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"date of termination of hostilities in the present war” means the date proclaimed by the President as the date of such termination, or the date specified in a concurrent resolution of the two Houses of Congress as the date of such termination, whichever is the earlier.

CODIFICATION: In $ 29.23 (m)-14, the text set forth above was substituted for the first sentence in paragraph (a), by Treasury Decision 5413, Oct. 31, 1944, 9 F.R. 13104.

$ 29.23 (m)-21 Computation of allowance for depletion of timber for given year.

Where a taxpayer elects to treat the cutting of timber as a sale or exchange of such timber under the provisions of section 117 (k) (1) the allowable depletion shall be the fair market value of the timber cut during the taxable year. Such fair market value shall be the fair market value of such timber as of the first day of the taxable year in which such timber is cut.

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above, by Treasury Decision 5413, Oct. 31, 1944, 9 FR. 13104.

$ 29.23 (m)-14 Discovery of mines other than coal, metal, fluorspar, ball and sagger clay, rock asphalt, flake graphite, vermiculite, beryl, feldspar, mica, talc, lepidolite, spodumene, and barite mines, and sulphur and potash mines or deposits. (a) To entitle a taxpayer to a valuation of his property, for the purpose of depletion allowances, by reason of the discovery of a mine (other than the mines described in this paragraph) or minerals (other than the minerals described in this subsection), it must appear that the mine or minerals were not acquired as the result of the purchase of a proven tract or lease; also the discovery must be made by the taxpayer after February 28, 1913, and must result in the fair market value of the property becoming disproportionate to cost. For the purpose of this section, coal, metal, fluorspar, ball and sagger clay, rock asphalt, and sulphur mines shall not be entitled to valuation upon the basis of discovery with respect to any taxable year, flake graphite mines shall not be entitled to such valuation for taxable years beginning after December 31, 1942, and vermiculite, beryl, feldspar, mica, talc, lepidolite, spodumene, and barite mines, and potash mines or deposits including potash salts in solution shall not be entitled to such valuation for taxable years beginning after December 31, 1943; likewise the discovery in any taxable year of oil or gas, coal, sulphur, metal, metallic ores, fiuorspar, ball and sagger clay, or rock asphalt shall not entitle the property to valuation based on discovery with respect to any taxable year, of flake graphite shall not entitle the property to such valuation with respect to any taxable year beginning after December 31, 1942, and of vermiculite, beryl, feldspar, mica, talc, lepidolite, spodumene, barite, and potash shall not entitle the property to such valuation with respect to any taxable year beginning after December 31, 1943. The exception specified in the preceding sentence shall not be applicable in the case of the following minerals, and in the case of the following mines containing such minerals, with respect to any taxable year beginning on or after the date of the termination of hostilities in the present war: fluorspar, ball and sagger clay, rock asphalt, flake graphite, vermiculite, beryl, feldspar, mica, talc, lepidolite, spodumene, and barite. For the purposes of this section, the term

CODIFICATION: In § 29.23 (m)-21, the undesignated paragraph set forth above was inserted immediately following the first paragraph, by Treasury Decision 5413, Oct. 31, 1944, 9 F.R. 13104. [Insert following statutory quotation immediately preceding § 29.23 (0)-1; T.D. 5425, Dec. 29, 1944, 10 F.R. 12]

SEC. 8. ADJUSTED GROSS INCOME. (Individual Tax Act of 1944, Part I.)

(b) Charitable contributions. Section 23 (0) (relating to the so-called “charitable deduction") is amended by striking out "net income as computed without the benefit of this subsection or of subsection (x)" and inserting in lieu thereof "adjusted gross income."

SEC. 2. TAXABLE YEARS TO WHICH APPLICABLE. (Individual Income Tax Act of 1944, Part I.)

Except as otherwise expressly provided, the amendments made by this part shall be applicable with respect to taxable years beginning after December 31, 1943.

§ 29.23 (0)-1 Contributions or gifts by individuals.

In the case of husband and wife making a joint return, the deduction for contributions or gifts is the aggregate of such contributions or gifts made by the spouses, and is limited to 15 percent of the aggregate adjusted gross income of the spouses or, for taxable years beginning prior to January 1, 1944, 15 percent of the aggregate net income of the

spouses computed without the benefit of the deduction for contributions.

CODIFICATION: $ 29.23 (0)-1 was amended in the following respects, by Treasury Decisión 5425, Dec. 29, 1944, 10 F.R. 12:

1. In the third paragraph, the clause “15 percent of his net income computed without the benefit of the deduction for contributions" was deleted and the clause "15 percent of his adjusted gross income or, for taxable years beginning prior to January 1, 1944, 15 percent of his net income computed without the benefit of the deduction for contributions" was inserted in lieu thereof.

2. The fourth paragraph was amended to read as set forth above. [Insert following statutory quotation immediately preceding § 29.23 (p)-1; T.D. 5342, Mar. 14, 1944, 9 F.R. 2846]

PUBLIC LAW 201 (78th Congress, 1st Session), approved December 17, 1943.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

[Insert following statutory quotation immediately preceding § 29.23 (q)-1; T.D. 5371, May 11, 1944, 9 F.R. 5111]

SEC. 114, CORPORATE CONTRIBUTIONS TO VETERANS' ORGANIZATIONS. (Revenue Act of 1943, Title I.)

Section 23 (q) (relating to charitable and other contributions by corporations) is amended (a) by inserting "veteran rehabilltation service," after "scientific,” in paragraph (2), (b) by inserting “or” at the end of paragraph (2), and (c) by inserting after paragraph (2) the following new paragraph:

(3) Posts or organizations of war veterans, or auxiliary units of, or trusts or foundations for, any such posts or organizations, if such posts, organizations, units, trusts, or foundations are organized in the United States or any of its possessions, and if no part of their net earnings inure to the benefit of any private shareholder or individual;

SEC. 101. TAXABLE YEARS TO WHICH AMENDMENTS APPLICABLE. (Revenue Act of 1943, Title I.)

Except as otherwise expressly provided, the amendments made by this title shall be applicable only with respect to taxable years beginning after December 31, 1943.

$ 29.23 (q)-1 Contributions or gifts by corporations. A corporation may, subject to the limitations provided by section 23 (g), deduct from its gross income contributions or gifts to organizations described in section 23 (q), except in computing net income for taxable years beginning before January 1, 1944, contributions or gifts to organizations organized and operated exclusively for veterans' rehabilitation services, or posts or organizations of war veterans, or auxiliary units of, or trusts or foundations for, any such posts or organizations are not deductible unless such contributions qualify as deductions under section 23 (q) prior to its amendment by section 114 of the Revenue Act of 1943. (See $ 29.22 (b) (4)-1 for definition of "political subdivision.")

[First sentence amended by T.D. 5371, May 11, 1944, 9 F.R. 5111]

Sec. 3. (a) Section 162 (d) (1) (B) of the Revenue Act of 1942 is amended to read as follows:

(B) Such a plan shall be considered as satisfying the requirements of section 165 (a), (3), (4), and (5) and (6) for the period beginning with the beginning of the first taxable year following December 31, 1942, and ending December 31, 1944, if the provisions thereof satisfy such requirements by December 31, 1944, and if by that time such provisions are made effective for all purposes as of a date not later than January 1, 1944.

(b) Section 162 (d) (2) of the Revenue Act of 1942 is amended to read as follows:

(2) In the case of a stock bonus, pension, profit sharing or annuity plan put into effect after September 1, 1942, such a plan shall be considered as satisfying the requirements of section 165 (a) (3), (4), (5), and (6) for the period beginning with the date such plan is put into effect and ending December 31, 1944, if the provisions thereof satisfy such requirements by December 31, 1944, and if by that time such provisions are made effective for all purposes as of a date not later than the effective date of such plan or January 1, 1944, whichever is the later.

$ 29.23 (p)-9 Contributions of an empolyer toward the purchase of retirement annuities (section 23 (p) (1) (B)).

CODIFICATION: $ 29.23 (p)-9 was amended by changing the parenthetical matter immediately after the fifth sentence to read as follows, by Treasury Decision 5342, Mar. 14, 1944, 9 F.R. 2846: (See section 162 (d) of the Revenue Act of 1942, as amended by Public Law 201 (78th Congress, 1st Session), approved December 17, 1943.)

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[Insert · following statutory quotation immediately preceding § 29.23 (3)-1; T.D. 5425, Dec. 29, 1944, 10 F.R. 12)

SEC. 8. ADJUSTED GROSS INCOME. (Individual Income Tax Act of 1944, Part I.)

(c) Medical expense - deduction. Section 23 (x) (relating to the so-called "medical expense deduction") is amended to read as follows:

(x) Medical, dental, etc., expenses. penses paid during the taxable year, not compensated for by insurance or otherwise,

for medical care of the taxpayer, his spouse, or & dependent specified in section 25 (b) (3), to the extent that such expenses exceed 5 per centum of the adjusted gross income. I only one surtax exemption is allowed under section 25 (b) for the taxable year, the maximum deduction for the taxable year shall be not in excess of $1,250. If more than one surtax exemption is so allowed, the maximum deduction shall be not in excess of $2,500. The term "medical care", as used in this subsection, shall include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (including amounts paid for accident or health insurance).

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SEC. 2. TAXABLE YEARS TO WHICH APPLICABLE. (Individual Income Tax Act of 1944, Part I.)

Except as otherwise expressly provided, the amendments made by this part shall be applicable with respect to taxable years beginning after December 31, 1943.

$ 29.23 (x)-1 Medical, dental, etc., expenses.

Where during the year for which the deduction is taken payments are made for medical care which are not compensated for during such year but for which compensation is received in a subsequent year or years, the entire amount of the compensation so received, if equal to or less than the amount which was deducted, shall be considered as attributable to the deduction taken for such prior year. If the amount of the compensation received in the subsequent year or years is greater than the amount which was deducted for the prior year, such portion of the compensation received which is equal in amount to the deduction taken shall be considered as attributable to such deduction. If the deduction for the prior year would have been greater than $2,500 or $1,250, as the case may be, but for the limitations on such deduction provided by section 23 (x), then, for the purposes of the two preceding sentences, the amount of the compensation received in a subsequent year or years shall be reduced by an amount equal to the amount by which the deduction for the prior year would have been greater than $2,500 or $1,250, as the case may be, but for such limitations. If compensation is received in a subsequent year or years, the net deduction for medical expenses will thus be the same as if the compensation had been received in the year in which the payments for medical care were made.

CODIFICATION: In $ 29.23 (x)-1, the last sentence of the second paragraph was deleted and the text set forth above substituted therefor, by Treasury Decision 5414, Nov. 1, 1944, 9 F.R. 13106.

Only such medical expenses are dedu

taxable years beginning prior to January 1, 1944, as exceed 5 percent of the net income for the taxable year computed without the deduction for medical expenses. Where the taxpayer has allowable deductions in a taxable year beginning prior to January 1, 1944, for charitable contributions and medical expenses, the allowable deductions for charitable contributions should be computed first without regard to the deduction for medical expenses, and thereafter, the deduction for medical expenses for such taxable year should be computed (see § 29.23 (a)-1). The maximum deduction allowable for medical expenses paid in any one taxable year beginning prior to January 1, 1944, is $2,500 in the case of a head of a family, or husband and wife filing a joint return for such taxable year. In all other cases the maximum for such years is $1,250.

For taxable years beginning after December 31, 1943, only such medical expenses are deductible as exceed 5 percent of the adjusted gross income for the taxable year. As to what constitutes adjusted gross income see section 22 (n). The maximum deduction allowable for medical expense paid in any one taxable year beginning after December 31, 1943, is $1,250 in the case of a taxpayer having only one surtax exemption and $2,500 in the case of a taxpayer entitled to more than one surtax exemption. A deduction for medical expenses shall not be deemed to have been allowed for any taxable year for which the taxpayer claimed and was allowed the standard deduction under section 23 (aa).

CODIFICATION: In 29.23 (x) (1), the two paragraphs set forth above were substituted for the fourth paragraph, by Treasury Decision 5425, Dec. 29, 1944, 10 F.R. 12.

The application of section 23 (x) and of this section may be illustrated by the following examples:

Example (1). Taxpayer A, divorced from B in December 1941 and having one dependent child, had net income for 1942 of $3,000 before deduction of medical expenses. During 1942 he paid $300 for medical care, of which $100 was for treatment of his dependent child and $200 for an operation in September 1941, on B, his wife at the time

of the operation. In 1942 he received a payment of $50 for health insurance covering B's illness during 1941.

The deduction allowable under section 23 (x) for the calendar year 1942 is $100, computed as follows: Payment for medical care in 1942... $300 Less: Amount of insurance received in 1942.

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Payment for medical care in 1942 not

compensated for during 1942----- 250 Less: 5 percent of $3,000 (net income be

fore deduction of medical expenses) -- 150

Excess, allowable as deduction for 1942.. 100

Example (2). Assuming that A, in example (1), brings suit in 1943 and in that year receives $150 upon a hospital insurance policy covering the expenses incurred by B in 1941, the amount included in taxable income for 1943 is $100, computed as follows (see section 22 (b) (5)): Compensation received in 1943..

$150 Less: Deduction allowed for prior year 1942---

100

unt attributed to medical deduction taken for 1944..

250 Amount to be included in gross income for 1945..

250 Amount to be excluded from gross in

come for 1945 ($5,000 less $250) --- 4, 750

Example (4). Assuming that C, in example (3), receives $8,000 in 1945 as compensation for the medical expenses which he incurred in 1944, the amount which c must include in his gross income for 1945 is $2,500 and the amount to be excluded from gross income for 1945 is $5,500, computed as follows (see section 22 (b) (5)): Compensation received in 1945.--- $8,000 Less: Amount by which medical de

duction for 1944 would have been greater than $2,500 but for the lim. itations provided by section 23 (x). 4, 750

Compensation received in 1945 re

duced by amount by which medical deduction for 1944 would have been greater than $2,500 but for the limitations provided by section 23 (x). 3. 250

Amount to be excluded from gross income for 1943...

50 Taxable income for 1943.

100 Example (3). Taxpayer C, who is entitled to two surtax exemptions under the provisions of section 25 (b), had an adjusted gross income of $35,000 for the calendar year 1944. During 1944 he paid $9,000 for medical care. C received no compensation for such medical expenses in 1944, but in 1945 he receives $5,000 upon an insurance policy covering the medical expenses which he incurred in 1944. C was allowed a deduction of $2,500 from his gross income for 1944. The amount which C must include in his gross income for 1945 is $250 and the amount to be excluded from gross income for 1945 is $4,750, computed as follows (see section 22 (b) (5)): Payment for medical care in 1944 (not compensated for in 1944).

$9,000 Less: 5 percent of $35,000 (adjusted gross income)

1, 750

Deduction allowable for 1944.-- 2, 500 Amount of compensation received in

1945 to be included in gross income for 1945 as attributable to deduction allowable for 1944.-

2, 500 Amount to be excluded from gross in

come for 1945 ($8,000 less $2,500)-- 5,500

CODIFICATION: In § 29.23 (x)-1, all the text following the sixth paragraph was deleted and the text set forth above was substituted therefor, by Treasury Decision 5414, Nov. 1, 1944, 9 F.R. 13106.

NOTE: Treasury Decision 5414, Nov. 1, 1944, 9 F.R. 13106 provides as follows:

The determination as to whether compensation received in a taxable year beginning prior to January 1, 1944 was attributable to a deduction for medical expenses taken for a prior taxable year shall, at the taxpayer's option, exercisable at any time, be made either under the provisions of g 29.23 (x)-1 of Regulations 111 prior to amendment by this Treasury decision or under the provisions of such section as amended by this Treasury decision. [Insert following statutory quotation immediately after § 29.23 (1)-1; T.D. 5371, May 11, 1944, 9 F.R. 5111) SEC. 115. SPECIAL DEDUCTION FOR

BLIND. (Revenue Act of 1943, Title I.)

Section 23 (relating to deductions in computing net income) is amended by inserting after section 23 (x) the following:

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(y) Special deduction for blind individuals—(1) In general. In the case of a blind individual, $500. For the purposes of this subsection, the status of the individual, insofar as it effects the application of this subsection to such individual, shall be determined as of July 1 of the taxable year, unless the taxable year does not include July 1, in which case such status shall be determined as of the last day of the taxable year.

(2) Definition. For the purposes of this subsection, the term "blind individual" means an individual whose central visual acuity does not exceed 20/200 in the better eye with correcting lenses, or whose visual acuity is greater than 20/200 but is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than 20 degrees,

SEC. 101. TAXABLE YEARS TO WHICH AMENDMENTS APPLICABLE. (Revenue Act of 1943, Title I.)

Except as otherwise expressly provided, the amendments made by this title shall be applicable only with respect to taxable years beginning after December 31, 1943.

$ 29.23 (y)-1 Special deduction for blind individuals. For taxable years beginning after December 31, 1943, a special deduction from gross income of $500 is allowed under the provisions of section 23 (y) to all blind individuals who qualify as such at any time on July 1 of the taxable year or, if the taxable year does not include July 1, on the last day of such taxable year. The term “blind individual" is defined in section 23 (y) (2). The deduction is allowable only if the taxpayer himself is the blind individual and is not allowable, e. g., in respect of a dependent who is blind. In the case of a joint return, if both husband and wife are blind individuals, a deduction of $1,000 is allowable, but if only the husband or wife is a blind individual, only $500 may be deducted.

An individual claiming the special deduction provided in section 23 (y) should, if not totally blind as of the status determination date, that is, as of July 1 of the taxable year or, if the taxable year does not include July 1, as of the last day of such taxable year, attach to his return a certificate from a physician skilled in the diseases of the eye or a registered optometrist showing in detail the condition of his eyes as of the status determination date. If he is totally blind as of the status determination date, that is, if he cannot distinguish light from darkness, he should attach to his return a statement setting forth such fact. IT.D. 5371, May 11, 1944, 9 F.R. 5111,

as amended by T.D. 5425, Dec. 29, 1944, 10 F.R. 13]

CODIFICATION: In § 29.23 (y)-1, the last sentence of the first paragraph reading as follows was deleted, by Treasury Decision 5425, Dec. 29, 1944, 10 F.R. 13: “The special deduction provided in section 23 (y) however, is in addition to the personal exemption, the credit for dependents, and all other allowable deductions." [Insert following statutory quotation immediately after § 29.23 (2)-1; T.D. 5425, Dec. 29, 1944, 10 F.R. 13]

Sec. 9. OPTIONAL STANDARD DEDUCTION. (Individual Income Tax Act of 1944, Part I.)

(a) In general. Section 23 is amended by adding at the end thereof a new subsection to read as follows:

(aa) Optional standard deduction for individuals—(1) Allowance. In the case of an individual, at his election a standard deduction as follows:

(A) Adjusted gross income $5,000 or more. If his adjusted gross income is $5,000 or more, the standard deduction shall be $500.

(B) Adjused gross income less than $5000. If his adjusted gross income is less than $5,000, the standard deduction shall be an amount equal to 10 per centum of the adjusted gross income upon the basis of which the tax applicable to the adjusted gross income of the taxpayer is determined under the tax table provided in section 400.

(2) In lieu of certain deductions and credits. The standard deduction shall be in lieu of: (A) all deductions other than those which under section 22 (n) are to be subtracted from gross income in computing adjusted gross income, (B) all credits with respect to taxes of foreign countries and possessions of the United States, (C) all credits with respect to taxes withheld at the source under section 143 (a) (relating to interest on tax-free covenant bonds), and (D) all credits against net income with respect to interest on certain obligations of the United States and Government corporations of the character specified in section 25 (a) (1) and (2).

(3) Method and effect of election. (A) If the adjusted gross income shown on the return is $5,000 or more, the standard deduction shall be allowed only if the taxpayer so elects in his return, and the Commissioner, with the approval of the Secretary, shall by regulations prescribe the manner of signifying such election in the return.

(B) If the adjusted gross income shown on the return is less than $5,000, the standard deduction shall be allowed only if the taxpayer elects, in the manner provided in Supplement T, to pay the tax imposed by such supplement.

(C) If the taxpayer does not signify, in the manner provided by subparagraph (A) or (B), his election to take the standard deduction, it shall not be allowed. If he

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