. R C.)
. Treasury Decson 5571, approved uy 8, 19 7, s revoked as of
the effectve date of ths Treasury Decson.
5. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Redera Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 2858, 3176, 3250(a), 325 , 3270, 3271, and 3272 of the
Interna Revenue Code (U. S. C, tte 26, sectons 2857, 2858, 3176,
3250 (a), 325 ,3270,3271, and 3272).)
Geo. . Schoeneman,
Commssoner.
pproved une 25,19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster uy 3. 19 8)
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287
Regs. 20, 19 .80a
Reguatons 20, Secton 19 .80a: ddtona
requrements.
19 8-1 -12855
T. D. 5627
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 19 .
W OL S L ND R T IL D L RS IN LI UORS
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
20, Whoesae and Reta Deaers n Lquors/ approved une 6, 19 0
(26 CFR, Part 19 ), those provsons of Treasury Decson 5323
C. . 19 , 695 , approved anuary 5, 19 ( 26 CFR, Part 171),
whch pertan to reports prepared and fed by whoesae quor deaers.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve
Procedure ct (Pubc Law 0 , Seventy-nnth Congress) s unneces-
sary n connecton wth the ssuance of these reguatons for the reason
that no change s made n e stng requrements of reguatons.
3. Reguatons 20, Whoesae and Reta Deaers n Lquors, ap-
proved une 6, 19 0 ( 26 CFR, Part 19 ), are hereby amended by
addng a new secton, 19 .80a, as foows:
rtce . Mantenance of Records and Postng of Sgns
Sec. 19 .80a. ddtona Requrements. (a) The whoesae quor deaer
sha report on Record 52, Part 2, and on transcrpt. Form 52- , the name and
address of each consgnee, n the coumn now desgnated Name. In the coumn
now desgnated ddress, there w be reported the name and address of the
person, frm, or corporaton payng (by advancement or rembursement) etter
ta , bottng charge, brokerage fee, handng charge, or cearance fee. ndcatng
whch are ncuded. The headng of both coumns w be amended accordngy.
(6) Where a whoesae quor deaer shps or devers dsted sprts to a
consgnee on the order of another whoesae quor deaer detaed records of the
transactons sha be kept on Record 52 by (1) the whoesae quor deaer makng
the shpment or devery, (2) the whoesae quor deaer gvng the order, and (3)
the consgnee f he s a whoesae quor deaer. For e ampe, assumng that
whoesae deaer ( ) shps or devers the dsted sprts to consgnee (C) on
the order of whoesae deaer ( ), entres w be made n Record 52 by the
partes nvoved as foows:
(1) whoesae deaer ( ) w show n hs Record 52 the name and
address of whoesae deaer ( ), who ordered the dsted sprts, as
we as the name and address of consgnee (C), the person to whom the
dsted sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from whoesae deaer ( ), gvng both the name
and address of ( ), and w at the same tme make an entry showng that
the dsted sprts were shpped or devered by ( ) to consgnee (C),
gvng the name and address of (C) ; and
(3) consgnee (C), If a whoesae quor deaer, w show n hs Record
52 that the dsted sprts were purchased from whoesae deaer ( )
and receved by hm from whoesae deaer ( ), gvng name and address
of both. Transcrpts of Record 52 on Forms 52- and 52- , requred to
be fed wth the dstrct supervsor, w smary show the detas of such
transactons. (Sees. 2857. 3171, 3176, I. R. C.)
mendng Reguatons 20
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Regs. 21, 191.1, etc.
288
. The provsons of Treasury Decson 5323 reatng to whoesae
quor deaers are revoked as of the effectve date of ths Treasury
Decson.
5. Ths Treasury Decson sha be effectve upon fng for pub-
caton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 3171, and 3176, of the Interna Revenue Code (U. S. C,
tte 26, sectons 2857, 3171, and 3176).)
Geo. . Sohoeneman,
C ommssoner.
pproved une 18, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fea wth the Dvson of the Federa Regster une 29, 19 8, 8: 7 a. m.)
Reguatons 21, Sectons 191.1, tc. 19 8-17-12910
T. D. 56 7
TITL 26 INT RN L R NU C PT R I, SU C PT R C, P RT 191.
IMPORT TION OF DISTILL D SPIRITS ND WIN S
mendng Reguatons 21
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. 0.
To Dstrct Supervsors and Others Concerned:
1. The ct of une 30, 19 8, effectve ugust 1, 19 8 (Pubc Law
857, ghteth Congress page 322, ths uetn ), amends secton
3150(a) of the Interna Revenue Code as foows:
That the frst sentence of secton 3150(a) of the Interna Revenue
Code (mposng a ta on fermented quors) s amended to read as fo-
ows: There sha be eved and coected on a beer, ager beer, ae,
porter, and other smar fermented quor, contanng one-haf of 1
per centum, or more, of acoho brewed or manufactured and sod, or
removed for consumpton or sae, wthn the Unte States, or mported
nto the Unted States, by whatever name such quors may be caed, a
ta of 7 for every barre contanng not more than thrty-one gaons,
and at a ke rate for any other quantty or for the fractona parts of a
barre authorzed and defned by aw.
Seo. 2. That secton 3150(a) of the Interna Revenue Code s further
amended by nsertng between the frst and second sentences thereof
the foowng sentence: Imported fermented mat quors sha, durng
the contnuance of the war-ta rate on fermented mat quors prescrbed
n secton 1650, be sub|ect to ta at such rate n eu of the rate heren-
before prescrbed.
Sec. 3. The amendment made by ths ct sha take effect on the frst
day of the frst month whch begns at east ten days after the date of
the enactment of ths ct
2. The purpose of these amendments s to set forth requrements con-
cernng the mposton and coecton of ta on fermented quors m-
ported nto the Unted StateS| and the abeng, markng, stampng,
and reease of such fermented quor from customs custody as provded
by aw. Owng to the tme mtaton and the nature of the amend-
ment, t s found to be unnecessary to ssue ths Treasury Decson wth
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289 Regs. 21, 191.1, etc.
notce and pubc procedure thereon under secton (a) of the d-
mnstratve Procedure ct, approved une 11, 19 6, or sub|ect to the
effectve date mtaton of secton (c) of sad ct.
3. Pursuant to the provsons of secton 3150(a), as amended, and
3176 of the Interna Revenue Code (26 U. S. C, 3150(a) and 3176),
sectons 191.1, 191.3(/), 191. , and 191.11 of Reguatons 21 (26 CFR,
Part 191), are amended, and sectons 191.3(t), 191.9a, and 191.15a are
added to such reguatons, effectve ugust 1, 19 8, as foows:
Sec. 191.1. Imported Dsted Spbtb, Wnes, and Fermented Lquors.
These reguatons are prescrbed pursuant to the provsons of aw governng
dsted sprts, wnes, and fermented quors from foregn countres arrvng
n the Unted States as that term s defned heren. (Dsted sprts, wnes,
and fermented quors arrvng n the Unted States from Puerto co and
the rgn Isands are governed by Reguatons 2 (26 CFR, Part 180).) (Sec.
8176, I. R. C.)
Sec. 191.3. Defntons.

(f) Importer sha mean any person who mports dsted sprts, wnes,
or fermented quor nto the Unted States.

(ft) Fermented quor sha mean a beer, ager beer, ae, porter, and other
smar fermented quor, by whatever name such quors may be caed, con-
tanng one-haf of 1 per centum, or more, of acoho by voume, produced by the
fermentaton of mat, whoy or n part, or from any substtute therefor. (Sec.
3176, I. R. C.)
Sec. 191. . Lquor Deaers Speca Ta es. very person engaged n bus-
ness as an mporter wthn the meanng of the term as denned n secton 191.3(/),
who ses, or offers for sae, dsted sprts, wnes, or fermented quors, must fe
Form 11, Speca Ta Return, wth the coector of nterna revenue and pay
speca (occupatona) ta es as whoesae deaer or reta deaer n quor, or
both, or, f mat quors ony are deat n, as whoesae mat quor deaer, or
reta mat quor deaer, or both, n accordance wth the aw and reguatons
governng the payment of such speca ta es. (26 CFR, Part 19 .) (Sec. 3176,
3250 (a), (b), (d), (e), 325 (b), (c), (e), (f), I. R. C.)
Sec. 191.9a. Fermented Lquors. (a) Rate of ta . fermented quor,
as defned n secton 191.3(n), brewed or manufactured and sod, or removed
for consumpton or sae, wthn the Unted States, or mported nto the Unted
States, s sub|ect to the nterna revenue ta prescrbed by secton 3150(a),
Interna Revenue Code, for every barre contanng not more than 31 gaons,
and at a ke rate for any other quantty or for the fractona parts of a barre
authorzed and defned by aw. The ta on fermented quor sha be pad by the
mporter when the fermented quor s entered, or wthdrawn from warehouse
for consumpton, n accordance wth customs requrements.
(6) Computaton of ta . In estmatng and computng such ta , the frac-
tona parts of a barre sha be haves, thrds, quarters, s ths, and eghths;
and, e cept as provded n (c), any fractona part of a barre, contanng ess
than one-eghth, sha be accounted one-eghth; more than one-eghth, and not
more than one-s th, sha be accounted one-s th; more than one-s th, and
not more than one-fourth, sha be accounted one-fourth ; more than one-fourth,
and not more than one-thrd, sha be accounted one-thrd; more than one-thrd,
and not more than one-haf, sha be accounted one-haf; more than one-haf,
and not more than 1 barre, sha be accounted 1 barre; and more than 1
barre, and not more than 63 gaons, sha be accounted 2 barres, or a hogshead.
The ta on any other quantty, as for e ampe, botted beer, w be computed
on the bass of actua quantty at the rate prescrbed by aw.
(c) Toerance. The foregong provsons requrng the accountng of barres
and fractona parts of barres at the ne t hgher quantty sha not appy where
the contents of any wooden barre contanng more than 81 gaons do not e ceed
31 gaons by more than one-haf gaon, and a proportonate quantty as to frac-
tona wooden contaners; nor where the contents of any meta barre contanng
more than 31 gaons do not e ceed 31 gaons by more than one-quarter gaon,
and a proportonate quantty as to fractona meta contaners; and no ta sha
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Regs. 21, 191. a, etc.
290
be coected on any e cess whch Is wthn the mts of such toerance. (Sees.
3150(a), as amended, 3176, I. R. C.)
Sec. 191.11. Coecton of Interna Revenue Ta es on Imported Dsted
Sprts, Wnes, and Fermented Lquors. Interna revenue ta es payabe on
mported dsted sprts, ncudng perfumes contanng dsted sprts, and on
wnes and fermented quors, when entered, or wthdrawn from warehouse for
consumpton, are coected, accounted for, and deposted as Interna revenue co-
ectons by coectors of customs In accordance wth customs requrements. (Sec.
3176, I. R. C.)
Sec. 191.15a. Reease, Labeng, and Stampng of Fermented Lquors.
Imported fermented quors are requred to-be reeased from customs custody
In conformty wth the Federa coho dmnstraton ct and reguatons there-
under. The attenton of a concerned s drected, n ths connecton, to the
provsons of rtces III and I of Reguatons No. 7 (27 CFR 7.30-7. 2)
reatng to the abeng and advertsng of mat beverages, ssued under the
Federa coho dmnstraton ct. Imported contaners of fermented quor
are requred to be marked, abeed, and stamped n accordance wth customs
reguatons (19 CFR, Part 11). (Sec. 3176, I. R. C.)
. Ths Treasury Decson s ssued under the authorty contaned
n sectons 3150(a), as amended, 3176, 3250 (a), (b), (d), (e), and
325 (b), (c), (e), (f), Interna Revenue Code (U. S. C, tte 26,
3150(a), 3176, 8250 (a), (b), (d), (e), and 325 (b), (c), (e| , (f).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
Frank Dow,
ctng Commssoner of Custom .
pproved uy 29. 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster ugust 3,19 8, 9 : 02 a. m.)
Reguatons 21, Sectons 191. a, 191.57a, and 19 8-15-12876
191.57b. T. D. 56 0
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 191.
IMPORT TION OF DISTILL D SPIRITS ND WIN S
mendng Reguatons 21
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 26, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1.19 7, a notce of proposed rue makng regardng
mportaton of dsted sprts and wnes was pubshed n the Fed-
era Regster (12 F. R. 7121).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 191. a, 191.57a, ana
191.57b of Reguaton 21, approved October 16, 19 0 ( 26 CFR, Part
191), are hereby adopted.
3. These amendments are desgner to provde rues for the reportng
of transactons n warehouse recepts.
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291
Regs. 21, 191. a, etc.
rtce I . Speca (Occupatona) Ta es
Sec. 191. a. Warehouse Recepts Coverng Dsted Sprts. Snce the sae
of warehouse recepts for dsted sprts s equvaent to the sae of dsted
sprts, every person engaged n busness as an mporter of dsted sprts, who
ses, or offers for sae, warehouse recepts for dsted sprts stored n customs
bonded warehouses, or esewhere, ncurs abty to speca ta as a deaer n
quor at the pace where the warehouse recepts are sod or offered for sae, and
must fe return and pay occupatona ta as provded n secton 191. . (Sees.
3176, 3250(a), 325 , 3270, 3271, 3272, I. R. C.)
rtce I. Importer s Records and Reports
Sec. 191.57a. Record of Warehouse Recepts To e ept by Importer. very
mporter who ses, or offers for sae, dsted sprts by warehouse recepts sha
keep a separate record, and render a monthy transcrpt, of a purchases and saes
of warehouse recepts on Form 52-F, Whoesae Lquor Deaer s Monthy Record
and Report of Purchases and Saes of Warehouse Recepts for Dsted Sprts.
There need not be entered on Form 52-F transactons n warehouse recepts not
nvovng the purchase or sae of dsted sprts, such as the recept from a
warehouseman of warehouse recepts coverng the depost or bottng of sprts
n hs warehouse or the surrender of warehouse recepts for the bottng of the
sprts n bond or ther transfer n bond to another warehouse. ntres on
Form 52-F sha be made as ndcated by the headngs of the coumns and nes
on the form and n accordance wth the nstructons prnted thereon or ssued
n respect thereto, and as requred by these reguatons. The provsons of
secton 191.59 wth respect to the tme of makng entres, and of secton 191.62
wth respect to forms to be provded by users, nre hereby made appcabe to
Form 52-F. The provsons of secton 191.60 wth respect to a separate record
of sera numbers of cases are hereby made appcabe to Form 52-F wth respect
to sera numbers of packages and cases purchased or sod by warehouse recepts.
The monthy transcrpt on Form 52-F sha be forwarded to the dstrct super-
vsor on or before the 10th day of the succeedng month. The mportaton of
dsted sprts, and the dsposton of such sprts from customs custody at the
tme of ther sae or wthdrawa therefrom, sha contnue to be reported on
Form 52- or Record 52, as the case may be. n accordance wth the provsons
of secton 191.57. The physca recept and dsposton of dsted sprts at
the mporter s whoesae quor deaer premses sha contnue to be reported on
Record 52 n accordance wth the provsons of secton 191.58. (Sees. 2857, 2858,
8171, 3176, 325 , I. R. C.)
Sec. 191.57b. Pace Where Form 52-F Sha e ept. very mporter sha
keep Form 52-F at the pace of busness where warehouse recepts are sod or
offered for sae. (Sees. 2S57. 2858, 3171, 3176, 325 ,1. R. C.)
. Ths Treasury Decson, sha be effectve on the thrty-frst cay
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 2858, 3171, 3176, 3250(a), 325 , 3270, 3271, and 3272 of
the Interna Revenue Code (U. S. C, tte 26, sectons 2857, 2858, 3171,
8176,3250(a),325 ,3270,3271,and 3272).)
Geo. . Schoeneman,
Commssoner.
pproved une 25,19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster uy 3, 19 8)
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Regs. 21, 191.61a
292
Reguatons 21, Secton 191.61a: ddtona
requrements.
19 8-1 -12856
T. D. 5628
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 191
IMPORT TION OF DISTILL D SPIRITS ND WIN S
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
21, Importaton of Dsted Sprts and Wnes, approved October
16, 19 0 ( 26 CFR, Part 191), those provsons of Treasury Decson
5323 C. . 19 , 695 , approved anuary 5,19 (26 CFR, Part 171),
whch pertan to reports prepared and fed by mporters.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve Pro-
cedure ct (Pubc Law 0 , Seventy-nnth Congress) s unnecessary
n connecton wth the ssuance of these reguatons for the reason that
no change s made n e stng requrements of reguatons.
3. Reguatons 21, Importaton of Dsted Sprts and Wnes,
approved October 16, 19 0 (26 CFR. Part 191), are hereby amended
by addng a new secton, 191.61a, as foows:
Sec. 191.61a. ddtona Requrements. (o) The mporter sha report, on
Form 52- , Part 2, and when Record 52 Is kept, on Part 2 and on transcrpt, Form
52- , the name and address of each consgnee, n the coumn now desgnated
Name. In the coumn now desgnated ddress, there w be reported the
name and address of the person, frm, or corporaton payng (by advancement
or rembursement) ether ta , bottng charge, brokerage fee, handng charge,
or cearance fee, ndcatng whch are Incuded. The headng of both coumns
w be amended accordngy.
(6) Where the mporter shps or devers dsted sprts to a consgnee on
the order of another whoesae quor deaer, detaed records of the transactons
sha be kept (1) on Form 52- by the mporter makng the shpment or devery,
(2) on Record 52 by the whoesae quor deaer gvng the order, and (3) on
Record 52 by the consgnee f he s a whoesae quor deaer. For e ampe,
assumng that Importer ( ) shps or devers the dsted sprts to consgnee (C)
on the order of whoesae deaer ( ), entres w be made on the prescrbed
forms as foows:
(1) mporter ( ) w show n hs Form 52- the name and address of
whoesae deaer ( ) who ordered the dsted sprts, as we as the name
and address of consgnee (C), the person to whom the dsted sprts are
actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from mporter ( ), gvng both the name and address
of ( ), and w at the same tme make an entry showng that the dsted
sprts were shpped or devered by ( ) to consgnee (C), gvng the name
and address of (C) ; and
(3) consgnee (C), f a whoesae quor deaer, w show n hs Record 52
that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from mporter ( ), gvng name and address of both.
copy of Form 52- and transcrpts of Record 52 on Forms 52- and 52- ,
requred to be fed wth the dstrct supervsor, w smary show the
detas of such transactons.
mendng Reguatons 21
btce I. Importer s Records and Retorts
R CORD ND R PORT OF IMPORT D DISTIU D SPIRITS
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293
Regs. 23, 181.13, etc.
(o) Where the mporter keeps Record 52 and s a party to transactons smar
to those descrbed n subsecton (6), he sha make smar entres of such trans-
actons In Record 62; and the transcrpts on Forms 52- and 52- , requred to
be fed wth the dstrct supervsor, w kewse show the detas of the trans-
actons. (Sees. 2857, 2858, 3171, 3176, 325 , I. It. O.)
. The provsons of Treasury Decson 5323 reatng to mporters
are revoked as of the effectve date of ths Treasury Decson.
5. Ths Treasury Decson sha be effectve upon fng for pubca-
ton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857,2858, 3171, 3176, and 325 , of the Interna Revenue Code
(U. S. C, tte 26, sectons 2857,2858, 3171, 3176, and 325 ).)
Geo. . Schoeneman,
G ommssoner.
pproved une 18, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29, 19 8, 8: 7 a. m.)
Reguatons 23, Sectons 181.13, tc. 19 8-19-12926
T. D.5651
TITL 26 INT RN L R NU C PT R I, SU C PT R C, P RT 181.
STILLS ND DISTILLING PP R TUS
mendng Reguatons 23
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. O.
To Coectors of Interna Revenue, Dstrct Supervsors, and Others
Concerned:
1. On une 10, 19 8, notce of proposed rue makng regardng the
ta free e portaton of dstng apparatus was pubshed n the Fed-
era Regster (13 F. R. 3120).
2. No ob|ectons to the rues havng been receved, the foowng
added sectons 181.28, 181.29, 181.30, 181.31, and 181.32 and the
amendment of subsectons 181.13(ff) and 181.1 (a) of Reguatons
23, approved March 30,19 0 (26 CFR, Part 181), are hereby adopted.
Sec. 181.13. Ta abe Status of Sts.

(g) portaton. Sts or worms or condensers ntended for purposes other
than dstng as defned n secton 181.12 may be removed wthout payment of
the commodty ta for e port by the manufacturer, or deaer, under the pro-
cedure prescrbed by sectons 181.28, 181.29, 181.30, 181.31, and 181.32. (Sec.
3791, I. R. C.)
Sec. 181.1 . Procedure for Remova for Domestc Use. (a) ppcaton and
permt for remova. No st, boer (douber or pot st), worm, condenser, or
othor dstng apparatus, sha be removed from the premses of the manu-
facturer, or deaer, as the case may be, for devery to a user, or for hs own
use, unt the coector of the dstrct In whch the manufacturer or vendor
s ocated has receved from the manufacturer or vendor an appcaton on
Form 110, n trpcate, for permsson to remove the dstng apparatus, and
permt on such form has been receved from such coector to remove the same.
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Regs. 23, 181.13, etc.
29
Such appcaton sha dscose he nane and address of the manufacturer or
vendor, the appro mate date the apparatus s to be removed, the name and
address of the person by whom the apparatus s to be used, the purpose for
whch t Is to be used, the type and knd of apparatus, Its capacty, he manu-
facturer s sera number of the apparatus, and, If the apparatus s ta abe, the
sera number of the manufacturer s speca (occupatona) ta stamp and the
sera number of the speca (commodty) ta stamp for the apparatus. The
coector ssung the remova penut sha furnsh a copy of such permt to the
dstrct supervsor n whose dstrct the apparatus s to be set up, regstered,
and used. No dstng apparatus may be set up or used for dstng as defned
by secton 181.12 wthout appcaton to and permt from the dstrct supervsor
n whose dstrct the apparatus s to be used as provded n secton 181.1 (6).
(See sectons 181.17 to 181.27, ncusve, reatve to e portaton of sts wth
beneft of drawback, and sectons 181.28 to 181.32, ncusve, reatve to e por-
taton free of ta .) I Sec. 3791, I. R. C.)
rtce I. portaton of Dstng pparatus Free of Ta
Sec. 181.28. ppcaton and ntry, Form 1690. The e porter w e ecute
and fe wth the coector of nterna revenue an appcaton and entry on Form
1600, n quadrupcate, when he desres to remove for e portaton, wthout pay-
ment of the commodty ta , a st, worm, or condenser ntended for purposes
other than dstng. ach appcaton, Form 16.10. must be numbered seray
commencng wth number 1 and contnung n reguar sequence for a app-
catons thereafter. Parts 1 and 2 of each copy w be fuy e ecuted. state-
ment by the person who ntends to use the dstng apparatus other than for
dstng must be fed by the e porter n support of the appcaton. The
statement must show the purchaser s name and address, the purpose for whch
the dstng apparatus w be used, the manufacturer s sera number of the
dstng apparatus, and the manufacturer s name and address. The sera
number and the manufacturer s name and address may be entered on the state-
ment by the e porter. If a requred nformaton has been furnshed by the
e porter, the coector of nterna revenue w approve each copy of the app-
caton and entry, retan the orgna and return three copes to the e porter.
The purchaser s statement w be retaned by the coector. Upon recept of
the approved copes of the appcaton and entry, the e porter may remove the
st, worm, or condenser descrbed theren for e port free of ta . If evdence
of e portaton (as herenafter prescrbed) s not receved by the coector of n-
terna revenue n due course, an approprate nqury w be made. (Sec. 3791,
I. R. C.)
Sec. 181.29. Markng of Sts, Worms, or Condensers. Sts, worms, or con-
densers Intended for e portaton free of ta sha have branded or stamped
thereon, n a conspcuous pace, the words For e port, foowed by the sera
number of the artce and the manufacturer s name. Where such artces are
manufactured from meta pates, the words For e port, wth the sera num-
ber of the artce and the manufacturer s name drecty thereunder, w be
stamped (In etters and fgures whch must, n no case, be ess than one-haf
Inch n heght) thereon wth a sutabe de, or otherwse permanenty aff ed to
each artce. Where the artce s constructed of wood, the words For e port.
the sera number of the artce, and the manufacturer s name w be branded
thereon. If the artce s to be e ported n a shppng contaner, the foregong
marks must aso be shown on such contaner n a manner whch w enabe
ready Identfcaton by customs offcers. (Sec. 3791, I. R. C.)
Sec. 181.30 Devery of Shpment; of Ladng. The e porter, upon re-
cept of the approved copes of the appcaton and entry, w dever the st,
worm, or condenser ether to the carrer or drecty for customs nspecton. Two
copes of the Form fOO w he transmtted to the coector of customs. copy
of the e port b of adng sha be forwarded and fed wth the coector of
customs. In case of e portaton through a border port to foregn contguous
terrtory, the b of adng w cover transportaton to destnaton and must
show the routng, partcuary the carrer whch w dever the shpment for
customs nsppcton at the border; aso, that the shpment was sent In care of the
coector or deputy coector of customs at the border port. (Sec. 3791, I. R C.)
Sec 181.31. Inspecton and Ladng. The coector of customs to whom the
copes of Form 1690 are transmtted w f n on each copy of the form the order
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Regs. 2 , 180.12a, etc.
for nspecton and adng. The Inspector of customs w carefuy e amne
the shpment descrbed n the entry and he w, f he fnds t to be otherwse
than descrbed, make a speca report thereon. fter havng comped wth the
order of nspecton and after the dstng apparatus has been duy aden on
board the e portng vesse or other vehce the nspector w compete and sgn
the certfcate of Inspecton and adng. (Sec. 3791, I. R. C.)
Sec. 181.32. Certfcaton of portaton. fter nspecton, adng, and
cearance for a foregn port of the vesse or other vehce on whch the dstng
apparatus descrbed n the entry s aden, and after recept of the e port or
through b of adng, the coector of customs w e ecute the certfcate of
e portaton on each copy of the entry, Form 1600. The coector of customs w
retan one copy for hs entry record and transmt the remanng copy of the
Form 1690 to the coector of nterna revenue who approved the form. (Sec.
3791, I. . C.)
3. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Secton 3791 of the Interna Revenue Code (26 U. S. C. . 3791).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
pproved September 1, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster September 8, 19 8)
Reguatons 2 , Sectons 180.12a, tc. 19 8-15-12877
T. D.56 1
TITL 26 INT RN L R NU . C PT R I, SU C PT R C. P RT 180.
LI UORS ND RTICL S FROM PU RTO RICO ND T IRGIN ISL NDS
mendng Reguatons 2
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors, Coectors of Interna Revenue, and Others
Concerned:
1. On November 1,19 7, a notce of proposed rue makng regardng
quors and artces from Puerto Rco and the rgn Isands was pub-
shed n the Federa Regster (12 F. R. 7117).
2. fter consderaton of such reevant matter as was presented by
nterested persons, the foowng added sectons 180.12a, 180.12b,
180.89a, 180.89b, 180.103a, 180.103b, 180.1 1a, and 180.1 1b of Regua-
tons 2 , approved une 16, 19 1 (26 CFR, Part 180), are hereby
adopted.
3. These amendments are desgned to provde rues for the report-
ng of transactons n warehouse recepts.
subpart products comng nto the unted ST T S FROM PU RTO RICO
rtce I . Genera
SP CI L (OCCUP TION L) T S
Sec. 180.12a. Lquor Deaers Speca Ta es. very person brngng quors
nto the Unted States from Puerto Rco, who ses, or offers for sae, such quors
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Regs. 2 , 180.12a, etc. 296
must fe Form 11, Speca Ta Return, wth the Coector of Interna Revenue
and pay speca (occupatona) ta es as whoesae deaer n quor or reta
deaer n quor, or both, n accordance wth the aw and reguatons governng
the payment of such speca ta es (26 CFR. Part 19 ). (Sees. 3176, 3250 a ,
(b), 325 (b), (c), 3270, 3271, 3272, 3360, I. R. C.)
Sec. 180.12b. Warehouse Recepts Coverng Dsted Sprts. Snce the
sae of warehouse recepts for dsted sprts s equvaent to the sae of ds-
ted sprts, every person brngng dsted sprts nto the Unted States from
Puerto Rco, who ses, or offers for sae, warehouse recepts for dsted sprts
stored n warehouses, or esewhere, ncurs nbty to speca ta as a deaer
n quors at the pace where such warehouse recepts are sod, or offered for sae,
and must fe return and pay occupatona ta as provded In secton 180.12a.
(Sees. 3176, 3250(a), 325 , 3270, 3271, 3272, 3360,1. R. C.)
rtce I. Records and Reports
Sec. 180.89a. Record of Warehouse Recepts. very person brngng ds-
ted sprts nto the Unted States from Puerto Rco, who ses, or offers for sae,
dsted sprts by warehouse recepts sha keep a separate record, and render
a monthy transcrpt, of a purchases and saes of warehouse recepts, on Form
52-F, Whoesae Lquor Deaer s Monthy Record and Report of Purchases and
Saes of Warehouse Recepts for Dsted Sprts. There need not be entered
on Form 52-F transactons n warehouse recepts not nvovng the purchase or
sae of dsted sprts, such as the recept from a warehouseman of warehouse
recepts coverng the depost or bottng of sprts In hs warehouse or the sur-
render of warehouse recepts for the bottng of the sprts n bond or ther
transfer n bond to another warehouse. ntres on Form 52-F sha be made as
ndcated by the headngs of the coumns and nes of the form and n accordance
wth the nstructons prnted thereon or ssued n respect thereto, and as requred
by these reguatons. The provsons of secton 180.90 wth respect to the tme
of makng entres, and of secton 180.93 wth respect to forms to be provded by
users, are hereby made appcabe to Form 52-F. The provsons of secton 180.91
wth respect to a separate record of sera numbers of cases are hereby made
appcabe to Form 52-F wth respect to sera numbers of packages and cases
purchased or sod by warehouse recepts. The monthy transcrpt on Form
52-F sha be forwarded to the dstrct supervsor on or before the 10th day of the
succeedng month. The arrva of dsted sprts n customs custody, and the
dsposton of such dsted sprts from customs custody at the tme of ther
sae or wthdrawa therefrom, sha contnue to be reported on Form 52- or
Record 52, as the case may be, n accordance wth the provsons of secton
180.88. The physca recept and dsposton of dsted sprts at the whoesae
quor deaer premses of the person brngng dsted sprts nto the Unted
States from Puerto Rco sha contnue to be reported on Record 52 n accordance
wth the provsons of secton 180.89. (Sees. 2857, 2858,- 3171, 3176, 325 . 3360,
I. R. C.)
Sec 180.89b. Pace Where Form 52-F Sha e ept. very person brngng
dsted sprts nto the Unted States from Puerto Rco sha keep Form 52-F
at the pace of busness where warehouse recepts are sod, or offered for sae.
(Sees. 2857, 2858, 3171, 3176, 325 , 3360, I. R. C.)
SU P RT II PRODUCTS COMING INTO T UNIT D ST T S FROM IRGIN
ISL NDS
rtce II. Genera Provsons
SP CI L (OCCUP TION L) T S
Sec. 180.103a. Lquor Deaers Speca Ta es. very person brngng quors
nto the Unted States from the rgn Isands, who ses, or offers for sae, such
quors must fe Form 11, Speca Ta Return, wth the Coector of Interna
Revenue and pay speca (occupatona) ta es as whoesae deaer In quor or
reta deaer In quor, or both, n accordance wth the aw and reguatons govern-
ng the payment of such speca ta es (26 CFR, Part 19 ). (Sees. 3176, 3250 (a),
(b). 325 (b). (c), 3270. 3271, 3272, 3350, 0 1, I. R. C.)
Sec. ISO. 103b. Warehouse Recepts Coverng Dsted Sprts. Snce he
ae of warehouse recepts for dsted sprts s equvaent to the sae of dst ed
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297
Regs. 2 . 180.12a, etc.
sprts, every person brngng dsted sprts nto the Unted States from the
rgn Isands, who ses, or offers for sae, warehouse recepts for dsted
sprts stored In warehouses, or esewhere, Incurs abty to speca ta as a
deaer n quors at the pace where such warehouse recepts are sod, or offered
for sae, and must fe return and pay occupatona ta as provded n secton
180.103a. (Sees. 3176, 3250(a), 325 , 3270, 3271, 3272, 3350, 0 1, I. R. C.)
Sec. 180.1 1a. Record of Warehouse Recepts. very person brngng ds-
ted sprts nto the Unted States from the rgn Isands, who ses, or offers
for sae, dsted sprts by warehouse recepts sha keep a separate record, and
render a monthy transcrpt, of a purchases and saes of warehouse recepts,
on Form 52-F, Whoesae Lquor Deaer s Monthy Record and Report of Pur-
chases and Saes of Warehouse Recepts for Dsted Sprts. There need not
be entered on Form 52-F transactons n warehouse recepts not nvovng the
purchase or tae of dsted sprts, such as the recept from a warehouseman
of warehouse recepts coverng the depost or bottng of sprts n hs warehouse
or the surrender of warehouse recepts for the bottng of the sprts n bond
or ther transfer n bond to another warehouse. ntres on Form 52-F sha
be made as ndcated by the headngs of the coumns and nes of the form and
n accordance wth the Instructons prnted thereon or ssued n respect thereto,
and as requred by these reguatons. The provsons of secton 180.1 2 wth
respect to the tme of makng entres, and of secton 180.1 5 wth respect to
forms to be provded by users, are hereby made appcabe to Form 52-F. The
provsons of secton 180.1 3 wth respect to a separate record of sera numbers
of cases are hereby made appcabe to Form 52-F wth respect to sera num-
bers of packages and cases purchased or sod by warehouse recepts. The
monthy transcrpt on Form 52-F sha be forwarded to the dstrct supervsor
on or before the 10th day of the succeedng month. The arrva of dsted
sprts n customs custody, and the dsposton of such dsted sprts from
customs custody at the tme of ther sae or wthdrawa therefrom, sha con-
tnue to be reported on Form 52- or Record 52, as the case may be, In accord-
ance wth the provsons of secton 180.1 0. The physca recept and dspos-
ton of dsted sprts at the whoesae quor deaer premses of the person
brngng dsted sprts nto the Unted States from the rgn Isands sha
contnue to be reported on Record 52 n accordance wth the provsons of secton
180.1 1. (Sees. 2857, 2858, 3171, 3176, 325 , 3350, 0 1, I. R. C.)
Sec. 180.1 1b. Pace Where Form 52-F Sha e ept. very person brng-
ng dsted sprts nto the Unted States from the rgn Isands sha keep
Form 52 F at the pace of busness where warehouse recepts are sod, or offered
for sae. (Sees. 2.S57, 2S58, 3171, 3176, 325 , 3350, 0 1, I. R. C.)
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned
n sectons 2857, 2858, 3171, 3176, 3250, 325 , 3270, 3271, 3272, 3350,
3360, and 0 1 of the Interna Revenue Code (U. S. C, tte 26, sec-
tons 2857, 2858, 3171, 3176, 3250, 325 , 3270, 3271, 3272, 3350. 3360,
and 0 1).)
rtce I. Records and Reports
(Pubshed n the Federa Regster uy 3, 19 8)
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Regs 2 , 180. 8a, 180. 9 2 8
Reguatons 2 , Sectons 180. 8a and 180. 9. 19 8-19-12927
T. D. 5652
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 180
LI UORS ND RTICL S FROM PU RTO RICO ND T IROIN ISL NDS
mendng Reguatons 2
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
To Dstrct Supervsors and Others Concerned:
1. On une 29, 19 8, notce of proposed rue makng regardng
shpment of quors and artces from Puerto Rco to the Unted
States was pubshed n the Federa Regster (13 F. R. 3589).
2. No ob|ectons to the rues havng been receved, Reguatons 2 .
approved une 16,19 1, are hereby changed by addng secton 180. 8a
and amendng secton 180. 9.
Sec. 180. 8a. cton by Carrer. The carrer of the merchandse specfed
on the Form 87- sha, at the tme of unadng at the port of arrva n the
Unted States, segregate and arrange the cases of quors or artces for con-
venent customs e amnaton and w assume any e pense ncurred n connecton
therewth. (Sees. 3360 and 0 1, I. R. C.)
Sec 180. 9. cton bt Coector of Customs at Port of rrva. (a) Inspec-
ton. Upon recept of Form 87- , appcaton and permt to shp ta -pad
quors or artces to the Unted States, bearng the sworn affdavt of the shpper
and the certfcaton of the nsuar nterna revenue agent that a the nterna
revenue ta es due on the quors or artces covered thereby have been pad
and the copes of Form 87- from the coector of customs n Puerto Rco, the
coector of customs at the port of arrva w nspect the merchandse to
determne whether the quantty specfed on the Form 87- s coutaned n
the shpment. e w e ecute hs certfcate on part 5 of each copy of Form
87- receved and ndcate thereon any e ceptons found at the tme of ds-
charge. The stntement of e ceptons shoud show the sera number of each
case or other shppng contaner whch sustaned a oss, the quantty of quor
reported shpped In such contaner, and the quantty ost. Losses occurrng as the
resut of mssng bottes, cases, or other contaners shoud be sted separatey
from empty contaners and contaners whch have sustaned osses due to break-
age. Where the statement Is made on the bass of bottes mssng or ost due to
other cause, the number nnd sze of bottes ost shoud be shown. If the coector
fnds that the fu amount of the ta es due has-not been pad, he w requre
the dfference due to be pad pror to reease of the merchandse n accordance
wth the appcabe provsons of these reguatons. When the proper nspecton
of the merchandse has been effected and any addtona ta es found to be due
on the quors or artces coected, the merchandse w be reeased.
(6) Dsposton of forms. Two copes of the Form 87- w be forwarded
to the deputy coector of nterna revenue at San uan, P. R., and one copy of
the form w be retaned by the coector of customs and be avaabe for Inspec-
ton by nterna revenue offcers. If the ta payer fes a cam for refund of ta
on osses, the deputy coector of nterna revenue w forward to the Comms-
soner a copy of the competed Form 87- wth the cam for refund. (Sees.
8360 and 0 1, I. R. O.)
3. Ths Treasury Decson sha be effectve on the thrty-frst day
after the dte of ts pubcaton n the Federa Regster.
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299
Regs. 2 , 180.92a. 180.1 a
(Sectons 3360 and 0 1 of the Interna Revenue Code (26 U. S.
C. . 3360 and 0 1).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
Frank Dow,
ctng Commssoner of Customs.
pproved September 1, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed In the Federa Regster September 8, 19 8)
Reguatons 2 , Sectons 180.92a and 180.1 a. 19 8-1 -12857
T. D.5629
TITL 2f INT RN L R NU . C PT R I, SU C PT R C, P RT 180.
LI UORS ND RTICL S FROM PU RTO RICO ND T IRGIN ISL NDS
mendng Refatons 2
Treasury Department,
Offce of Commssonek of Interna Revenue,
Washngton 5, D. C.
To Dstrct Supervsors and Others Concerned:
1. The purpose of ths amendment s to ncorporate n Reguatons
2 , Lquors and rtces from Puerto Rco and the rgn Isands,
approved une 16. 19 1 (26 CFR, Part 180), those provsons of
Treasury Decson 5323 C. . 19 , 695 , approved anuary 5, 19
(26 CFR, Part 171), whch pertan to reports prepared and fed by
Sersons brngng dsted sprts nto the Unted States from Puerto
;co and the rgn Isands.
2. It s found that compance wth the notce, pubc rue makng
procedure, and effectve date requrements of the dmnstratve Pro-
cedure ct (Pubc Law 0 , Seventy-nnth Congress) s unnecessary
n connecton wth the ssuance of these reguatons for the reason that
no change s made n e stng requrements of reguatons.
3. Reguatons 2 , Lquors and rtces from Puerto Rco and the
rgn Isands, approved une 16, 19 1 (26 CFR. Part 180), are
hereby amended by addng two new sectons, 180.92a and 180.1 a, as
foows:
SU P RT I. PRODUCTS COMING INTO T UNIT D ST T S
FROM PU RTO RIOO
rtce I. Record and Reports
Sec. 180.92a. ddtona Requrements. (a) very person brngng dsted
sprts nto the Unted States from Puerto Rco sha report, on Form 52- , Part 2,
and when Record 52 s kept, on Part 2 and on transcrpt, Form 52- , the name
and address of each consgnee, n the coumn now desgnated Name. I. the
coumn now desgnated ddress, there w be reported the name and address
of the person, frm, or corporaton payng (by advancement or rembursement)
ether ta , bottng charge, brokerage fee, handng charge, or cearance fee, nd-
catng whch are Incuded. The headng of both coumns w be amended
accordngy.
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Regs. 2 , 180.92a, 180.1 a 300
(6) Where a person brngng dsted sprts nto the Unted States from
Puerto Rco shps or devers dsted sprts to a consgnee on the order of
another whoesae quor deaer, detaed records of the transactons sha be
kept (1) on Form 52- by the person brngng the dsted sprts nto the Unted
States from Puerto Rco, (2) on Record 52 by the whoesae quor deaer gvng
the order, and (8) on Record 52 by the cons(nee f he s a whoesae quor
deaer. For e ampe, assumng that whoesae deaer ( ) shps or devers the
dsted sprts to consgnee (C) on the order of whoesae deaer ( ), entres
w be made on the prescrbed forms as foows:
(1) whoesae deaer ( ) w show In hs Form 52- the name and
address of whoesae deaer ( ) who ordered the dsted sprts, as we
as the name and address of consgnee (C), the person to whom the dsted
sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from whoesae deaer ( ), gvng both the name
and address of ( ), and w at the same tme make an entry showng that
the dsted sprts were shpped or devered by ( ) to cons|mee (C),
gvng the name and address of (O) ; and
(3) consgnee (C), f a whoesae quor deaer, w show n hs Record
52 that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from whoesae deaer ( ), gvng name and address of
both. copy of Form 62- and transcrpts of Record 52 on Forms 52-
and 52- , requred to be fed wth the dstrct supervsor, w smary
show the detas of such transactons.
(o) Where a person brngng dsted sprts nto the Unted States from Puerto
Rco keeps Record 52 and s a party to transactons smar to those descrbed n
subsecton (6), he sha make smar entres of such transactons n Record 52;
and the transcrpts on Forms 52- and 52- , requred to be fed wth the dstrct
supervsor, w kewse show the detas of the transactons. (Sees. 2857. 2858.
3171. 3176, 325 , 3360, L R. O.)
SU P RT II. PRODUCTS COMING INTO T UNIT D ST T S FROM IRGIN
ISL NDS
rtce I. Records and Reports
Sec. 180.1 a. ddtona Requrements. (a) very person brngng ds-
ted sprts nto the Unted States from the rgn Isands sha report, on
Form 52- , Part 2, and when Record 52 s kept, on Part 2 and on transcrpt.
Form 52- , the name and address of each consgnee, n the coumn now des-
gnated Name. In the coumn now desgnated ddress, there w be reported
the name and address of the person, frm, or corporaton payng (by advancement
or rembursement) ether ta , bottng charge, brokerage fee, handng charge,
or cearance fee, ndcatng whch are ncuded. The headng of both coumns
w be amended accordngy.
(6) Where a person brngng dsted sprts nto the Unted States from
the rgn Isands shps or devers dsted sprts to a consgnee on the order
of another whoesae quor deaer, detaed records of the transactons sha
be kept (1) on Form 52- by the person brngng the dsted sprts Into the
Unted States from the rgn Isands, (2) on Record 52 by the whoesae quor
deaer gvng the order, and (3) on Record 52 by the consgnee f he s a whoe-
ae quor deaer. For e ampe, assumng that whoesae deaer ( ) shps or
devers the dsted sprts to consgnee (O) on the order of whoesae deaer
( ), entres w be made on the prescrbed forms as foows:
(1) whoesae deaer ( ) w show n hs Form 52- the name and
address of whoesae deaer ( ) who ordered the dsted sprts, as we as
the name and address of consgnee (C), the person to whom the dsted
sprts are actuay shpped or devered;
(2) whoesae deaer ( ) w show n hs Record 52 that the dsted
sprts were purchased from whoesae deaer ( ), gvng both the name
and address of ( ), and w at the same tme make an entry showng that
the dsted sprts were shpped or devered by ( ) to consgnee (C), gv-
ng the name and address of (C); and
(3) consgnee (C), f a whoesae quor deaer, w show n hs Record
52 that the dsted sprts were purchased from whoesae deaer ( ) and
receved by hm from whoesae deaer ( ), gvng name and address of both.
copy of Form 52- and transcrpts of Record 52 on Forms 52- and 52- ,
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301
Regs. 28, S 176.16, etc.
requred to be fed wth the dstrct supervsor, w smary show the
detas of such transactons,
(o) Where a person brngng dsted sprts Into the Unted States from the
rgn Isands keeps Record 52 and s a party to transactons smar to those
descrbed n subsecton (6), he sha make smar entres of such transactons
In Record 62; and the transcrpts on Forms 52- and 52- , requred to be fed
wth the dstrct supervsor, w kewse show the detas of the transactons.
(Sees. 2857, 2858, 8171, 325 , 3350, 0 1,1. R, a)
. The provsons of Treasury Decson 5323 reatng to persons
brngng dsted sprts nto the Unted States from Puerto Rco
and the rgn Isands are revoked as of the effectve date of ths
Treasury Decson.
5. Ths Treasury Decson sha be effectve upon fng for pub-
caton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned n
sectons 2857, 2858, 3171, 3176, 325 , 3350, 3360. and 0 1 of the In-
terna Revenue Code (U. S. C, tte 26, sectons 2857, 2858, 3171, 3176,
325 , 3350, 3360, and 0 1).)
Geo. . Schoeneman,
Commssoner.
pproved une 18, 19 8.
. L. M. Wgons,
ctng Secretary of the Treasury.
(Fed wth the Dvson of the Federa Regster une 29,19 8, 8: 7 a. m.)
Reguatons 28, Sectons 176.16, 176.17,176.21, 19 8-1 -12858
and 176.23. T. D. 5631
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 176.
DR W C ON DISTILL D SPIRITS ND WIN S
mendng Reguatons 28
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 6, D. C.
To Dstrct Supervsors and Others Concerned:
1. On pr 9, 19 8, notce of proposed rue-makng regardng the
estabshment of off-premses rooms for the storage of ta -pad ds-
ted sprts or wnes botted or packaged especay for e port was
pubshed n the Federa Regster (13 F. R. 1932).
2. No ob|ectons to the rues havng been receved, the foowng
amendments of secton I76.17p and subsectons 176.16(/), 176.17(/),
176.21 (c), and 176.23(/) of Reguatons 28, approved ugust 29, 19 0
(26 CFR, Part 176), are hereby adopted.
Sec. 176.16. ottng of I)stt.ed Sprts ob Wnes Wthout Rectfcaton
by Rectfers and Propbetobs of Ta -Pad ottng ouses.
m
(/) Transfer and storage pendng e portaton. Sprts or wnes botted espe-
cay for e port under ths secton may be transferred from the e port storage
room of the botter, pursuant to Form 1656, ppcaton for Transfer of Ds-
ted Sprts or Wnes otted specay for port, to another e port storage
room at the port of e portaton, for storage pendng reease for drect e porta-
ton or use as suppes on vesses or arcraft. Such e port storage room at the
port of e portaton may be estabshed by the propretor of a ta -pad bottng
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Reg . 28, 176.16, etc.
302
house or rectfer, under the provsons of Reguatons 11 (26 CFR, Part 189)
or Reguatons 15 (26 CFR, Part 190), whether or not the propretor of the
ta -pad bottng house or rectfer Intends to botte dsted sprts or wnes
especay for e port. n e port storage room at a port of e portaton may aso be
estabshed by the propretor of an nterna revenue bonded warehouse contguous
to the bonded premses under the provsons of Reguatons 10 (26 CFR, Part 185).
Form 1656 w be e ecuted, In quadrupcate (or quntupcate, f the sprts are
to be transferred to another supervsory dstrct), by the botter or e porter,
after approprate arrangements have been made by hm wth the propretor of
the e port storage room at the port of e portaton for such storage. copes
of the form w then be submtted to the dstrct supervsor, or desgnated
offcer, for approva. Upon approva thereof, the sprts or wnes may be reeased
by the Government offcer for transfer. The offcer w retan one copy for hs
fes, furnsh one copy to the botter, forward one copy to the dstrct supervsor,
and forward one copy to the consgnee. If the sprts or wnes are transferred
to another dstrct, he w forward one copy to the dstrct supervsor of such
dstrct. The sprts or wnes so transferred and stored w be entered for
drawback and marked and reeased for e portaton, etc., In accordance wth the
procedure prescrbed by sectons 176.35 to 176.38, ncusve. (Sec. 3179(b), as
amended, I. R. C, and sees. 309 (a), (b), (c), (d), and 318 (d), (1) of the
Tarff ct of 1930, as amended (19 U. 8. C, Sup. , 1300 (a), (b), (c), (d), and
1313 (d), ()).)
Sec. 176.17. ottng of Wnes by Wnemakebs ob Propretors of onded
Storerooms.

(/) Transfer and storage pendng e portaton. Wnes botted especay for
e port under ths secton may be transferred pursuant to Form 1656 from the
e port storage room of the botter to another e port storage room at the port of
e portaton, for storage pendng reease for drect e portaton or use as suppes
on vesses or arcraft, n accordance wth the procedure set forth n secton
176.16(f). Such e port storage room at the port of e portaton may be estab-
shed by a wnemaker or the propretor of a bonded storeroom under secton
176.15, or by the propretor of a ta -pad bottng house, or rectfer, under the
provsons of Reguatons 11 (26 CFR, Part 189) or Reguatons 15 (26 CFR
Part 190), whether or not the wnemaker or the propretor of a bonded storeroom
ntends to botte wnes especay for e port, or the propretor of the ta -pad
bottng house or rectfer Intends to botte sprts or wnes especay for e port.
n e port storage room at a port of e portaton may aso be estabshed by the
propretor of an nterna revenue bonded warehouse contguous to the bonded
premses under the provsons of Reguatons 10 (26 CFR, Part 185). (Sec.
3179(b), as amended, I. R. C, and sees. 300 (a), (b), (c), (d). and 313 (d), ()
of the Tarff ct of 1930, as amended (10 U. S. C, Sup. , 1310 (a), (b), (c), (d),
and 1313 (d), (1)).)
P C OIN OF DISTILL D SPIRITS ND WIN S WIT OUT R CTIFIC TION

Sec. 176.17p. Transfer and Storage Pendng portaton. Sprts or wnes
packaged especay for e port under the provsons of the reguatons n ths
part may be transferred from the e port storage room pursuant to Form 1656 to
another e port storage room at the port of e portaton, for storage pendng re-
ease for drect e portaton or use as suppes on vesses or arcraft. Such e port
storage room at the port of e portaton may be estabshed by the propretor of a
ta -pad bottng house or a rectfyng pant, under the provsons of Reguatons
11 (26 CFR, Part 189) or Reguatons 15 (26 CFR, Part 190), whether or not the
propretor ntends to package dsted sprts or wnes especay for e port.
n e port storage room at a port of e portaton may aso be estabshed by the
propretor of an Interna revenue bonded warehouse contguous to the bonded
premses under the provsons of Reguatons 10 (26 CFR. Part 185). Form S8
sha be e ecuted n quadrupcate (or quntupcate, f the sprts or wnes are
to be transferred to another supervsory dstrct) by the packer or e porter after
approprate arrangements have been made by hm wth the propretor of the
e port storasre room at the port of e portaton for such storage. copes of
the form w then be submtted to the dstrct supervsor, or desgnated of cer, for
approva. On approva thereof, the sprts or wnes may be reeased by the
Government offcer for transfer. The offcer sha retan one copy for hs fes.
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303
Regs. 28, 176 16, etc.
furnsh one copy to the packer, forward one copy to the dstrct supervsor, and
forward one copy to the consgnee. If the sprts or wnes are transferred to
another dstrct, the storekeeper-gauger sha forward one copy to the dstrct
supervsor of such dstrct. Sprts or wnes so transferred and stored w he
entered for drawback and marked and reeased for e portaton, etc., n accordance
wth the procedure prescrbed In sectons 176.35 to 176.38, ncusve. (Sec.
3179(b), as amended, I. R. C, and sees. 309 (a), (b), (c), (d), and 313 (d), (1)
of the Tarff ct of 1930, as amended (19 U. S. C, Sup. , 1309 (a), (b), (c), (d),
and 1313 (d), (1)).)
Sec. 176.21. ppcaton, Fohm 237.

(c) Transfer and storage pendng e portaton. Sprts and wnes botted or
packaged especay for e port under the provsons of ths secton may be trans-
ferred from the e port storage room of the botter or rectfer, pursuant to Form
1656, to another e port storage room at the port of e portaton for storage pend-
ng reease for drect e portaton or use as suppes on vesses or arcraft, n
accordance wth the procedure prescrbed n secton 176.16( ). Such e port
storage room at the port of e portaton may be estabshed by the propretor
of a ta -pnd bottng house or a rectfer, under the provsons of Reguatons
11 (26 CFR. Part 189) or Reguatons 15 (26 CFR. Fart 190), whether or not
the propretor of the ta -pad bottng house or the rectfer ntends to botte
or package dsted sprts or wnes especay for e port. n e port storage
room at a port of e portaton may aso be estabshed by the propretor of an
Interna revenue bonded warehouse contguous to the bonded premses under
the provsons of Reguatons 10 (26 CFR, Part 185). (Sec. 3179(b), as amended,
I. R. C., and sees. 309 (a), (b), (c), (d), and 318 (d), () of the Tarff
ct of 1930, as amended (19 U. S. C, Sup. , 1309 (a), (b), (c), (d), and
1313 (d), ()).)
Sec. 176.23. ottunq by Pekson Othek Than Rectfek.

If) Transfer and storage pendng e portaton. Sprts and wnes botted
especay for e port under ths secton may be transferred pursuant to Form
16. 6 from the e port storage room of the botter to another e port storage
room at the port of e portaton, for storage pendng reease for drect e porta-
ton or use as suppes on vesses or arcraft, In accordance wth the procedure
prescrbed by secton 176.16(f). Such e port storage room at the port of e -
portaton may be estabshed by the propretor of a ta -pad bottng house or
rectfer, under the provsons of Reguatons 11 (26 CFR, Part 189) or Regu-
atons 15 (26 CFR, Part 190), whether or not the propretor of the ta -pad
bottng house or rectfer ntends to botte dsted sprts or wnes especay
for e port. n e port storage room at a port of e portaton may aso be estab-
shed by the propretor of an nterna revenue bonded warehouse contguous
to the bonded premses under the provsons of Reguatons 10 (26 CFR, Part
185). (Sec. 3179(b), as amended, I. R. C, and sees. 309 (a), (b), (c), (d),
and 813 (d), (1) of the Tarff ct of 1930, as amended (19 U. S. C, Sup. ,
1309 (a), (b), (c), (d), and 1318 (d), ()).)
3. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of ts pubcaton n the Federa Regster.
(Secton 3179(b), as amended, I. R. G, and sectons 309 (a), (b),
fc),(d), and 313 (d), () of the Tarff ct of 1930, as amended (19
U. S. G, Sup. , 1309 (a), (b), (c), (d), and 1313 (d), ()).)
Geo. . Schoeneman,
Commssoner.
pproved une 18, 19 8.
. L. M. Wggns,
ctng Secretary of the Treasury.
(Pubshed In the Federa Regster une 30, 19 8)
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Regs. 28, 176.27
30
.Reguatons 28, Secton 176.27: Fberboard
cases.
19 8-21-129 2
T. D. 5655
TITL 26 INT RN L R NU . C PT R I, SU C PT R C, P RT 176.
DR W C ON DISTILL D SPIRITS ND WIN S
To Dstrct Supervsors and Others Concerned:
1. On une 10, 19 8, notce of proposed rue makng, regardng
constructon of fberboard cases for use n packng dsted sprts
botted especay for e port, was pubshed n the Federa Regster
(13 F. R. 3120).
2. fter consderaton of a such reevant matter as was presented
by nterested persons regardng the proposa, the foowng amend-
ment of secton 176.27 of Reguatons 28 (26 CFR, Part 176), approved
ugust 29,19 0, s hereby adopted.
3. The purpose of ths amendment s to enumerate the Federa
specfcatons whch sha be appcabe to the constructon of fber-
board cases sutabe for packng dsted sprts botted especay
for e port; to emnate provsons whch may be nconsstent there-
wth; and to restate requrements for ners and parttons, and the
seang of cases for shpment. Copes of Federa Specfcatons
LLL- -631 and LLL- -636 may be procured from the Superntend-
ent of Documents, Washngton 25, D. C., for the sum of 5 cents each.
Se ;. 176.27. Fberboard Cases. (a) Requrements. Sprts botted especay
for e port may be paced n cases (bo es) constructed of sod fberboard, snge
and doube wa corrugated fberboard, one-pece stye, meetng tbe appcabe
requrements of rue 1, Consodated Freght Cassfcaton; rue 18, Offca
press Cassfcaton; Federa Specfcatons LLL- -631 for corrugated bo es,
e cept that -fute corrugated sheets specfed theren may not be used; and
Federa Specfcatons LLL- -636 for sod fber bo es: Provded,, That the cases
need not be sub|ected to the drop test requrements of such Federa specfcatons.
In addton, the requrements of paragraphs (6) and (o) of ths secton sha
appy.
(6) Lners and parttons. The top, bottom, and sdes of the cases sha be
ned wth doube-faced corrugated board conformng to the requrements of
paragraph (a) of ths secton. cept as otherwse provded heren, the cases
sha aso contan parttons separatng each botte. Such parttons sha be
tghty fttng, touchng the top, bottom, and a sdes of the case, and made of
the same board as the ners for the top, bottom, and sdes. The nteror packng
of pads, ners, or parttons s not requred where the bottes are paced In nd-
vdua doube-faced corrugated cartons meetng the requrements of paragraph
(a) of ths secton. cusve of ners, nteror packng other than the type
specfed heren may be used where equa protecton to the sprts w be afforded.
(c) Securng cases for shpment. The top and bottom of the case sha be
secured by gung the entre nner surface of the nner faps to the top and
bottom ners, and the entre nner surface of the outer faps to the nner faps
wth scate of soda, or an equay effcent adhesve: Provded, That contaners
seaed wth automatc seang machnes are not requred to have the nner faps
gued to the top and bottom pads or ners. In eu of gung, the top and bottom
of the case may be secured wth meta fastenngs or stapes, or sttchng wre
made of stee, treated to resst rust, and not ess than one-haf of an nch ong.
The stapes or sttches sha be spaced not more than 2 Inches apart, sha pass
through a the peces to be fnstened, and sha be cnched on the Insde. (Sec.
8179(b), I. R. C, and sec. 309 (a), (b), (c), (d) of the Tarff ct of 1930.
as amended (19 U. S. C. Supp. , 1309 (a), (b), (c), (d)).)
mendng Reguatons 28
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton 25, D. C.
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305
Regs. 28, 176 27
. Ths Treasury Decson sha be effectve on the thrty-frst day
after the date of pubcaton n the Federa Regster.
(Ths Treasury Decson s ssued under the authorty contaned
n secton 3179(b), Interna Revenue Code (26 U. S. C. 3179(b)), and
secton 309 (a), (b), (c), (d) of the Tarff ct of 1930, as amended (19
U. S. C. Supp. , 1309 (a), (b), (c), (d)).)
Geo. . Schoeneman,
Commssoner of Interna Revenue.
Thomas . Lynch,
ctng Secretary of the Treasury.
pproved September 17, 19 8.
Thomas . Lynch,
ctng Secretary of the Treasury.
(Pubshed n the Federa Regster September 2 , 19 8)
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h

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o
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Msc. I
306
OL OM RG RIN
19 8-15-12880
MS. 32
Schedue of oeomargarne produced and materas used durng the month of
May, 19 8, as compared wth May, 19ft
May, 19 8
Tota producton of uncoored oeomargarne.
Tota wthdrawn ta pad
Pounds
76, 6 7,007
Ingredent schedue of uncoored oeomargarne:
utter cuture
nutter favor
Ctrc acd -
Coconut o
Corn o
Cottonseed fakes
Cottonseed o -
Dervatve of gycerne. _ -
Daccty -
Lecthn -
Mk.... -
Monostearne
Neutra ard
Oeo o -
Oeo stearne -
Oeo stock
Peanut o -
Sat -
Soda (henzoate of)
Soya bean fakes
Soya bean o
Sodum supho acetate -
Soya bean stearne
tamn concentrate
Tota-
Tota producton of coored oeomargarne.
Tota wthdrawn tar pad.
ngredent schedue of coored oeomargarne:
nutter favor
Coconut o -
Coor -
Corn o
Cottonseed fakes
Cottonseed o
I ervatvc of gycerne. _
Daccty
Lecthn -
Mk
Monostearne
Neutra ard -
Oeo o.... -
Oeo stearne.
Oeo stock -
Peanut o - -
Sat
Soda (benoate of)
Soya bean o
Soya bean stearne
tamn concentrate
1 500
118, 8 9
37, 0 2, 897
127,807
303
109. 58
12. 926, 952
69.303
1, 7 5
1, 96, 705
225,118
1,035
1.692.628
2,333,193
58.308
2 0
21.65 . 377
6,0
81
10.898
77. 935,079
7. 2 5. 01
5. 893, 719
106
66,700
3,8 9
,601
3,151, 980
10, 810
80
10, 80
1.232.911
3, 31
Tota..
7 ,182
228.2 7
3,511
2.125,098
9
737
7. 316. 732
fgures are sub|ect to revson unt pubshed In the Commssoner s annua report
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307
(Msc.
19 8-17-12911
MS. 325
Schedue of oeomargarne produced and materas used durng the month of
une, 19 8, at compared wth une, 19 7
uno, 19 8 une, 19 7
Tota producton of unconred oeomargarne
Tota wthdrawn ta -pad
Ingredent schedue of uncoored oeomargarne:
utter favor
Ctrc add -
Coconut o
Corn o
Cottonseed fakes
Cottonseed o
Dervatve of gycerne
Daoety
Lecthn
Mk
Monostearne
Neutra ard
Oeoot
Oeo stenrne
Oeo stock
Peanut o
Sat
Soda (hentoate oft
Sodum supho acetate
Soya bean fakes
Soya bean o
Soya bean stearne
tamn concentrate
Tota.
Tota producton of coored ooomarparne.
Tota wthdrawn ta -pad
Ingredent schedue of coored oeomargarne:
utter favor
Coconut o
Coor
Corn o
Cottonseed o
Dervatve of t
Daoety
Lecthn
Mk
Monostearne.
Neutra ard.-.
Oeo o
Oeo stock..
Peanut o
Sat
Soda (benoate of)
Soya bean o
Soya bean stearne
tamn concentrate.
Tota...
Pounds
69, 7 .398
6 . 31. 08
2.0 6
156. 880
8 .808
785, 108
109, 238
353
98,825
716, 301
69,936
5 0. 9 0
316.875
300,790
6,8 7
212, 78
235, 326
81,937
6.793
98
116,853
100
10,670
70, 882, 891
6.3 , 2
, 971, 279
169
68,098
, 27
2, 328, 978
11.887
8,138
1.058,868
2,172
8,861
8,276
100
197,882
206,867
3.388
2.889,7 3
128
1,186
6, 62,2
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Msc.)
308
19 8-19-1292S
MS. 326
Schedue of oeomargarne produced and materas used durng the month of
uy, 19 8, as compared th uy, 19 7
uy. 19 8
uy. 19 7
Tota producton of uncoored oeomargarne . .
Pouvdt
,068,288
PovndM
.555. 55.1
Tota wthdrawn ta -pad
8, 59,093
5, 03. 1-
Ingredent schedue of uncoored oeomargarne:
utter favor
1, 25
160
21
Ctrc acd
Coconut o
27,210
39 ,957
129.31f
23, Su
Com o
Cottonseed fakes
360
Cottonseed o
17,195.296
6 .079
177
63,858
7,388,29
39,621
59,006
85,070
275,953
18,250
1,718.155
1.360,7 8
32,573
3,906
L3 9
15, 973, 162
6. 02
19.052,29
69.777
95
Dervatve of gycerne _
Daeety
Lecthn.
53.029
7.506,616
Mk
Monostearne
57. 69
Neutra ard
k . I
177.136
295,7 1
Oeoo
Peanut o
31,010
2,188, 69
1.383.952
Sat
Soda (benzoate of)
3 , 735
Sodum supho acetate
. Soya bean fakes
13.873,06 )
6.5S6
tamn concentrate.
Tota....
. 706, 89
5, S2.202
Tota producton of coored oeomnrgarne
8, 85, 697
,3 1.S
Tota wthdrawn ta -pad
7,395.559
Ingredent schedue of coored oeomargarne:
785
223,7 0
6,792
15,785
63
Coor
706,39
, 5
Dervatve of gycerne
3,118,523
1 ,1 8
13
5.130
600
353.851
8,251
16
1707
781,166
1,826
5,032
.768
Z919
3,299
1 2. m
3,175
1. 792,50
Daeety
Lecthn
10, 02
1. 26,16
3.986
37,055
20, 52
650
1 ,150
260,235
,583
3,307, 78
2, 61
1,180
Mk
Monostearne-
Oeo o
Sat
Soya bean fakes.
tamn concentrate
82
Tota
8,597,582
, 0,735
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(Msc
19 8-21-129
MS. 327
Schedue of oeomargarne produced and materas used durng the month of
ugust, 19 8, as compared wth ugust, 19 p
ugust, 19 8
ugust. 19 7
Poundt
65. 556, 399
5.822,289
66, 225, 19
- 2.118
Ingredent schedue of uncoored oeomanarne:
1,717
179
11
19,000
35,857
27,911, 190
178,8 0
789,009
19,218,96
2
101,810
338
98.13
10,983, 778
59,203
3 6. 1
25 .386
239,716
2,590
1,239,017
2.03 .6 9
7,16
6,7 9
687
78, 62
135
56,368
7,762, 99
55, 235
186.288
183,387
257,566
37,287
1,821,271
1, 13,005
3 ,613
22,950, 272
9,808
1 , 22.39
6, 37
66,811,006
6, 502, 37
7,778,620
, 219,188
6,632,829
1,979. SCO
Ingredent schedue of coored oeomargarne:
120
156,820
3,891
22,872
69
1,197,062
3,963
3. 9
3.0 3, 918
12.926
9
950
896.359
5,997
18
3,962
737,103
1,970
20,27
17, 170
7, 5.52
6.0 5
139, 527
2,735
10, 636
1,333,010
3.268
16,529
1 8,7
2. 00
6,260
2 5, 36
, 86
3,376
2,9 6, 567
1,100
Sut
1,268, 129
82
8,001.7 8
,351,816
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Msc.
310
19 8-23-129C6
MS. 325
Schedue of oeomargarne produced and materas used durng the month of
September, 19 t8, as compared wth September, 19 7
September. 19 8
Tota producton of uncoored oeomargarne..
Tota wthdrawn ta -pad
Ingredent schedue of unentered oeomargarne:
utter favor
Ctrc acd
Coconut o
Corn o -
Cottonseed fakes
Cottonseed o
Cottonseed stearne
Dervatve of gycerne
Dacety
Lecthn - -
Mk
Monostearne
Neutra ard
Oeo o... -
Oeo stearne
Oeo stock
Peanut o
Sat
Soda (ben oate of) - -
Sodum supho acetate
Soya bean fakes
Soya bean o
tamn concentrate
Tota.
Tota producton of coored oeomargarne.
Tota wthdrawn ta -pad
Ingredent schedue of coored oeomargarne:
utter favor _
Coconut o _.
Coor.
Corn n
Cottonseed fakes
Cottonseed o _
Dervatve of gycerne
Dacetv
Lecthn.
Mk.
Monostearne ._
NeutTa ard
Oeo n.
Oeo stock
Peanut o
Sat
Soda fhenzoate of)
.Gnya ean o
Soya bean fakes
Soya bean stearne
Yfttmn concentrate _.
I otaL
Pounds
71,070,981
68,158, 738
1.576
51.905
32.572
35. 771. 20
119.881
377
105.379
11,8 9.2 1
63.617
276,9 2
228.892
ns. m
36.2 5
385.633
2. 17 . 3
51. 08
5.225
285
20.536. 08
10.515
7,693.585
256
2 8. 0
7,578
.20
3.70 . 879
16.893
33
13, 27
1.6 7.011
,335
16,07
11.886
2,100
11.598
289. 38
5,06
3, 85.962
3.870
1.273
9, 7 .319
Pmnd .
6Z300 5
6 . 8.12.636
230

307. ran
1,182,757
26. 93 S
101.6-
73
10. 8 66:
73.69
3 7.0 1
3 7.033
368. 261
7S. 6S
2,160. 6
1.938. PI I

63.379. 11
5.1 5. 915
2,917,9 9
3
772. 7
6.21S
16.388
2,27
1.397. 70
9,235

5. 87
89a O
8,015
22.18
IS. 831
00
27.1M
167. S
2.697
1.890,701
10.590
5.2 . 76
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311
Msc.
19 8-25-12990
MS. 329
Schedue of oeomargarne produced and materas used durng the month of
October, 19 8, as compared wth October, 9. 7
October, 19 8
Tota producton of uncoored oeomargarne
Tota wthdrawn ta-pad
Pound
70,285,3 6
69, 691, 93
Ingredent schedue of uncoored oeomargarne:
utter favor
Ctrc acd _
Coconut o
Corn o
Cottonseed fakes
Cottonseed o
Cottonseed stearne ._ _.
Dervatve of gycerne
1,659
Dacety..
Lecthn.-
Mk
Monostearne
Neutra ard -
Oeoo
Oeo stearne
Oeo stock..
Peanut o -
Sat --
Soda (benwateof)
Sodum supho acetate. -.
Soyabean fakes
Soya bean o
tamn concentrate
Tota.
Tota producton of coored oeoroargarno.
Tota wthdrawn ta -pad
Inpredent schedue of coored oeomargarne:
utter favor
Coconut o
Coor
Corn o - -
Cottonseed fakes
Cottonseed o -
Dervatve of gycerne
Dacety
Lecthn -
Mk
Monostearne
Neutra ard
Oeoo
Oeo stearne
Oeo stock
Peanut o
Sat
8oda (benoate of).
Soya bean fakes
cf_. .
, 330
1,908
0, 01,078
68, 5
358
110, 3
11,6 7,762
61,327
231.687
181,75
30,175
59,881
2.129. 598
50,956
5,136
30
15,830,828
10,198
71,196,121
9.3 0.777
8,627,886
127
9,362
,898
911
Tota.
5.285,515
13,850
2
13,720
1,583,077
.677
3,100
,700
5,850
2.200
2,326
287, 87
5,260
3,395
2, 19 ,86
1,219
9, 66,080
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Msc.
312
TO CCO
19 8-1 -12859
T. 213
Statement of manufactured tobacco produced, by dosses, durng the month of
pr, 19 8, as compared wth pr, 191ft
pr, 1M8
pr. 19 7
Pound
Pounds
Pug ---
,199, 637
61, 887
22a 18
3,376,808
9,692,591
3,389,562
s, 761.m
Twst
38.35
336, SS
3,302.37
8. 799,116
3,2 5.217
Tota
21,3 269
18,88 .563
19 8-16-12895
T.215
Statement of manufactured tobacco produced, by casses, durng the month of
May, 19 8, as compared wth May, 19 7
May. 19 8
May, 19 7
Pounds
3. 1 .895
3. 319
217. 318
3. 270, 11
9,01 .972
3,175. 719
t a
Png. _
1,97S . 6 7
3 . W
Twst -
Fne-cut chewng
295,32
3, CO.
7, 575. MS
3,197.72
Scrap chewng
Snuff
Tota ;
19, 536, 337
16. 73,016
19 8-18-12917
T.217
Statement of manufactured tobacco produced, by casses, durng the month of
une, 19 8, as compared wth une, 19 7
une, 19 8
une, 19 7
Pound
3,70 ,0 9
81,163
256.6 7
3.733.302
9,251,250
8,510,795
Poundt
Pug
8,0OO.6S7
311.715
326.3
Twst .
8,211.33;
8, 90.
Snuf._
8,006,677
Tota
20,937,206
18,356,582
fgures are sub|ect to revson unt pubshed In the Commssoners annua report
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313
Msc.
19 8-20-12936
T.219
Statement of manufactured tobacco produced, by casses, durng the month of
uy, 19 8, as compared wth uy, 19 7
uy, 19 8
uy, 19 7
Pug
Pound
3,591,297
5 , 17
Pound
,766,268
27,085
302,786
3, 66, 7 0
9,8 5,137
2,988,211
Twst --
Fne-cat chewng
229,836
3,116,039
7,6 8,216
2, 9 9,76
Scrap chewng ._
Smokng
Snuff _ _
TotaL
17,889,320
21,266,227
19 8-23-1290
T. 221
Statement of manufactured tobacco produced, by casses, durng the month of
ugust, 19 8, as compared wth ugust, 19 7
ugust, 19 8
ugust. 19 7
Pound
,21 ,93
53.889
251, 11
3,957,930
9,389.676
3,3 2,382
Pound
Pug
6,002.017
39,729
305,617
3.660,66
9,880, 718
3,3 0, 7 7
Twst
Smokng
Snuff
Tota
21,610,321
22,629, 92
19 8-25-12991
T.223
Statement of manufactured tobacco produced, by casses, durng the month of
September, 19 8, as compared wth September, 19 7
September,
19 8
September,
19 7
Pug.
Pound
,157,330
86,20
256, 71
3,780,3 8
10,665, 700
3, 71,09
Pounds
, 892, 07
65. 899
332, 253
3,97 , 5
10,8 8. SM
8,719,175
Twst
Fne-cut chewng
Scrap chewng . .
Snuff
TotaL
22.816,1 7
2 ,233,262
820828 19 21
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31
19 8-26-12997
T. 225
Statement of manufactured tobacco produced, by casses, durng the month of
October, 19 8, as compared wth October, 19 7
-
October, 19 8
October, te
Pounds
Poun
5,1 2.711
Pug
,112, 1
531,627
237.050
Twst..
531, me
3,92 ,3 1
11.7 3,385
355, S2
, 26.1 8
11.682,831
.100.5
Snuff
3, 50, 555
Tota
23,999,372
26,260,811
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315
Msc.
CIG R TT S -
19 8-1 -12860
T. 21
Premnary statement of sma cgarettes removed for consumpton durng the
month of May, 19 8, as compared wth removas for the same month of 191,1
Removas
May, 19 8
May, 19 7
Ta -pad
Number
29,091,082,975
2, 363, 2, 668
Number
25, 759,29 , 775
2,965,030,7 6
Tota.
31, 55,105,6 3
28, 72 ,925,521
19 8-16-12896
T. 216
Premnary statement of sma cgarettes removed for consumpton durng the
month of une, 19 8, as compared wth removas for the same month of 19 7
Removas
une, 19 8
une, 19 7
Number
31,268.736,705
3,2 9,518,501
Number
28,5 0,383,823
2,268,787,855
Tota
3 , 518, 255, 206
30,809,171,678
19 8-18-12918
T. 218
Premnary statement of sma cgarettes removed for consumpton durng the
month of uy, 19 8, as compared wth removas for the same month of 19 7
Removas
uy, 19 8
uy, 19 7
Ta-pad
Number
27. 20 . 95 , 9
3.007, 83 .190
Number
29,371. 50.330
2,332,787,207
Tota
30,272,788,690
31,70 ,237,597
19 8-21-129 3
T. 220
Premnary statement of sma cgarettes removed for consumpton durng the
month of ugust, 19 8, as compared wth removas for the same month of
19 7
Removas
ugust, 19 8
ugust, 19 7
Number
3 ,192,166, 925
3,6 0,731,368
Number
28,9 3, 58,733
2, 528, 3 ,11
Tota
37. 738,898. 293
31, 71,892,8 7
fgures are sub|ect to revson unt pubshed In the Commssoner s annua report
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Msc.
316
19 8-23-129GS
T.222
Premnary statement of sma cgarettes removed for consumpton durng the
month of September, 19 8, as compared wth removas for the same month of
19 1
Removas
September, 1918
September, 19 7
Number
28,983,1 ,215
,103,393,133
Number
29, 00, 695. 796
2, 70. ., 572,810
Tota
3 ,088, 638,3 8
32, 106, 268.605
19 8-25-12992
T. 22
Premnary statement of sma cgarettes removed for consumpton durng the
mouth of October. 19 8, as compared wth removas for the same month o
19 7
Removas
October, 19 S
October, 19 7
Ta -pad
Number
31.079.228,801
,029,91 ,698
Number
33,1 0. .75. 25
3,526. 928, 000
Tota
35, 103,1 3, 99
38,667,603,850
19 8-26-12998
T. 226
Premnary statement of sma cgarettes removed for consumpton durng the
month of November, 19 8, as compared wth removas for the same month of 19 1
Removas
November, 19 8
November, 19 7
Number
29, 075, 68,0 0
2, 736, 28,273
Number
27,0 ,062,530
2,536,055.610
Tota
31,811,896,313
29,680,118,0 0
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L GISL TION
19 8-1 -12861
. . R S. 395. PU LIC L W 635, IG TI T CONGR SS
C PT R 59, S COND S SSION
ont Resouton To e tend the tme for the reease, free of estate
and gft ta , of powers of appontment, and for other purposes.
Resoved by the Senate and ome of Representatves of the Unted
States of merca n Congress assembed, That secton 03(d) (3) of
the Revenue ct of 19 2 (reatng to the reease of certan powers of
appontment) s hereby amended by strkng out uy 1, 19 8
wherever t appears and nsertng n eu thereof uy 1, 19 9 ; and
secton 52(c) of the Revenue ct of 19 2 s hereby amended to read
as foows:
(c) Reease efore uy 1, 19 9.
(1) reease of a power to appont before uy 1,19 9, sha not be deemed
a transfer of property by the Indvdua possessng such power.
(2) Ths subsecton sha appy to a caendar years pror to 19 9 and
to that part of the caendar year 19 9 pror to uy 1,19 9.
Sec. 2. For the purposes of sectons 03 and 52 of the Revenue ct
of 19 2, a power to appont created by a w e ecuted on or before
October 21,19 2, sha be consdered a power created on or before such
date f the person e ecutng such w des before uy 1,19 9, wthout
havng repubshed such w, by codc or otherwse, after October 21,
19 2.
T NSION OF TIM FOR SS SSM NT OF D F RR D C SS PROFITS T
Sec. 3. (a) Secton 710(a) (5) of the Interna Revenue Code s
hereby amended by addng at the end thereof the foowng: Notwth-
standng any other provson of aw or rue of aw, to the e tent that
any amount of ta remanng unpad pursuant to ths paragraph s n
e cess of the reducton n ta fnay determned under secton 722,
such e cess may be assessed at any tme before the e praton of one
year after such fna determnaton,
(b) The amendment made by ths secton sha be effectve as f
made by secton 222(b) of the Revenue ct of 19 2.
pproved une 12, 19 8.
19 8-15-12881
. . R S. 296. PU LIC L W 6 2, IG TI T CONGR SS
C PT R 68, S COND S SSION
ont Resouton To mantan the status quo n respect of certan
empoyment ta es and soca-securty benefts pendng acton by Con-
gress on e tended soca-securty coverage.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That (a) secton 1 26(d)
(317)
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318
and secton 1607() of the Interna Revenue Code are amended by
nsertng before the perod at the end of each the foowng: . but
such term does not ncude (1) any ndvdua who, under the usua
common-aw rues appcabe n determnng the empoyer-empoyee
reatonshp, has the status of an ndependent contractor or (2) any
ndvdua (e cept an offcer of a corporaton) who s not an empoyee
under such common-aw rues .
(b) The amendments made by subsecton (a) sha have the same
effect as f ncuded n the Interna Revenue Code on February 10,
1939, the date of ts enactment.
Sec. 2. (a) Secton 1101 (a)(6) of the Soca Securty ct s amended
by nsertng before the perod at the end thereof the foowng: , but
such term does not ncude (1) any ndvdua who, under the usua
common-aw rues appcabe n determnng the empoyer-empoyee
reatonshp, has the status of an ndependent contractor or (2) any
ndvdua (e cept an offcer of a corporaton) who s not an empoyee
under such common-aw rues .
(b) The amendment made by subsecton (a) sha have the same
effect as f ncuded n the Soca Securty ct on ugust 1 , 1935.
the date of ts enactment, but sha not have the effect of vodng any
(1) wage credts reported to the ureau of Interna Revenue wth
respect to servces performed pror to the enactment of ths ct or
(2) wage credts wth respect to servces performed pror to the
cose of the frst caendar quarter whch begns after the date of the
enactment of ths ct n the case of ndvduas who have attaned
age s ty-fve or who have ded, pror to the cose of such quarter,
and wth respect to whom pror to the date of enactment of ths ct
wage credts were estabshed whch woud not have been estabshed
had the amendment made by subsecton (a) been n effect on and after
ugust 1 , 1935.
(c) (1) The Federa Securty dmnstrator s drected to estmate
and report to the Congress at the earest practcabe date ( ) the
tota amount pad as benefts under tte II of the Soca Securty ct
whch woud not have been pad had the amendment made by sub-
secton (a) been n effect on and after ugust 1 , 1935, and ( ) the
tota amount of such payments whch the dmnstrator estmates
w hereafter he pad by vrtue of the provsons of subsecton (b).
(2) There s hereby authorzed to be approprated to the Federa
Od- ge and Survvors Insurance Trust Fund a sum equa to the
aggregate of the amounts reported to the Congress under para-
graph (1).
Sec. 3. (a) Secton 3(a) of the Soca Securty ct, as amended, s
amended to read as foows:
(a) Prom the sums approprated therefor, the Secretary of the Treasury sha
pay to each State whch has an approved pan for od-age assstance, for each
quarter, begnnng wth the quarter commencng October 1, 19 8, (1) an amount,
whch sha be used e cusvey as od-age assstance, equa to the sum of the
foowng proportons of the tota amounts e pended durng such quarter as
od-age assstance under the State pan wth respect to each needy ndvdua
who at the tme of such e pendture s s ty-fve years of age or oder and Is not
an nmate of a pubc Insttuton, not countng so much of such e pendture wth
respect to any such ndvdua for any month as e ceeds 50
( ) three-fourths of such e pendtures, not countng so much of any
e pendture wth respect to any month as e ceeds the product of 20 mut-
ped by the tota number of such ndvduas who receved od-age assstance
for such month, pus
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319
( ) one-haf of the amount by whch such e pendtures e ceed the ma -
mum whch may be counted under cause ( ) ;
and (2) an amount equa to one-haf of the tota of the sums e pended durng
such quarter as found necessary by the dmnstrator for the proper and effcent
admnstraton of the State pan, whch amount sha be used for payng the
costs of admnsterng the State pan or for od-age assstance, or both, and for
no other purpose.
(b) Secton 03(a) of such ct, as amended, s amended to read
as foows:
Sec. 03. (a) From the sums approprated therefor, the Secretary of the Treas-
ury sha pay to each State whch has an approved pan for ad to dependent
chdren, for each quarter, begnnng wth the quarter commencng October 1,
19 8, (1) an amount, whch sha be used e cusvey as ad to dependent chdren
equa to the sum of the foowng proportons of the tota amounts e pended
durng such quarter as ad to dependent chdren under such pan, not countng
so much of such e pendture wth respect to any dependent chd for any month
as e ceeds 27, or f there s more than one dependent chd n the same home,
as e ceeds 27 wth respect to one such dependent chd and 18 wth respect to
each of the other dependent chdren
( ) three-fourths of such e pendtures, not countng so much of any
e pendtures wth respect to any month as e ceeds the product of 12 mut-
ped by the tota number of dependent chdren wth respect to whom ad
to dependent chdren s pad for such month, pus
( ) one-haf of the amount by whch such e pendtures e ceed the ma -
mum whch may be counted under cause ( );
and (2) an amount equa to one-haf of the tota of the sums e pended durng
such quarter as found necessary by the dmnstrator for the proper and effcent
admnstraton of the State pan, whch amount sha be used for payng the costs
of admnsterng the State pan or for ad to dependent chdren, or both, and
for no other purpose.
(c) Secton 1003(a) of such ct, as amended, s amended to read
as foows:
(a) From the sums approprated therefor, the Secretary of the Treasury sha
pay to each State whch has an approved pan for ad to the bnd, for each
quarter, begnnng wth the quarter commencng October 1, 10 8, (1) an amount,
whch sha be used e cusvey as ad to the bnd, equa to the sum of the
foowng proportons of the tota amounts e pended durng-such quarter as ad
to the bnd under the State pan wth respect to each needy ndvdua who s
bnd and s not an nmate of a pubc Insttuton, not countng so much of such
e pendture wth respect to any such Indvdua for any month as e ceeds 50
( ) three-fourths of such e pendtures, not countng so much of any
e pendture wth respect to any month as e ceeds the product of 20 mut-
ped by the tota number of such Indvduas who receved ad to the bnd
for such month, pus
( ) one-haf of the amount by whch such e pendtures e ceed the ma -
mum whch may be counted under cause ( ) ;
and (2) an amount equa to one-haf of the tota of the sums e pended durng
such quarter as found necessary by the dmnstrator for the proper and effcent
admnstraton of the State pan, whch amount sha be used for payng the costs
of admnsterng the State pan or for ad to the bnd, or both, and for no other
purpose.
(d) The amendments made by ths secton sha become effectve
on October 1,19 8.
oseph W. Martn, r.,
Speaker of the ouse of Representatves.
. ND N RG,
Presdent of the Senate pro tempore.
In the ouse of Representatves, U. S.,
vme U, 19 8.
The ouse of Representatves havng proceeded to reconsder th
|ont resouton ( . . Res. 296) entted ont resouton to mantan
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320
the status quo n respect of certan empoyment ta es and soca-
securty benefts pendng acton by Congress on e tended soca-
securty coverage, returned by the Presdent of the Unted States
wth hs ob|ectons, to the ou.se of Representatves, n whch t
orgnated, t was
Resoved, That the sad |ont resouton pass, two-thrds of the
ouse of Representatves agreeng to pass the same.
ttest:
ohn ndrews,
Cerk.
I certfy that ths ont Resouton orgnated n the ouse of
Representatves.
ohn ndrews,
Cerk.
In the Senate or the Unted States,
tme 1 (egsatve day, une 1), 19p8.
The Senate havng proceeded to reconsder the |ont resouton
( . . Res. 296) entted ont resouton to mantan the status quo
n respect of certan empoyment ta es and soca-securty benefts
pendng acton by Congress on e tended soca-securty coverage,
returned by the Presdent of the Unted States wth hs ob|ectons,
to the ouse of Representatves, n whch t orgnated, and passed by
the ouse of Representatves on reconsderaton of the same, t was
Resoved, That the sad |ont resouton pass, two-thrds of the
Senators present havng voted n the affrmatve.
ttest:
Car . Loeffer,
Secretary.
19 8-15-12882
. R. 5065. PU LIC L W 706, IG TI T CONGR SS
C PT R 537, S COND S SSION
n ct To amend secton 1700(a)(1) of the Iuterna Revenue
Code so as to e empt hosptazed servcemen and veterans from the
admssons ta when admtted free.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That secton
1700(a)(1) of the Interna Revenue Code (reatng to the ta on
amounts pad for admsson) s amended by addng at the end thereof
a new sentence as foows: Sub|ect to such reguatons as the Com-
mssoner, wth the approva of the Secretary, sha prescrbe, no ta
sha be mposed n the case of admsson free of charge of a hospta-
zed member of the mtary, nava, or ar forces of the Unted States
or of a person hosptazed as a veteran by the Federa Government n
a Federa, State, muncpa, prvate, or other hospta or nsttuton,
e cept when such member or veteran s on eave or furough.
Seo. 2. The amendment made by ths ct sha be effectve on and
after the frst day of the frst month whch commences more than
twenty da3Ts after the enactment of ths ct.
pproved une 19, 19 8.
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321
19 8-15-1288
S. 2655. PU LIC L W 759, IG TI T CONGR SS
C PT R 625, S COND S SSION
n ct To provde for the common defense by ncreasng the
strength of the armed forces of the Unted States, ncudng the
reserve components thereof, and for other purposes.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed,
TITL I
Secton 1. (a) Ths ct may be cted as the Seectve Servce ct
of 19 8 .

CI IL R LI F
Sec. 1 . Notwthstandng the provsons of secton 60 of the ct
of October 17, 19 0 (5 Stat. 1191), and the provsons of secton
of the ct of uy 25, 19 7 (Pubc Law 239, ghteth Congress),
a of the provsons of the Soders and Saors Cv Reef ct of
19 0, as amended, ncudng specfcay artce I thereof, sha be
appcabe to a persons n the armed forces of the Unted States,
ncudng a persons nducted nto the armed forces pursuant to ths
tte, the Coast Guard, or the Pubc eath Servce, unt such tme
as the Soders and Saors Cv eef ct of 19 0, as amended, s
repeaed or otherwse termnated by subsequent ct of the Congress:
Provded, That, wth respect to persons nducted nto the armed forces
whe ths tte s n effect, wherever under any secton or provson of
the Soders and Saors Cv Reef ct of 19 0, as amended, a pro-
ceedng, remedy, prvege, stay, mtaton, accountng, or other trans-
acton has been authorzed or provded wth respect to mtary servce
rformed whe such ct s n force, such secton or provson sha
deemed to contnue n fu force and effect so ong as may be neces-
sary to the e ercse or en|oyment of such proceedng, remedy, prv-
ege, stay, mtaton, accountng, or other transacton.

pproved une 2 , 19 8.
19 8-16-12897
. R. 821 . PU LIC L W 773. IG TI T CONGR SS
C PT R 6 0, S COND S SSION
n ct To revse, codfy, and enact nto aw tte 28 of the Unted
States Code entted udca Code and udcary .
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That tte 28 of
the Unted States Code, entted udca Code and udcary s
hereby revsed, codfed, and enacted nto aw, and may be cted as
Tte 28, Unted States Code, secton , as foows:
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322
Sec. 36. Secton 11 1(a) of the Interna Revenue Code s hereby
amended to read as foows:
The crcut courts of appeas and the Unted States Court of ppeas for the
Dstrct of Coumba sha have e cusve |ursdcton to revew the decsons
of the Ta Court, e cept as provded In secton 125 of tte 28 of the Unted
States Code, n the same manner and to the same e tent as decsons of the dstrct
courts n cv actons tred wthout a ury; and the |udgment of any such court
sha be fna, e cept that t sha be sub|ect to revew by the Supreme Court of
the Unted States upon certorar, n the manner provded n secton 125 of tte
28 of the Unted States Code.

pproved une 25,19 8, 12: 25 p. m., . D. T.
19 8-15-12S85
. . R S. 28. PU LIC L W 828, IG TI T CONGR SS
C PT R 726, S COND S SSION
ont Resouton Provdng an e tenson of tme for camng credt
or refund wth respect to war osses.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That f a cam for credt
or ref und under the nterna-revenue aws reates to an overpayment
on account of the deductbty by the ta payer of a oss n respect
of property consdered destroyed or sezed under secton 127(a) of
the Interna Revenue Code, reatng to war osses, for a ta abe year
begnnng n 19 1 or 19 2, the three-year perod of mtaton pre-
scrbed n secton 322(b)(1) of the Interna Revenue Code sha n
no event e pre pror to December 31, 19 9. In the case of such a
cam fed on or before December 31, 19 9, the amount of the credt
or refund may e ceed the porton of the ta pad wthn the perod
provded n secton 322(b) (2) or (3) of the Interna Revenue Code,
whchever s appcabe, to the e tent of the amount of the overpay-
ment attrbutabe to the deductbty of the oss descrbed n ths
secton.
pproved une 29, 19 8,
19 8-16-12898
. R. 0162. PU LIC L W 857, IG TI T CONGR SS
C PT R 770, S COND S SSION
n ct To make mported beer and other smar mported fer-
mented quors sub|ect to the nterna-revenue ta on fermented
quor.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That the frst sen-
tence of secton 3150(a) of the Interna Revenue Code (mposng a ta
on fermented quors) s amended to read as foows: There sha be
eved and coected on a beer, ager beer, ae, porter, and other
smar fermented quor, contanng one-haf of 1 per centum, or
more, of acoho brewed or manufactured and sod, or removed for
consumpton or sae, wthn the Unted States, or mported nto the
Unted States, by whatever name such quors may be caed, a ta of
7 for every barre contanng not more than thrty-one gaons, and
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323
at a ke rate for any other quantty or for the fractona parts of a
barre authorzed and defned by aw .
Sec. 2. That secton 3150(a) of the Interna Revenue Code s fur-
ther amended by nsertng between the frst and second sentences
thereof the foowng sentence: Imported fermented mat quors
sha, durng the contnuance of the war-ta rate on fermented mat
quors prescrbed n secton 1650, be sub|ect to ta at such rate n eu
of the rate herenbefore prescrbed .
Sec. 3. The amendment made by ths ct sha take effect on the frst
day of the frst month whch begns at east ten days after the date
of the enactment of ths ct.
pproved une 30, 19 8.
19 8-16-12899
. . R S. 29. PU LIC L W 869, IG TI T CONGR SS
C PT R 789, S COND S SSION
ont Resouton Reatng to the marta deducton, for estate-ta
purposes, In the case of fe Insurance or annuty payments.
Resoved by the Senate and. ome of Representatves of the Unted
States of merca n Congress assembed, That secton 812(e) (1) (G)
of the Interna Revenue Code (reatng to fe nsurance wth power
of appontment n survvng spouse) s hereby amended to read as
foows :
(G) Lfe Insurance or nnuty Payments Wth Power of ppont-
ment n Survvng Spouse. In the case of an nterest n property passng
from the decedent consstng of proceeds under a fe nsurance, endow-
ment, or annuty contract, f under the terms of the contract such pro-
ceeds are payabe n Instaments or are hed by the nsurer sub|ect to an
agreement to pay nterest thereon (whether the proceeds, upon the
termnaton of any nterest payments, are payabe n a ump sum or n
annua or more frequent nstaments), and such nstament or nterest
payments are payabe annuay or at more frequent ntervas, com-
mencng not ater than thrteen months after the decedent s death, and
a amounts payabe durng the fe of the survvng spouse are payabe
ony to such spouse, and such spouse has the power to appont a amounts
payabe under such contract (e ercsabe n favor of such survvng
spouse, or of the estate of such survvng spouse, or n favor of ether,
whether or not n each case the power s e ercsabe In favor of others),
wth no power n any other person to appont to any person other than
the survvng spouse any part of the amounts payube under such
contract
(1) such proceeds sha, for the purposes of subparagraph ( ),
be consdered as passng to the survvng spouse, and
() no part of such proceeds sha, for the purposes of subpara-
graph ( )(), be consdered as passng to any person other than
the survvng spouse.
Ths subparagraph sha be appcabe ony f, under the terms of the
contract, such power n the survvng spouse to appont, whether e er-
csabe by w or durng fe, s e ercsabe by such spouse aone and n
a events.
Sec. 2. The amendment made by ths |ont resouton sha be ap-
pcabe wth respect to estates of decedents dyng after December
31, 19 7.
pproved uy 1, 19 8.
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19 8-16-12900
. R. 6808. PU LIC L W 899, IG TI T CONGR SS
C PT R 829, S COND S SSION
n ct To permt refund or credt to brewers of ta es pad on beer
ost n bottng operatons.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That causes (1),
(2), (3), ( ), and (5) of secton 315 (a) of the Interna Revenue
Code are hereby redesgnated ( ). ( ), (C), (D), and ( ), and sec-
ton 315 (a) of such code s further amended by strkng out (a)
owance. and nsertng n eu thereof the foowng:
(a) owance.-
(1) Unsaabe products .
Sec. 2. Secton 315 (a) of such code s further amended by addng
at the end thereof the foowng:
(2) Loss. The Commssoner sha make refund, or n eu thereof, f he
so eects, aow credt to a brewer n the amount of ta pad by such brewer
on any beer, ager beer, ae, porter, or other smar fermented mat quor
manufactured by such brewer whch was ost n hs bottng house through
breakage or eakage or n the process of fng, cappng, pasteurzng, or abe-
ng, upon the fng of a cam therefor by the brewer and proof by hm to the
satsfacton of the Commssoner that such beer, ager beer, ae, porter, or
other smar fermented mat quor was fuy ta -pad and that no refund
or credt was made or aowed therefor under paragraph (1) to ths sub-
secton. Refund or credt under ths paragraph for such oss durng any
caendar month sha not e ceed an amount equa to 2 per centum of the
ta pad by hm on a beer, ager beer, ae, porter, or other smar fermented
mat quor removed by hm durng such caendar month from hs brewery
to hs bottng house.
Sec. 3. Secton 315 (b) of such code s amended to read as foows:
(b) Tme fob Fng Cam. No cam under the provsons of subsecton (a)
sha be aowed uness fed wthn nnety days after the cose of the month
wthn whch such destructon or return to the brewery for use as brewng
matera, or oss, occurred.
Sec. . The amendment made by secton 2 sha be appcabe ony
wth respect to. beer, ager beer, ae, porter, or other smar fermented
mat quor whch s ost after the frst day of the month n whch
fas the date of the enactment of ths ct.
Sec. 5. That secton 3 0 (d) of the Interna Revenue Code (reatng
to manufacturers e cse ta es on musca nstruments) s hereby
amended to read as foows:
(d) Musca nstruments, but the ta mposed by ths secton sha not appy
to musca Instruments sod for the use of any regous or nonproft educatona
nsttuton for e cusvey regous or educatona purposes. The rght to
e empton under ths subsecton sha be evdenced n such manner as the
Commssoner, wth the approva of the Secretary, may prescrbe by reguatons.
Sec. 6. Secton 3 3(a) (3) ( ) () of the Interna Revenue Code
(reatng to credts and refunds) s hereby amended to read as foows:
() resod for the e cusve use of any State, Terrtory of the Unted
States, or any potca subdvson of the foregong, or of the Dstrct of
Coumba, or, n the case of musca nstruments embraced n secton 8 0 (d),
resod for the use of any regous or nonproft educatona Insttuton for
e cusvey regous or educatona purposes;.
Sec. 7. The amendments made by sectons 1 and 2 of ths ct sha
be appcabe wth respect to saes made after the date of enactment
of ths ct.
pproved uy 3, 19 8.
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IND
dmssons, dues, and ntaton fees, Reguatons 3 (19 1)
amended
dmssons ta . (See Msceaneous ta es.)
ffated corporatons, eecton to fe separate returns for
caendar year 19 8
r-condtonng unts, sef-contaned, type sub|ect to ta
coho, ndustra, Reguatons 3 amended
en, status changed from nonresdent to resdent durng ta -
abe year, e emptons and use of ta tabe
mendments:
Reguatons 116
Secton 05.102
Secton 05.605
Reguatons 113 (19 3), sectons 1 3.51, 1 3.52
Reguatons 112, secton 35.736(a)-3
Reguatons 111
Sectons 29.22(b) (13)-1, 29.22(d)-7, 29.23(m)-3,
29.23(m)-5, 29.23(m)-10(rf), 29.23(m)-13(a),
29.23(m)-1 , 29.23(q)-, 29.11 -1, 29.251-1,
29.322-7, 29. 21-1
Sectons 29.27()-, 29.115-1
Secton 29.51-2..
Secton 29.53-1..
Sectons 29.212-2, 29.231-3
Secton 29.322-7
Reguatons 109, secton 30.736(o)-3
Reguatons 108, sectons 86.1 and 86.2
Reguatons 107
Sectons 03.203, 03.206, 03.226, 03.602
Reguatons 106
Sectons 02.203, 02.206, 02.226, 02.70
Reguatons 105, secton 81.2 (6)
Reguatons 103
Sectons 19.22(b) (13)-1, 19.22(d)-7, 19.322-7, 19. 21-1
Secton 19.322-7..
Reguatons 91 -
Reguatons 90
Reguatons 88, secton 319.30
Reguatons 51 (19 1), sectons 320.70, 320.72, 320.76
Reguatons 7 (1928), artces 12, 15, 17
Reguatons 6 (19 0), sectons 316.22. 316.23, 316.25,
316.26, 316.29, 316.200, 316.202, 316.20
Reguatons (19 ). sectons 31 .23, 31 .25, 31 .26,
31 .29, 31 .60, 31 .62, 31 .6
Reguatons 3 (19 1), sectons 101.82, 101.33, 101.38,
101.39
Reguatons 2 (19 2), sectons 130.71, 180.72
(325)
Rung No
12981
12923
12816
12S 8
12868
129 6
12887
12890
129S0
12883
12887
12978
12922
1295
12979
129 7
12883
12951
12931
12973
12931
12973
12950
12887
129 7
12931
12931
12878
12985
1298
12983
12982
12981
12980
G
e
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326
mendments Contnued
Reguatons 28
Sectons 176.16(/), 176.17(/), 176.17p, 176.21(c), 176.23
(/)
Secton 176.27 I
Reguatons 2
Sectons 180.12a (added), 180.12b (added), 180.89a
(added), 180.89b (added), 180.103a (added), 180.-
103b (added), 180.1 1a (added), 180.1 1b (added)..
Sectons 180. 8a (added), 180. 9
Sectons 180.92a (added), 180.1 a (added)
Reguatons 23, sectons 181.13(d), 181.1 (a), 181.28
(added), 181.29 (added), 181.30 (added), 181.31 (added),
181.32 (added)
Reguatons 21
Sectons 191.1, 191.3(f), 191.3(h) (added), 191. ,
191.9a (added), 191.11, 191.15a (added)
Sectons 191. a (added), 191.57a (added), 191.57b
(added)
Secton 191.61a (added)
Reguatons 20
Sectons 19 .27(a), 19 .75(a), 19 .75(6), 19 .75(e),
19 .76, 19 .78, 19 .7Sa (added)
Secton 19 .80a (added)
Reguatons 18
Sectons 192.7, 192.13, 192.16, 192.22, 192.2 , 192.25,
192.26, 192.27, 192.31, 192.33, 192. 1, 192. 6, 192.76
to 192.81, ncusve, 192.87, 192.89, 192.92(a), 192.9 ,
192.95, 192.96, 192.107, 192.111, 192.118, 192.125,
192.127, 192.129, 192.130, 192.1 6, 192.1 9, 192.150,
192.175, 192.18 , 192.185, 192.1S7, 192.191, 192.195,
192.196, 192.201, 192.20 , 192.207, 192.209, 192.22 ,
192.252, 192.259, 192.260, 192.263
Sectons 192.270 (added), 192.271 (added), 192.272
(added)
Reguatons 15
Sectons 190.159a (added), 190. 29a (added), 190. 29b
(added) .
Secton 190. 3 a (added)
Reguatons 11
Sectons 189.7, 189.1 , 189.16, 189.22, 189.35, 189.36,
189.38, 189.39, 189. 0, 189. 3, 189. , 189. 8, 189.58,
189.62, 189.69, 189.100..
Sectons 189.132a (added), 189.132b (added), 189.1 3a
(added)
Secton 189.135a (added)
Reguatons 10
Sectons 185.9, 185.10, 185.28, 185.78, 185.79, 185.81,
185.82, 185.83, 185.88, 185.89, 185.96, 185.97, 185.99,
185.231
Sectons 185.22a (added), 185. 2, 185. 79a (added)...
Sectons 185. 63a (added), 185. 75a (added), 185. 75b
(added)
Secton 185. 78a (added)
Reguatons 9, artces 25, 3
Reutatons 6
Sectons 188.18, 188.30, 188.31, 188.32, 188.33, 188.3 ,
188.5 , 188.97, 188.115, 188.12 , 188.126.
Secton 188.89 -
Rung No.
12858
129 2
12877
12927
12857
12926
12910
12876
12856
12875
12855
1293
12909
1287
1285
12989
12873
12853
12988
12851
12872
12852
12952
12987
129 1
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327
mendments Contnued
Reguatons 5
Sectons 18 .7, 18 .8, 18 .9 (revoked), 18 .10 (re-
voked), 18 .11, 18 .15, 18 .16, 18 .17, 18 .35,
18 . 0, 18 . 1, 18 . 2, 18 . 9, 18 .5 , 18 .60, 18 .6 ,
18 .65, 18 .66, 18 .67c, 18 .67d, 18 .67e, 18 .79,
18 .106, 18 .107, 18 .110, 18 .111 (revoked),
18 .112, 18 .113, 18 .117, 18 .118, 18 .119,
18 .123(a)(2), 18 .128, 18 .129, 18 .130, 13 .131,
18 .133, 18 .13 , 18 .135(a)(3), 18 .138(a)(2) (re-
voked), 18 .138(b)(3) (revoked), 18 .139 (a), (b),
18 .1 0(b), 18 .1 1, 18 .1 1a, 18 .1 8, 18 .150,
18 .153, 18 .155 (revoked), 18 .155a (revoked),
18 .156, 18 .2 6, 18 .391, 18 .392 (revoked)
Sectons 18 . 1 a (added), 18 . 22a (added), 18 . 22b
(added)
Secton 18 . 25a (added)
Reguatons
Sectons 183.5, 183.6, 183.7 (revoked), 183.8 (revoked),
183.9, 183.13, 188.1 , 183.15, 183.35, 183. 1, 183 ,
183. 5, 183. 6, 183.51, 183.52, 183.56, 183.62, 183.70,
183.7 , 183.75, 183.78, 183.79, 183.81, 183.9 ,
183.121, 183.122, 183.125, 183.126 (revoked),
183.127, 183.128, 183.132, 183.133, 183.13 ,
183.138(a)(2), 183.1 3 to 183.1 6, ncusve, 183.1 8,
183.1 9, 183.152(a)(3), 183.155(a)(2) (revoked),
183.155(b)(3) (revoked), 183.156 (a), (b), 183.157(b)
183.158, 183.160, 183.169, 183.172, 183.17 (re-
voked), 183.175 (revoked), 183.176, 183.256, 183.370,
183. 37, 183. 38, 183. 39, 183. 1, 183. 5, 183. 6
Sectons 183.392a (added), 183. 03a (added), 183. 03b
(added) _
Secton 183. 06a (added)
Reguatons 3
Sectons 182. 85a (added), 182.6 8a (added), 182.6 8b
(added) -
Secton 182.6 8(c)
nnutes, Nevada empoyees retred for servce-connected
n|ury --
ssocatons:
Modfcaton of I. T. 3930 reatng to o and gas |ont oper-
atng agreements
Status of |ont operatng agreements between coowners of
o and gas propertes

ases, mtary, eased by Unted States, status as possessons.

randy, producton of, Reguatons 5 amended
raz, ta mposed by artce 97 of Decree Law No. 58 , credt
aganst Federa ncome ta
ureau of Interna Revenue, hearngs n Washngton where
ssue referred for technca advce
usness corporaton ta , Rhode Isand, when deductbe
usness e penses:
Payment to New York Stock change gratuty fund
Professona wrter, protecton from fre of resdence used
party as an ohce
Rung No
12963
12871
12850
12962
222
12870
23
128 9
235
12868
215
128 8
216
12902
10
12996
130
12971
126
1280
98
( 12850
2 9
12871
2 8
12963
237
12930
91
1291
59
12913
50
12938
28
12969
29
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328
Rung No. Page
Capta gans and osses, hodng perod of commodty acqured
under futures contract
Carry-overs of net operatng osses and unused e cess profts
credts
Casuaty osses, parta destructon of trees used n trade or
busness
Cgarettes:
Statement of remova of, for consumpton
Mav, 19 8 and 19 7...
uno, 19 8 and 19 7
uv, 19 8 and 19 7
ugust, 19 8 and 19 7.
September, 19 8 and 19 7
October, 19 8 and 19 7
November, 19 8 and 19 7
Communty ncome, husband and wfe domced n Phppne
Isands
Communty property, New Me co, ncome from survvng wfe s
share durng admnstraton of deceased husband s estate
Compensaton, servces rendered by a partnershp for a perod
of more than 36 months
Contrbutons of an empoyer to an empoyees trust or annuty
pan, deductbty, reguatons amended
Contrbutons, permsson to use and occupy property, deduct-
bty of vaue of such use and occupancy
Corporatons, affated, eecton to fe separate returns for
caendar vear 19 8
Court decsons:
vaon musement Corp. v. Unted Staes
roderck, dmnstratr ; Turks ead Cub v
Centra anover ank Trust Co. et a.; Commssoner v..
Commssoner v. Centra anover ank Trust Co. et a
Commssoner; state of dran . Larkn, deceased, et a. v.
Genera Motors cceptance Corporaton v. ggns
ggns; Genera Motors cceptance Corporaton v
Larkn, state of dran ., deceased, et a. v. Commssoner.
McCntock et a. v. Westover
Pttsburgh, Cncnnat, Chcago St. Lous Raroad Co. v.
Unted States
Trupano et a. v. Unted States
Turks ead Cub v. roderck, dmnstratr
Unted States; vaon musement Corp. v
Unted States; Pttsburgh, Cncnnat, Chcago St. Lous
aroad Co. v
Unted States; Trupano et a. v
Unted States; Wsconsn ectrc Power Co. v
Westover; McCntock et a. v
Wsconsn ectrc Power Co. v. Unted States
Credts aganst ta :
Income ta pad to Phppne Isands
Ta mposed by artce 97 of razan Decree Law No. 58 .
D
Decedent, ncome n respect of, bonus payment receved by sur-
vvng wdow n Lousana
Decedents, ncome, suffcency of consent fed by e ecutors
Deductons:
Dvdends pad on preferred stock owned by e empt Unted
States nstrumentaty
Massachusetts ta on meas
1290
12879
12920
128(50
12896
12918
129 3
12965
12992
12998
12889
12921
12957
12972
12903
12923
128 5
12907
12905
12905
12863
12939
12939
12863
12933
12865
12869
12907
128 5
12865
12869
12925
12933
12925
129 8
12930
12977
12863
128 3
12888
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329
Rung No.
Deductons Contnued
Payments to New York Stock change gratuty fund
Permsson to use and occupy property, vaue of such use
and occupancy
Trusts, porton of net ncome for chartabe purposes, ong-
term capta gan
Department stores empoyng the reta nventory and eectve
nventory methods, prce ndces and data for uy, 19 8
Depostares n connecton wth payment of ta es, Reguatons
116 amended
Depostary recepts, Reguatons 116 amended
Dsted sprts:
ottng n bond, Reguatons 6 amended
ottng of ta -pad, Reguatons 11 amended
ottng, other than acoho, n bond, Reguatons 6
amended
ottng ta -pad, Reguatons 11 amended
Producton, Reguatons amended
Sprts and wnes
Drawback, Reguatons 28 amended
Importaton of, Reguatons 21 amended .
Rectfcaton of, Reguatons 15 amended
Warehousng of, Reguatons 10 amended .
Dstrbutons by persona hodng companes, Reguatons 111
amended
Dvdends pad on preferred stock owned by e empt Unted
States nstrumentaty, deducton
Dues and ntaton fees. (See Msceaneous ta es.)

ectrca energy for commerca consumpton, dares

mpoyees trust or annuty pan, deductbty of an empoyer s
contrbutons, reguatons amended
mpoyment ta es:
Interna Revenue Code
mpoyees
Muscans
Status determnaton, effect of P. L. 6 2 ( ghteth
Congress), reguatons amended
mpoyers, status determnaton, effect of P. L. 6 2
( ghteth Congress), reguatons amended
mpoyment, vendors of newspapers and magaznes...
Inspecton of returns, Form SS-a, by State Unem-
poyment Compensaton Commssons
Producton credt assocatons
Returns, preparaton of Form SS-a wth respect to
seamen
Wages, seamen s, when to be reported
Reguatons 106 amended
Reguatons 107 amended
Soca Securty ct, empoyer-empoyee status, effect of P.
L. 6 2 ( ghteth Congress), reguatons amended
820823
12938
28
12903
33
12905
93
12956
26
12890
123
12906
12
12987
251
12989
262
129 1
25
12853
268
12873
267
128 9
235
12870
23
12962
222
12858
301
129 2
30
12856
292
12876
290
12910
288
1285
271
1287
269
12851
258
12852
261
12872
260
12988
255
12978
6
128 3
68
12925
188
12972
3
12893
1 5
12931
1 0
12931
1 0
12973
135
129 9
1 9
12995
1 7
12961
1 8
12961
1 8
12973
135
12973
135
12931
1 0
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330
quvaent e empton provsons, Sngapore...
state ta , powers of appontment, Reguatons 105 amended..
cess profts:
Credt carry-overs, successor raroads
Reef for nstament bass ta payers, Reguatons 109 and
112 amended
nson ct, reports requred under proft-mtng pro-
vsons
cess Profts Ta Counc:
Organzaton and procedure
Organzaton change
Personne of e ecutve commttee
Pantng and purchase of orange groves as commtments
under secton 722(b)( )
emptons, aen, status changed from nonresdent to resdent
durng ta abe year.
tenson of tme, reports of profts under nson ct
F
Farmers, gross ncome, feeder catte gven by father to son and
ater sod
Frearms ct (1938), Federa, censng under
Frearms, machne guns and certan other; Reguatons 88
amended
Foregn shps and arcraft, earnngs, Reguatons 111 amended..
Foregn ta es, credt, ta mposed by artce 97 of razan
Decree Law No. 58 _
Form W-2 (Revsed uy 19 8), Wthhodng Statement 19 8:
ppcaton of secton 05.501 of Reguatons 116
Rues for reproducng
Form W-2, Wthhodng Statement 19 9, rues for reproducng.
G
Gan or oss, bass, sae of feeder catte receved by son as gft
from father
Gasone, ubrcatng o, and matches, Reguatons (19 )
amended
Gft ta :
Payment by one spouse of entre ncome ta abty,
treatment
Powers of appontment, Reguatons 108 amended
Gross ncome, e cusons:
mounts receved from vountary empoyees beneft
assocaton on account of nonndustra dsabty
arnngs of foregn shps and arcraft, Reguatons 111
amended

usband and wfe:

ont return when empoyng dfferent accountng methods.
Phppne Isands domce, communty ncome
I
Industra acoho. Reguatons 3 amended
Interest, Unted States savngs bonds
Inventores under eectve method, prce ndces and data for
uy, 19 8, for use by department stores
ang No.
128
12950
12879
12883
12891
12960
12958
12959
12892
129 6
12891
1299
12908
12878
12979
12930
1292
12915
12970
1299
12982
12932
12951
12968
12979
12976
128S9
12868
12975
12956
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Rung No
Page
L
Legsaton:
ghteth Congress
Pubc Law No. 635
Pubc Law No. 6 2
Pubc Law No. 706 ,
Pubc Law No. 759_
Pubc Law No. 773
Pubc Law No. 828
Pubc Law No. 857.
Pubc Law No. 869
Pubc Law No. 899
Lquor, fermented mat, Reguatons 18 amended
Lquors and artces from Puerto Rco and the rgn Isands,
Reguatons 2 amended
Lquors, whoesae and reta deaers n, Reguatons 20 amended
Lvestock, feeder catte gven by father to son and ater sod..
Losses, casuaty, parta destructon of trees used n trade or
busness
Lousana, bonus payment receved by survvng wdow n com-
munty
Luncheon cub, ta on dues and ntaton fees
M
guns
amended
Manufacturers e cse ta :
Renta agreement, ease
Type of sef-contaned ar-condtonng unt sub|ect to...
Massachusetts, ta on meas, treatment for Federa ncome ta
purposes
Meas, ta , Massachusetts, treatment for Federa ncome ta
purposes
Mtary bases eased by Unted States, status as possessons..
Msceaneous e cse ta es, saes by the manufacturer, Regua-
tons 6 amended
Msceaneous ta es:
dmssons, dues, and ntaton fees, Reguatons 3 (19 1)
amended
dmssons ta , appcaton to charges for pony rdes,
mnature autos, etc
r-condtonng unts, sef-contaned, type sub|ect to ta ..
rtces merey coated wth a depost of precous meta,
etc., ta abty
Dance ha servng refreshments, ta abty
Dues and ntaton fees, uncheon cubs
state ta , powers of appontment, Reguatons 105
amended
Gasone, ubrcatng o, and matches, Reguatons
(19 ) amended
Lcensng under Federa Frearms ct (1938)
Pstos and revovers, Reguatons 7 (1928) amended
Safe depost bo es and certan transportaton and com-
muncaton servces, Reguatons 2 (19 2) amended
Skatng rnk, admssons ta , appcabty
Stamp ta
Corporate securtes, unsecured nstruments, de-
bentures
Prospectve appcaton of Ct. D. 1708 wth mta-
tons.-
12861
317
12881
317
12882
320
1288
321
12897
321
12885
322
12S08
322
12899
323
12900
32
12909
281
1293
272
12857
299
12877
295
12927
298
12855
287
12875
283
1299
7
12920
32
12977
87
12907
170
12878
16
12933
180
128 6
180
12888
30
12888
30
1286
98
12983
185
12981
165
1289
167
128 6
180
12866
192
128 5
168
12907
170
12950
153
12982
187
12908
19
1298
190
12980
178
12867
166
12939
157
129 0
160
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Msceaneous ta es Contnued
Ta -e empt transfer of frearms Reguatons 88 amended
Transportaton of persons by arpane, amounts pad for,
ta abty.
Transportaton of property, Reguatons 113 (19 3)
amended
Transportaton of students, payment from funds derved
from admssons, etc., ta abty
Muscans, status for the purpose of Federa empoyment ta es,
etc
N
Net operatng oss carry-overs, successor raroads
Nevada, dsabty retrement annuty and penson
New Me co, communty property, ncome from survvng
wfe s share durng admnstraton of deceased husband s
estate
New York Stock change gratuty fund, deducton of pay-
ments to
O
O and gas propertes:
Modfcaton of I. T. 3930 reatng to |ont operatng
agreements
Status of |ont operatng agreements between coowners
Oeomargarne:
Returns of manufacturers of and whoesae deaers n,
Reguatons 9 amended
Statstcs of producton and materas used
Mav, 19 8 and 19 7
une, 19 8 and 19 7
uv, 19 8 and 19 7
ugust, 19 8 and 19 7 ---
September, 19 8 and 19 7
October, 19 8 and 19 7
Orange groves, pantng and purchase, commtments under
secton 722(b)( )
Partneshps:
Compensaton for servces rendered for a perod of more
than 36 months
Modfcaton of I. T. 3930 reatng to o and gas |ont
operatng agreements
Status of |ont operatng agreements between coowners of
o and gas propertes
Pensons, Nevada empoyees retred for servce-connected n-
|ury
Persona hodng companes, dstrbutons, Reguatons amend-
ed
Phppne Isands:
usband and wfe domced n, communty ncome ..,
Income ta pad to, credt aganst ta
Pstos and revovers, Reguatons 7 (1928) amended
Procedure, bureau, hearngs n Washngton where ssue referred
for technca advce
Producton credt assocatons, status for empoyment ta
purposes
Rung No.I
12878
12916
12986
128 7
12893
12879
12902
12921
12938
28
12996
12971
130
126
12952
161
128S0
12911
12928
129
12966
12990
306
307
308
309
310
311
12892
103
12957
61
12996
130
12971
126
12902
10
12978
6
12889
129 8
1298
51
131
190
1291
59
12995
1 7
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Rung No.| Page
Pubc aws:
ghteth Congress
No. 635, e tendng tme for the reease, free of estate
and gft ta , of powers of appontment, etc
No. 6 2, mantanng the status quo n respect of cer-
tan empoyment ta es and soca-securty benefts,
etc _
No. 706, amendng secton 1700(a)(1) of the Interna
Revenue Code so as to e empt hosptazed servce-
men and veterans from admssons ta when ad-
mtted free
No. 759, provdng for the common defense by n-
creasng the strength of the armed forces of the
Unted States, etc
No. 773, revsng, codfyng, and enactng nto aw
tte 28 of the Unted States Code
No. 828, e tendng tme for camng credt or refund
wth respect to war osses
No. 857, makng mported beer and other smar m-
ported fermented quors sub|ect to the nterna
revenue ta
No. 869, reatng to the marta deducton, for estate
ta purposes, n the case of fe nsurance or annuty
payments
No. 899. permttng refund or credt to brewers of
ta es pad on beer ost n bottng operatons
R
Raroad company, essor of raroad property, carryng on or
dong busness
Reguatons. (See mendments: Reguatons.)
Renta agreement, transactons thereunder, ease
Reproducton of Form W-2 (Revsed uy 19 8), Wthhodng
Statement 19 8
Reproducton of Form W-2, Wthhodng Statement 19 9
Resdence, used partay as offce by professona wrter, cost
of fre protecton
Reta e cse ta es, Reguatons 51 (19 1) amended
Retaers e cse ta es, artces merey coated wth a depost of
precous meta, etc
Returns:
ffated corporatons, eecton to fe separate returns for
caendar year 19 8
amnaton, hearngs n Washngton where ssue referred
for technca advce
Indvdua, ta abe years begnnng after December 31,
19 7.-
Inspecton, Form SS-a, by State Unempoyment Com-
pensaton Commssons
ont, husband and wfe empoyng dfferent accountng
methods
ont payment by one spouse of entre abty, treatment.
Manufacturers of and whoesae deaers n oeomargarne,
Reguatons 9 amended
Preparaton of Form SS-a wth respect to seamen
Tme for fng fna, of decedents, Reguatons 111 amended
Rewards, nformaton eadng to detecton and punshment of
aw voators
Rhode Isand, busness corporaton ta , when deductbe
12861
12881
12882
1288
12897
12885
12898
12899
12900
12865
12933
12915
12970
12969
12985
12866
12923
1291
12922
129 9
12976
12932
12952
12961
1295
12953
12913
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s
Safe depost bo es and certan transportaton and communca-
ton servces, Reguatons 2 (19 2) amended
Savngs Notes, Treasury, Seres D, sae
Searches and sezures, vadty of arrest wthout warrant
Sngapore, equvaent e empton provsons
Skatng rnk, admssons ta , appcabty
Stamp ta . (See Msceaneous ta es.)
Sts and dstng apparatus, Reguatons 23 amended
T
Ta Court of the Unted States, The:
Decsons of, st of acquescences and nonacquescences
Ta tabe, use by aen whose status changed from nonresdent
to resdent durng ta abe year -
Tobacco:
Statement of manufactured, produced, by casses
pr, 19 8 and 19 7-
May, 19 8 and 19 7
une, 19 8 and 19 7..
uy, 19 8 and 19 7...
ugust, 19 8 and 19 7...
September, 19 8 and 19 7
October, 19 8 and 19 7
Transportaton:
Persons by arpane, amounts pad, ta abty
Students, payment from funds derved from admssons,
etc., ta abty
Transportaton of property, Reguatons 113 (19 3) amended..
Treasury Savngs Notes Seres I), sae
Trusts, deducton for porton of net ncome for chartabe pur-
poses, ong-term capta gan
U
Unted States savngs bonds, status of nterest

nson ct, reports requred under proft-mtng provsons

ountary empoyees beneft assocaton, amounts receved by
members on account of nonndustra dsabty
W
War osses, tme for camng credt or refund, Reguatons 103
and 111 amended
Wthhodng Statement 19 8, Form W-2 (Revsed uy 19 8):
ppcaton of secton 05.501 of Reguatons 116
ues for reproducng
Wthhodng Statement 19 9, Form W-2, rues for reproducng
Rung No-
12980
12935
12869
128
12867
12926
12993
129 6
12859
12895
12917
12936
1296
12991
12997
12916
128 7
12986
12935
12905
12975
12891
12968
129 7
1292
12915
12970
o
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