D. 3490). Trusts set aside for future donation to the above classes of corporations were not deductible until actually given to such corporation.

By provision in the 1921 act, the donees may include, in addition to the above, gifts to the United States or any political subdivision if used for public purposes; foundations, funds, trusts, and so forth, organized for purposes of distributing gifts to such corporations, literary organizations, and posts or auxiliaries of the American Legion (Sec. 214(a) (11); Art. 251).

No deductions of this character are permitted corporations unless the expenditure can be shown directly to benefit the corporation, such as a gift to a hospital to which employees of the corporation are sent (Art. 562). The cases which follow refer, unless otherwise stated, to the deductibility of contributions by individuals within the 15% limitation.

Donations to religious organizations include pew rents, assessments, church dues, and basket collections (A. R. M. 2).

Contributions to charitable organizations have included donations to a pension fund for a municipal police force, which was in charge of a committee constituted by law (S. 1202); premiums on a life insurance policy where the organization was the beneficiary (O. D. 299); payments to an organization to relieve earthquake sufferers of Porto Rico (O. D. 345); payments to a welfare league with the understanding that the funds were to be used for hospital purposes (I. T. 1217). Contributions to cemetery corporations are, as a rule excluded (O. D. 217, A. R. R. 1122). Under the 1918 act contributions to a fund invested and disbursed for charitable purposes were not deductible (O. D. 669); under the 1921 act they are deductible provided no profit inures to the donor.

Educational institutions have included associations formed to give musical education to students and the public through concerts (S. 1176); a memorial association whose purpose was to construct a museum and lecture halls (A. R. R. 301, reversing O. D. 649), not those organized for the purpose of purchasing and improving lands as a park to serve as a memorial to soldiers and sailors (O. D. 104), nor those erecting monuments and

memorials (S. 1246); The Community Service (Incorporated) (O. D. 389); the Woodrow Wilson Foundation (I. T. 1579); but have not included the National Dry Federation (O. D. 44), a citizens' social club (A. R. R. 379), or an association whose purpose was to disseminate certain labor legislation propaganda (S. 1362).

Gifts to cities, such as an athletic field for a public high school were not deductible under the 1918 act (O. D. 126 and 607), but would be in 1921 or subsequent years. A contribution to a fund to induce an industrial plant to locate in the city was likewise not deductible (O. D. 39; see A. R. R. 3513 as to the income which the corporation must report).

Contributions to exempt corporations other than those specified in Section 231(6), as, for example, civic leagues and social welfare organizations, cannot be deducted (I. T. 1800).

Contributions may be money or property (I. T. 1256) but not services rendered (O. D. 712) unless shown per contra as income; the fair value at the time of gift will govern (T. D. 3491), and any excess over cost is not income (L. O. 1118). A donor who gave a life estate in certain bonds to an individual with a remainder interest to a church, may deduct the cash value at the time of gift (I. T. 1776).

Proportionate shares in contributions made by partnerships (O. D. 185) or personal service corporations during 1918-21 (I. T. 1196) are deductible, subject to the 15% limitation, by partners or stockholders.

A corporation could not deduct the amount paid into a pension fund for the benefit of its employees if the corporation constituted itself as trustee and at its discretion selected the employees to be benefited (S. 965). But if the fund was organized entirely separate from the corporation and the corporation retains no control over the fund, donations to it by the corporation are deductible, being looked upon as additional compensation (O. D. 110). Contributions by a corporation to Liberty Loan drives, American Red Cross, United War Workers, and the Salvation Army were not deductible, even though the corporation was owned by a single family (A. R. R. 373). Advertising for any of these purposes, over the corporation's name, was deductible (Art. 562). A bank was not allowed to deduct from gross income a donation made through a Chamber of Commerce for the purpose of inducing a railroad company to extend its tracks into the town where the bank was located (I. T. 1169). A

corporation was a member of chambers of commerce and commercial clubs in various cities but was not allowed to deduct contributions, in addition to regular fees, for the purpose of local benefits and activities (I. T. 1153). Although a Y. M. C. A. was located on the property of the donor and was used exclusively for the benefit of its employees, the corporation could not deduct contributions for its support (O. D. 986).

XVI

INSURANCE-TRAVELING AND OTHER EXPENSES

Insurance premiums as a business expense. Traveling expenses. Compensation to employees. Rent. Professional expenses. Miscellaneous business expenses.

INSURANCE premiums paid by a taxpayer who is the beneficiary or whose estate is the beneficiary under the policy are not deductible, the rule being applicable alike to individuals and corporations (Sec. (a) (4); Art. 291, 581); the law looks upon such payments as a form of investment. But if a corporation which pays the premium is not the beneficiary the premium will be regarded as additional compensation to the employee and therefore deductible to the corporation as a business expense (Art. 294). This is presumed to include premiums paid on group insurance policies, even though such premiums do not constitute taxable income to employees benefiting thereby (Art. 33).

Premiums on insurance securing a loan, paid by an individual, and later by a partnership or corporation, have been held to be deductible as business expenses (O. D. 38, 396, 711, 843, 10II). This, however, has been changed in part, the rule now being that no premiums paid on policies on the lives of officers or employees which constitute the security for loans are deductible, because the person or corporation paying the premium is a beneficiary even though he is not equitably entitled to claim from the proceeds any more than the amount of the loan (Sol. Op. 136). It has also been held that no deduction can be claimed by an officer of a corporation if he pays a premium on insurance covering his life where the corporation is the beneficiary (I. T. 1214). But the corporation can deduct premiums on policies securing loans where the debtor insured is not an officer or employee or one financially interested in the corporation (I. T. 1511).

Premiums paid on insurance policies payable to the estate of

the creator but assigned to a charitable organization as security for a loan were not deductible (I. T. 1453).

A taxpayer who was required to take out insurance in favor of partners was allowed to deduct the premiums as a business expense provided none of the proceeds would be used to satisfy any obligation of the taxpayer (I. T. 1340).

Premiums on indemnity bonds taken out by Government employees were deductible (O. D. 878).

TRAVELING EXPENSES

Traveling expenses incurred by an individual under the 1918 act were on the border line between personal and business expenses. When a trip was undertaken for other than business purposes, the expenses (except transportation tax) were not deductible. But the individual could deduct his traveling expenses for business purposes, including meals and lodging, unless reimbursed therefor, to the extent that they were in excess of his expenses while living at home. There were three possible cases:

(a) When the individual paid his own expenses, was not reimbursed therefor and his salary did not cover such expenses, the latter constituted, including meals and lodging over and above the additional expenses of his household if he were living at home, proper business expenses.

(b) If the individual was reimbursed for his actual traveling expenses, including meals and lodging, taxable income resulted from such reimbursement equal to his expenses if he were living at home.

(c) An allowance for expenses was taxable to the extent that it exceeded the actual expense (including only the extra cost of meals and lodging) to which it referred, and a deficiency of the allowance in covering the excess cost of meals and lodging was deductible. Thus mileage allowances to army officers and United