(b) As used in this title the term "invested capital" does not include borrowed capital. WAR AND EXCESS Borrowed capital not missible assets de (c) There shall be deducted from invested capital as above defined included. a percentage thereof equal to the percentage which the amount of Percentage of inadinadmissible assets is of the amount of admissible and inadmissible ducted. assets held during the taxable year. Determination from (d) The invested capital for any period shall be the average average invested capiinvested capital for such period, but in the case of a corporation tal. making a return for a fractional part of a year, it shall be the same fractional part of such average invested capital. Taxed as average SEC. 327. That in the following cases the tax shall be determined similar business. as provided in section 328: If invested capital (a) Where the Commissioner is unable to determine the invested not determined. capital as provided in section 326; (b) In the case of a foreign corporation or of a corporation entitled etForeign corporations, to the benefits of section 262; (c) Where a mixed aggregate of tangible property and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfactorily to determine the respective values of the several classes of property at the time of payment, or to distinguish the classes of property paid in for stock and for bonds, respectively; Where property paid for stock not separable. Exceptions. (d) Where upon application by the corporation the Commissioner Upon application to prevent hardship from finds and so declares of record that the tax if determined without abnormal conditions. benefit of this section would, owing to abnormal conditions affecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative corporations specified in section 328. This subdivision shall not apply to any case (1) in which the tax (computed without benefit of this section) is high normal capital. merely because the corporation earned within the taxable year a high rate of profit upon a normal invested capital, nor (2) in which 50 per plus Government concentum or more of the gross income of the corporation for the taxable tracts, etc. year (computed under section 233 of Title II) consists of gains, profits, commissions, or other income, derived on a cost-plus basis from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive. on Income from cost Determination of tax by comparison with income of average simi lar business. SEC. 328. (a) That in the cases specified in section 327 the tax shall be the amount which bears the same ratio to the net income of the taxpayer (in excess of the specific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income (in excess of the specific exemption of $3,000) for such year. In the case of a foreign corporation or of a corporation entitled trig to the benefits of section 262 the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representative corporations. tions, etc. corpora Method of computa In computing the tax under this section the Commissioner shall tion. compare the taxpayer only with representative corporations whose invested capital can be satisfactorily determined under section 326 and which are, as nearly as may be, similarly circumstanced with respect to gross income, net income, profits per unit of business transacted and capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances. Ratios to be deter (b) For the purposes of subdivision (a) the ratios between the mined by regulations. average tax and the average net income of representative corporations shall be determined by the Commissioner in accordance with regulations prescribed by him with the approval of the Secretary. WAR AND EXCESS kept. PROFITS TAX. (c) The Commissioner shall keep a record of all cases in which the Record of deter- tax is determined in the manner prescribed in subdivision (a), conmined cases to be taining the name and address of each taxpayer, the business in which engaged, the amount of invested capital and net income shown by the return, and the amount of invested capital as determined under Information to Con- such subdivision. The Commissioner shall furnish a copy of such record and other detailed information with respect to such cases when required by resolution of either House of Congress, without regard to the restrictions contained in section 257. gress. Ante, p. 270 Reorganizations. Valuation of assets transferred after March 3, 1917, on. Proviso. If previous owner not a corporation. Restriction. Miscellaneous. Tax for fiscal year ending in 1921. Proportion puted. com Credit for payments under prior Act. Refund of excess. Ante, p. 268. For fiscal year ending in 1922. Returns required. PART VI.-REORGANIZATIONS. SEC. 331. That in the case of the reorganization, consolidation, or change of ownership of a trade or business, or change of ownership of property, after March 3, 1917, if an interest or control in such trade or business or property of 50 per centum or more remains in the same persons, or any of them, then no asset transferred or received from the previous owner shall, for the purpose of determining invested capital, be allowed a greater value than would have been allowed under this title in computing the invested capital of such previous owner if such asset had not been so transferred or received: Provided, That if such previous owner was not a corporation, then the value of any asset so transferred or received shall be taken at its cost of acquisition (at the date when acquired by such previous owner) with proper allowance for depreciation, impairment, betterment or development, but no addition to the original cost shall be made for any charge or expenditure deducted as expense or otherwise on or after March 1, 1913, in computing the net income of such previous owner for purposes of taxation. PART VII.-MISCELLANEOUS. SEC. 335. (a) That if a corporation (other than a personal service corporation) makes return for a fiscal year beginning in 1920 and ending in 1921, the war-profits and excess-profits tax for the taxable year 1921 shall be the sum of: (1) the same proportion of a tax for the entire period computed under the Revenue Act of 1918, which the portion of such period falling within the calendar year 1920 is of the entire period, and (2) the same proportion of a tax for the entire period computed under this title, which the portion of such period falling within the calendar year 1921 is of the entire period. Any amount heretofore or hereafter paid on account of the tax imposed for such taxable year by the Revenue Act of 1918 shall be credited towards the payment of the tax as above computed, and if the amount so paid exceeds the amount of such tax, the excess shall be credited or refunded to the corporation in accordance with the provisions of section 252 of this Act. (b) If a corporation (other than a personal service corporation) makes a return for a fiscal year beginning in 1921 and ending in 1922, the war-profits and excess-profits tax for the portion of the year falling within the calendar year 1921 shall be an amount equivalent to the same proportion of a tax for the entire period computed under this title, which the portion of such period falling within the calendar year 1921 is of the entire period. SEC. 336. That every corporation, not exempt under section 304, shall make a return for the purposes of this title. Such returns shalĺ be made, and the taxes imposed by this title shall be paid, at the same times and places, in the same manner, and subject to the same conditions, as is provided in the case of returns and payment of income Provisions applica- tax by corporations for the purposes of Title II, and all the provisions Ante, p. 260. ble. of that title not inapplicable, including penalties, are hereby made applicable to the taxes imposed by this title. SEC. 337. That in the case of a bona fide sale of mines, oil or gas wells, or any interest therein, where the principal value of the property has been demonstrated by prospecting or exploration and discovery work done by the taxpayer, the portion of the tax imposed by this title attributable to such sale shall not exceed 20 per centum of the selling price of such property or interest. EFFECTIVE DATE OF TITLE. SEC. 338. That this title shall take effect as of January 1, 1921. TITLE IV.-ESTATE TAX. SEC. 400. That when used in this title The term "executor" means the executor or administrator of the decedent, or, if there is no executor or administrator, any person in actual or constructive possession of any property of the decedent; The term "net estate" means the net estate as determined under the provisions of section 403; The term "month" means calendar month; and The term "collector" means the collector of internal revenue of the district in which was the domicile of the decedent at the time of his death, or, if there was no such domicile in the United States, then the collector of the district in which is situated the part of the gross estate of the decedent in the United States, or, if such part of the gross estate is situated in more than one district, then the collector of internal revenue of such district as may be desginated by the Commissioner. fers of estates here Vol. 40, p. 1098. SEC. 401. That, in lieu of the tax imposed by Title IV of the Rev-Tax levied on transenue Act of 1918, a tax equal to the sum of the following percentages after. of the value of the net estate (determined as provided in section 403) is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act, whether a resident or nonresident of the United States: 1 per centum of the amount of the net estate not in excess of $50,000; 2 per centum of the amount by which the net estate exceeds $50,000 and does not exceed $150,000; 3 per centum of the amount by which the net estate exceeds $150,000 and does not exceed $250,000; 4 per centum of the amount by which the net estate exceeds $250,000 and does not exceed $450,000; 6 per centum of the amount by which the net estate exceeds $450,000 and does not exceed $750,000; 8 per centum of the amount by which the net estate exceeds $750,000 and does not exceed $1,000,000; 10 per centum of the amount by which the net estate exceeds $1,000,000 and does not exceed $1,500,000; 12 per centum of the amount by which the net estate exceeds $1,500,000 and does not exceed $2,000,000; 14 per centum of the amount by which the net estate exceeds $2,000,000 and does not exceed $3,000,000; 16 per centum of the amount by which the net estate exceeds $3,000,000 and does not exceed $4,000,000; 18 per centum of the amount by which the net estate exceeds $4,000,000 and does not exceed $5,000,000; 20 per centum of the amount by which the net estate exceeds $5,000,000 and does not exceed $8,000,000; Rates. ESTATE TAX. Not applicable if decedent in World War service, etc. Vol. 39, pp. 777, 1002. 22 per centum of the amount by which the net estate exceeds $8,000,000 and does not exceed $10,000,000; and 25 per centum of the amount by which the net estate exceeds $10,000,000. The taxes imposed by this title or by Title II of the Revenue Act of 1916 (as amended by the Act entitled "An Act to provide increased revenue to defray the expenses of the increased appropriations for the Army and Navy and the extensions of fortifications, Vol. 40, pp. 324, 1096. and for other purposes," approved March 3, 1917) or by Title IX of the Revenue Act of 1917, or by Title IV of the Revenue Act of 1918, shall not apply to the transfer of the net estate of any decedent who has died or may die from injuries received or disease contracted in line of duty while serving in the military or naval forces of the United States in the war against the German Government, or to the transfer of the net estate of any citizen of the United States who has died or may die from injuries received or disease contracted in line of duty while serving in the military or naval forces of any country while associated with the United States in the prosecution of such war, or prior to the entrance therein of the United States, and any tax collected upon such transfer shall be refunded to the estate of such decedent. Refund if tax collected. Gross estate. Subject to administration. Dower or curtesy interests. Transfers in contemplation of death. SEC. 402. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of_all property, real or personal, tangible or intangible, wherever situated(a) To the extent of the interest therein of the decedent at the time of his death which after his death is subject to the payment of the charges against his estate and the expenses of its administration and is subject to distribution as part of his estate; (b) To the extent of any interest therein of the surviving spouse, existing at the time of the decedent's death as dower, curtesy, or by virtue of a statute creating an estate in lieu of dower or curtesy; (c) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in two years included. in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title; Prior transfers with Extent of joint interests. Exception. Provisos. from decedent, etc. (d) To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than a If property acquired fair consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than a fair consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: If acquired by gift, Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy in the entirety by the decedent and spouse, or where so acquired by the decedent and other person as joint tenants and their interests are not otherwise etc. any specified or fixed by law, then to the extent of one-half of the value thereof: ESTATE TAX. Passing under (e) To the extent of any property passing under a general power general power of apof appointment exercised by the decedent (1) by will, or (2) by deed pointment. executed in contemplation of, or intended to take effect in possession or enjoyment at or after, his death, except in case of a bona fide sale for a fair consideration in money or money's worth; and (f) To the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own life; and to the extent of the excess over $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life. Received on insurance policies. Excess of beneficiaries. SEC. 403. That for the purpose of the tax the value of the net Net value deterestate shall be determined (a) In the case of a resident, by deducting from the value of the gross estate mined. Of resident. (1) Such amounts for funeral expenses, administration expenses, tion, etc., expenses. claims against the estate, unpaid mortgages upon, or any indebtedness in respect to, property (except, in the case of a resident decedent, where such property is not situated in the United States), losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, or from theft, when such losses are not compensated for by insurance or otherwise, and such amounts reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes; Taxes excepted. Property received Restricted to pro perty on which estate (2) An amount equal to the value of any property forming a part from prior decedent. of the gross estate situated in the United States of any person who died within five years prior to the death of the decedent where such property can be identified as having been received by the decedent from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received: Provided, That this deduction shall be allowed only where an estate tax under this or any prior tax paid. Act of Congress was paid by or on behalf of the estate of such prior decedent, and only in the amount of the value placed by the Commissioner on such property in determining the value of the gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate and not deducted under paragraphs (1) or (3) of subdivision (a) of this Applicable to deaths section. This deduction shall be made in case of the estates of all decedents who have died since September 8, 1916; Limit. since September 8, 1916. Bequests, etc., to (3) The amount of all bequests, legacies, devises, or transfers, public, religious, chariexcept bona fide sales for a fair consideration in money or money's table, etc., uses. worth, in contemplation of or intended to take effect in possession or enjoyment at or after the decedent's death, to or for the use of the United States, any State, Territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes, or to or for the use of any corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual, or to a trustee or trustees exclusively for such religious, charitable, scientific, Applicable to deaths literary, or educational purposes. This deduction shall be made in since 1917. December 31, |