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split as between husband and wife but may be taken by the one who is the main support of the dependents.

The personal exemption allowed those in the military and naval service did not include personal exemptions or the exemption for dependents (O. D. 123). Notwithstanding that a daughter supported and maintained her mother elsewhere than in her own home, the daughter was, for income tax purposes, classified as the head of a family (O. D. 665). A widower who maintained a home and supported his daughter therein was held to be the "head of a family" even though the daughter was over 18 years of age (O. D. 422). If a child over 18 years of age was materially dependent on his parent, the parent could claim exemption as the head of a family even though the child had income (Ō. D. 474); in another case not even material dependence was necessary (I. T. 1618). Under a divorce settlement, two daughters remained six months with the father and six months with the mother. The father was entitled to an exemption as the head of a family, if on the last day of the taxable year he was furnishing a home for the daughters and paying over one-half of their support (O. D. 754). Unavoidable absence of a wife, due to the war, did not bar the husband from taking the $2,000 exemption (O. D. 357). The test of who is entitled to the $2,000 exemption is that the taxpayer must be contributing over one-half to the support of a dependent and must be in that position on the last day of the taxable year (O. D. 775), and that blood relationship must exist (I. T. 1619). Where husband and wife both contributed to the support of a dependent, the exemption must be claimed by the one who was the chief support; this exemption cannot be divided (O. D. 776). Where the earnings of two sons (over $1,000 each) aged 17 and 20 were appropriated by a parent who in turn supported the sons, the parent was entitled to an exemption for the 17-year-old son only. The parent must report the appropriated earnings of his sons as his personal income (O. D. 797). An American citizen may claim the exemption for dependents irrespective of the nationality or place of residence of the dependent (O. D. 139).

B. Individual Surtax. Surtax rates did not apply in 1921 on income of less than $5,000 and in 1922 on income of less than $6,000. From 1913 to 1916, inclusive, only incomes exceeding $20,000 were subject to surtax. From 1917 to 1921, inclusive, surtaxes began at $5,000.

C. Corporation Normal Tax. As in the case of individuals credits are allowed corporations for normal tax purposes which include Liberty bond interest and a specific exemption, in certain cases, of $2,000. In detail these are (Sec. 236, Art. 591):

(a) Interest on United States obligations and bonds of the War Finance Corporation, as described in (b) above.

(b) A specific exemption of $2,000 applicable to corporations with income less than $25,000. Where the net income exceeds $25,000, no specific exemption may be deducted. It is provided in addition that the total tax is not to be in excess of (1) the tax payable if the $2,000 exemption were allowed plus (2) the net income in excess of $25,000; this provision is obviously of advantage only to corporations whose net income was no more than $25,200 in 1921 and no more than $25,250 in 1922.

(c) In 1921 and prior years, the excess profits tax which, of course, was computed before it was possible to arrive at the normal tax.

The right of a corporation to take the $2,000 credit depends upon the net income before deducting the net losses of prior years (I. T. 1725).

D. Corporation Excess Profits Tax. The excess profits credits under the 1918 and 1921 acts were (Art. 791).

(a) Eight per cent of the invested capital. Anything above 8% and the specific exemption was regarded as "excess profit" for purposes of this tax.

(b) A specific exemption of $3,000. Invested capital also entered into the tax computation in connection with the application of the 20% and 40% rates; that is, the 20% rate was applied to the net income falling between the excess profits credit and 20% of the invested capital, while the 40% rate applied to the net income in excess of 20% of the invested capital.

XXIV

RATES OF TAX-CREDITS FOR FOREIGN TAXES -FISCAL YEARS

Normal and surtax rates for individuals. Corporations. Credits for income and war profits taxes paid to a foreign country. Fiscal and partial years.

(a) Individuals. The following tables summarize the rates since 1913 applicable to individuals. The normal tax and surtax must, of course, be added together in order to determine the total tax. It will be noted that normal tax rates have increased from 1% to 8% during the 10-year period, and surtaxes from a maximum of 6% to 65%, and now 50%.

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