United States Code

EFFECTIVE DATE Section 68 (c) of Pub. L. 85-866 provided that: "The amendments made by this section [adding this section] shall apply with respect to the calendar year 1955 and all calendar years thereafter. For calendar years before 1955, the determination as to whether the exercise or nonexercise by an employee of an election or option described in section 2517 of the Internal Revenue Code of 1954 (as added by subsection (a)) [this section] is a transfer for purposes of chapter 4 of the Internal Revenue Code of 1939 shall be made as if this section had not been enacted and without inferences drawn from the fact that this section is not made applicable with respect to calendar years before 1955."

Calendar year defined, see section 2502 of this title. Taxable gifts

Defined, see section 2503 of this title.

For preceding years, see section 2504 of this title.

§ 2522. Charitable and similar gifts. (a) Citizens or residents.

In computing taxable gifts for the calendar year, there shall be allowed as a deduction in the case of a citizen or resident the amount of all gifts made during such year to or for the use of

(1) the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes;

(2) a corporation, or trust, or community chest, fund, or foundation, 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 shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation;

(3) a fraternal society, order, or association, operating under the lodge system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals;

(4) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual.

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(b) Nonresidents.

In the case of a nonresident not a citizen of the United States, there shall be allowed as a deduction the amount of all gifts made during such year to or for the use of

(1) the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes;

(2) a domestic 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 shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation;

(3) a trust, or community chest, fund, or foundation, 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 substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation; but only if such gifts are to be used within the United States exclusively for such purposes;

(4) a fraternal society, order, or association, operating under the lodge system, but only if such gifts are to be used within the United States exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals;

(5) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual.

For disallowance of certain charitable, etc., deductions otherwise allowable under this section, see sections 503 and 681.

(d) Other cross references.

(1) For exemption of gifts to or for benefit of Library of Congress, see section 5 of the Act of March 3, 1925, as amended (56 Stat. 765; 2 U. S. C. 161).

(2) For construction of gifts for benefit of library of Post Office Department as gifts to or for the use of the United States, see section 2 of the Act of August 8, 1946 (60 Stat. 924; 5 U. S. C. 393).

(3) For exemption of gifts for benefit of Office of Naval Records and Library, Navy Department, see section 2 of the Act of March 4, 1937 (50 Stat. 25; 5 U. S. C. 419b).

(4) For exemption of gifts to or for benefit of National Park Service, see section 5 of the Act of July 10, 1935 (49 Stat. 478; 16 U. S. C. 19c).

(5) For construction of gifts accepted by the Secretary of State under the Foreign Service Act of 1946 as gifts to or for the use of the United States, see section 1021 (e) of that Act (60 Stat. 1032; 22 U. S. C. 809).

(6) For construction of gifts or bequests of money accepted by the Attorney General for credit to "Commissary Funds, Federal Prisons" as gifts or bequests to or for the use of the United States, see section 2 of the Act of May 15, 1952, 66 Stat. 73, as amended by the Act of July 9, 1952, 66 Stat. 479 (31 U. S. C. 725s-4).

(7) For payment of tax on gifts of United States obligations to the United States, see section 24 of the Second Liberty Bond Act, as amended (59 Stat. 48, § 4; 31 U. S. C. 757e).

(8) For construction of gifts for benefit of or use in connection with Naval Academy as gifts to or for the use of the United States, see section 3 of the Act of March 31, 1944 (58 Stat. 135; 34 U. S. C. 1115b).

(9) For exemption of gifts for benefit of Naval Academy Museum, see section 4 of the Act of March 26, 1938 (52 Stat. 119; 34 U. S. C. 1119).

(10) For exemption of gifts received by National Archives Trust Fund Board, see section 7 of the National Archives Trust Fund Board Act (55 Stat. 582; 44 U. S. C. 300gg). (Aug. 16, 1954, ch. 736, 68A Stat. 410; Sept. 2, 1958, Pub. L. 85-866, title I, § 30(d), 72 Stat. 1631.)

REFERENCES IN TEXT

Section 2 of act August 8, 1946 (60 Stat. 924; 5 U.S.C. 393), referred to in par. (2) of subsec. (d), was repealed by Pub. L. 86-682, § 12(c), Sept. 2, 1960, 74 Stat. 708. See section 2101 of Title 39, The Postal Service.

Section 2 of act March 4, 1937 (50 Stat. 25; 5 U.S.C. 419b), referred to in par. (3) of subsec. (d), was repealed by act Aug. 10, 1956, ch. 1041, § 53, 70A Stat. 641. See section 7222 of Title 10, Armed Forces.

Section 3 of act March 31, 1944 (58 Stat. 135; 34 U. S. C. 1115b), referred to in par. (8) of subsec. (d), was repealed by act Aug. 10, 1956, ch. 1041, § 53, 70A Stat. 741. See section 6973 of Title 10, Armed Forces.

Section 4 of act March 26, 1938 (52 Stat. 119; 34 U. S. C. 1119), referred to in par. (9) of ɛubsec. (d), was repealed by act Aug. 10, 1956, ch. 1041, § 53, 70A Stat. 741. See section 6974 of Title 10, Armed Forces. AMENDMENTS

1958 Subsec. (c). Pub. L. 85-866 substituted "503" for "504".

CROSS REFERENCES

Calendar year defined, see section 2502 of this title. Disallowance of certain charitable, etc., deductions, see sections 503, 681 of this title.

Estate tax credit for gift tax, see section 2012 of this title.

Extent of deductions, see section 2524 of this title.

Gifts and bequests accepted by the Secretary of Commerce under Bureau of Standards Act as gifts and bequests to United States, see section 278a of Title 15, Commerce and Trade.

Income tax deductions for charitable, etc., contributions and gifts, see section 170 of this title.

Taxable gifts defined, see section 2503 of this title.

§ 2523. Gift to spouse.

(a) In general.

Where a donor who is a citizen or resident transfers during the calendar year by gift an interest in property to a donee who at the time of the gift is the donor's spouse, there shall be allowed as a deduction in computing taxable gifts for the calendar year an amount with respect to such interest equal to one-half of its value.

(b) Life estate or other terminable interest.

Where, on the lapse of time, on the occurrence of an event or contingency, or on the failure of an event or contingency to occur, such interest transferred to the spouse will terminate or fail, no deduction shall be allowed with respect to such interest

(1) if the donor retains in himself, or transfers or has transferred (for less than an adequate and full consideration in money or money's worth) to any person other than such donee spouse (or the estate of such spouse), an interest in such property, and if by reason of such retention or transfer the donor (or his heirs or assigns) or such person (or his heirs or assigns) may possess or enjoy any part of such property after such termination or failure of the interest transferred to the donee spouse; or

(2) if the donor immediately after the transfer to the donee spouse has a power to appoint an interest in such property which he can exercise (either alone or in conjunction with any person) in such manner that the appointee may possess or enjoy any part of such property after such

termination or failure of the interest transferred to the donee spouse. For purposes of this paragraph, the donor shall be considered as having immediately after the transfer to the donee spouse such power to appoint even though such power cannot be exercised until after the lapse of time, upon the occurrence of an event or contingency, or on the failure of an event or contingency to

occur.

An exercise or release at any time by the donor, either alone or in conjunction with any person, of a power to appoint an interest in property, even though not otherwise a transfer, shall, for purposes of paragraph (1), be considered as a transfer by him. Except as provided in subsection (e), where at the time of the transfer it is impossible to ascertain the particular person or persons who may receive from the donor an interest in property so transferred by him, such interest shall, for purposes of paragraph (1), be considered as transferred to a person other than the donee spouse.

Where the assets out of which, or the proceeds of which, the interest transferred to the donee spouse may be satisfied include a particular asset or assets with respect to which no deduction would be allowed if such asset or assets were transferred from the donor to such spouse, then the value of the interest transferred to such spouse shall, for purposes of subsection (a), be reduced by the aggregate value of such particular assets.

(d) Joint interests.

If the interest is transferred to the donee spouse as sole joint tenant with the donor or as tenant by the entirety, the interest of the donor in the property which exists solely by reason of the possibility that the donor may survive the donee spouse, or that there may occur a severance of the tenancy, shall not be considered for purposes of subsection (b) as an interest retained by the donor in himself. (e) Life estate with power of appointment in donee spouse.

Where the donor transfers an interest in property, if by such transfer his spouse is entitled for life to all of the income from the entire interest, or all the income from a specific portion thereof, payable annually or at more frequent intervals, with power in the donee spouse to appoint the entire interest, or such specific portion (exercisable in favor of such donee spouse, or of the estate of such donee spouse, or in favor of either, whether or not in each case the power is exercisable in favor of others), and with no power in any other person to appoint any part of such interest, or such portion, to any person other than the donee spouse

(1) the interest, or such portion, so transferred shall, for purposes of subsection (a) be considered as transferred to the donee spouse, and

(2) no part of the interest, or such portion, so transferred shall, for purposes of subsection (b) (1), be considered as retained in the donor or transferred to any person other than the donee spouse.

This subsection shall apply only if, by such transfer, such power in the donee spouse to appoint the

interest, or such portion, whether exercisable by will or during life, is exercisable by such spouse alone and in all events.

(f) Community property.

(1) A deduction otherwise allowable under this section shall be allowed only to the extent that the transfer can be shown to represent a gift of property which is not, at the time of the gift, held as community property under the law of any State, Territory, or possession of the United States, or of any foreign country.

(2) For purposes of paragraph (1), community property (except property which is considered as community property solely by reason of paragraph (3)) shall not be considered as "held as community property" if the entire value of such property (and not merely one-half thereof) is treated as the amount of the gift.

(3) If during the calendar year 1942 or in succeeding calendar years, property held as such community property (unless considered by reason of paragraph (2) as not so held) was by the donor and the donee spouse converted, by one transaction or a series of transactions, into separate property of the donor and such spouse (including any form of co-ownership by them), the separate property so acquired by the donor and any property acquired at any time by the donor in exchange therefor (by one exchange or a series of exchanges) shall, for purposes of paragraph (1), be considered as "held as ccmmunity property."

(4) Where the value (at the time of such conversion) of the separate property so acquired by the donor exceeded the value (at such time) of the separate property so acquired by such spouse, paragraph (3) shall apply only with respect to the same portion of such separate property of the donor as the portion which the value (as of such time) of such separate property so acquired by such spouse is of the value (as of such time) of the separate property so acquired by the donor. (Aug. 16, 1954, ch. 736, 68A Stat. 412.)

§ 2524. Extent of deductions.

The deductions provided in sections 2522 and 2523 shall be allowed only to the extent that the gifts therein specified are included in the amount of gifts against which such deductions are applied. (Aug. 16, 1954, ch. 736, 68A Stat. 414.)

In addition to other taxes, there is hereby imposed on the income of every individual a tax equal to the following percentages of the wages (as defined in section 3121(a)) received by him with respect to employment (as defined in section 3121(b)) —

(1) with respect to wages received during the calendar year 1962, the rate shall be 3% percent; (2) with respect to wages received during the calendar years 1963 to 1965, both inclusive, the rate shall be 3% percent;

(3) with respect to wages received during the calendar years 1966 to 1967, both inclusive, the rate shall be 4% percent; and

(4) with respect to wages received after December 31, 1967, the rate shall be 4% percent. (Aug. 16, 1954, ch. 736, 68A Stat. 415; Sept. 1, 1954, ch. 1206, title II, § 208(b), 68 Stat. 1094; Aug. 1, 1956, ch. 836, title II, § 202(b), 70 Stat. 845; Aug. 28, 1958, Pub. L. 85-840, title IV, § 401(b), 72 Stat. 1041; June 30, 1961, Pub. L. 87-64, title II, § 201(b), 75 Stat. 141.)

AMENDMENTS

1961-Pub. L. 87-64 increased the rate of tax for calendar year 1962 from 3 to 3% percent, calendar years 1963 to 1965, inclusive, from 3% to 3% percent, calendar years 1966 and 1967 from 4 to 4% percent, calendar year 1968 from 4 to 4% percent, and for calendar years after December 31, 19.8, irom 41⁄2 to 4% percent.

1958-Pub. L. 85-840 increased the rate of tax by substituting provisions imposing a tax of 21⁄2 % for calendar year 1959, 3% for calendar years 1960-1962, 32% for calendar years 1963-1965, 4% for calendar years 1966-1968, and 42% for calendar years beginning after Dec. 31, 1968, for provisions which imposed a tax of 24% for calendar years 1957-1959, 23% for calendar years 1960-1964, 34% for calendar years 1965-1969, 34% for calendar years 1970-1974, and 44% for calendar years beginning after Dec. 31, 1974.

1956-Act Aug. 1, 1956, increased the rate of tax with respect to wages received during the calendar years 1957 to 1959, and for all calendar years thereafter, by onequarter percent.

1954 Act Sept. 1, 1954, increased the 34 percent rate of tax for the calendar year 1970 and subsequent years to 32 percent for calendar years 1970 to 1974 and 4 percent for 1975 and subsequent years.

EFFECTIVE DATE OF 1931 AMENDMENT Amendment of section by Pub. L. 87-64 applicable with respect to remuneration paid after Dec. 31, 1961, see section 201(d) of Pub. L. 87-64. set out as a note under section 1401 of this title.

EFFECTIVE DATE OF 1958 AMENDMENT Amendment of section by Pub. L. 85-840 applicable with respect to remuneration paid after Dec. 31, 1958, see section 401 (d) of Pub. L. 85-840, set out as a note under section 1401 of this title.

EFFECTIVE DATE OF 1956 AMENDMENT Amendment of this section by act Aug. 1, 1956, applicable with respect to remuneration paid after Dec. 31, 1956, see section 202 (d) of such act Aug. 1, 1956, set out as a note under section 1401 of this title.

REFERENCES TO SOCIAL SECURITY ACT

Section 402 of act Sept. 1, 1954, provided that: "References in the Internal Revenue Code of 1939, the Internal Revenue Code of 1954, the Railroad Retirement Act of 1937, as amended [section 228a et seq. of Title 45], or any other law of the United States to any section or

subdivision of a section of the Social Security Act [chapter 7 of Title 42] redesignated by this Act shall be deemed to refer to such section or subdivision of a section as so redesignated."

CROSS REFERENCES

Adjustment of tax under this section, see section 6205 (a) of this title.

Amount and method of adjustment inapplicable to taxes under this chapter, see section 1314 (e) of this title. Assessment for underpayment of tax imposed by this section, see section 6205 (b) of this title.

Effective date of this subtitle, see section 7851 (a) (3) of this title.

Nondeductibility of taxes imposed by this section as deduction from gross income, see section 3502 (a) of this title.

Priority of debts due to United States, see section 191 of Title 31, Money and Finance.

Tax paid by employer not included in definition of wages under title II of Social Security Act, see section 409 of Title 42, The Public Health and Welfare.

§ 3102. Deduction of tax from wages.

(a) Requirement,

The tax imposed by section 3101 shall be collected by the employer of the taxpayer, by deducting the amount of the tax from the wages as and when paid. An employer who in any calendar quarter pays to an employee cash remuneration to which paragraph (7) (B) or (C) or (10) of section 3121 (a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar quarter is less than $50; and an employer who in any calendar year pays to an employee cash remuneration to which paragraph (8) (B) of section 3121 (a) is applicable may deduct an amount equivalent to such tax from any such payment of remuneration, even though at the time of payment the total amount of such remuneration paid to the employee by the employer in the calendar year is less than $150 and the employee has not performed agricultural labor for the employer on 20 days or more in the calendar year for cash remuneration computed on a time basis.

(b) Indemnification of employer.

Every employer required so to deduct the tax shall be liable for the payment of such tax, and shall be indemnified against the claims and demands of any person for the amount of any such payment made by such employer. (Aug. 16, 1954, ch. 736, 68A Stat. 415; Sept. 1, 1954, ch. 1206, title II, § 205A, 68 Stat. 1093; Aug. 1, 1956, ch. 836, title II, § 201(h) (3), 70 Stat. 841.)

1956

AMENDMENTS

Subsec. (a). Act Aug. 1, 1956, substituted "$150 and the employee has not performed agricultural labor for the employer on 20 days or more in the calendar year for cash remuneration computed on a time basis" for "$100." 1954 Subsec. (a). Act Sept. 1, 1954, added a new sentence at the end permitting in certain instances an employer to deduct employee tax even though payment to the employee is less than $50 for the calendar quarter or $100 for the calendar year.

CROSS REFERENCES

Deductions as constructive payment, see section 3123

of this title.

Receipts for employees for taxes deducted by employers, see section 6051 of this title.

Sec.

Subchapter B.-Tax on Employers

3111. Rate of tax.

3112. Instrumentalities of the United States. 3113. District of Columbia credit unions.

AMENDMENTS

1956 Act Aug. 1, 1956, ch. 836, title II, § 201(a)(2), 70 Stat. 839, added item 3113.

§ 3111. Rate of tax.

In addition to other taxes, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121(b))—

(1) with respect to wages paid during the calendar year 1962, the rate shall be 3% percent;

(2) with respect to wages paid during the calendar years 1963 to 1965, both inclusive, the rate shall be 3% percent;

(3) with respect to wages paid during the calendar years 1966 to 1967, both inclusive, the rate shall be 4% percent; and

(4) with respect to wages paid after December 31, 1967, the rate shall be 4% percent. (Aug. 16, 1954, ch. 736, 68A Stat. 416; Sept. 1, 1954, ch. 1206, title II, § 208 (c), 68 Stat. 1094; Aug. 1, 1956. ch. 836, title II, § 202 (c), 70 Stat. 845; Aug. 28, 1958. Pub. L. 85-840, title IV, § 401(c), 72 Stat. 1042; June 30, 1961, Pub. L. 87-64, title II, § 201(c), 75 Stat. 141.) AMENDMENTS

1961-Pub. L. 87-64 increased the rate of tax for calendar year 1962 from 3 to 3% percent, calendar years 1963 to 1985, inclusive, from 3% to 3% percent, calendar years 1966 and 1967 from 4 to 4% percent, calendar year 1968 from 4 to 4% percent, and for calendar years after December 31, 1968, from 41⁄2 to 4% percent.

1958-Pub. L. 85-840 increased the rate of tax by substituting provisions imposing a tax of 22 percent for calendar year 1959, 3 percent for calendar years 1960-62, 31⁄2 percent for calendar years 1963-65, 4 percent for calendar years 1966-68, and 42 percent for calendar years beginning after Dec. 31, 1968, for provisions which imposed a tax of 24 percent for calendar years 1957-59, 24 percent for calendar years 1960-64, 34 percent for calendar years 1965-69, 334 percent for calendar years 1970-74, and 44 percent for calendar years beginning after Dec. 31, 1974.

1956-Act Aug. 1, 1956, increased the rate of tax with respect to wages paid during the calendar years 1957 to 1959, and for all calendar years thereafter, by one-quarter percent.

1954 Act Sept. 1, 1954, increased the 34 percent rate of tax for the calendar year 1970 and subsequent years to 31⁄2 percent for calendar years 1970 to 1974 and 4 percent for 1975 and subsequent years.

EFFECTIVE DATE OF 1961 AMENDMENT Amendment of section by Pub. L. 87-64 applicable with respect to remuneration paid after Dec. 31, 1961, see section 201(d) of Pub. L. 87-64, set out as a note under section 1401 of this title.

CROSS REFERENCES Adjustment of tax under this section, see section 6205 (a) (1) of this title.

Assessment for underpayment of tax imposed by this section, see section 6205 (b) of this title.

Erroneous payments under this chapter as credit on other taxes or refunded, see section 3503 of this title. Services which are exempt or immune from this tax not included in definition of employment under Title II of the Social Security Act, see section 409 of Title 42, The Public Health and Welfare.

§ 3112. Instrumentalities of the United States.

Notwithstanding any other provision of law (whether enacted before or after the enactment of this section) which grants to any instrumentality of the United States an exemption from taxation, such instrumentality shall not be exempt from the tax imposed by section 3111 unless such other provision of law grants a specific exemption, by reference to section 3111 (or the corresponding section of prior law), from the tax imposed by such section. (Aug. 16, 1954, ch. 736, 68A Stat. 416.)

§ 3113. District of Columbia credit unions.

Notwithstanding the provisions of section 16 of the Act of June 23, 1932 (D. C. Code, sec. 26-516; 47 Stat. 331), or any other provision of law (whether enacted before or after the enactment of this section) which grants to any credit union chartered pursuant to such Act of June 23, 1932, an exemption from taxation, such credit union shall not be exempt from the tax imposed by section 3111. (Added Aug. 1, 1956, ch. 836, title II, § 201 (a) (1), 70 Stat. 839.)

vidual by such employer during such calendar year. If an employer (hereinafter referred to as successor employer) during any calendar year acquires substantially all the property used in a trade or business of another employer (hereinafter referred to as a predecessor), or used in a separate unit of a trade or business of a predecessor, and immediately after the acquisition employs in his trade or business an individual who immediately prior to the acquisition was employed in the trade or business of such predecessor, then, for the purpose of determining whether the successor employer has paid remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) with respect to employment equal to $4,800 to such individual during such calendar year, any remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) with respect to employment paid (or considered under this paragraph as having been paid) to such individual by such predecessor during such calendar year and prior to such acquisition shall be considered as having been paid by such successor employer;

(2) the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of

(A) retirement, or

(B) sickness or accident disability, or

(D) death;

(3) any payment made to an employee (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) on account of retirement;

(4) any payment on account of sickness or accident disability, or medical or hospitalization expenses in connection with sickness or accident disability, made by an employer to, or on behalf of, an employee after the expiration of 6 calendar months following the last calendar month in which the employee worked for such employer;

(5) any payment made to, or on behalf of, an employee or his beneficiary—

(A) from or to a trust described in section 401 (a) which is exempt from tax under section 501 (a) at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust,

(B) under or to an annuity plan which, at the time of such payment, is a plan described in section 403 (a), or

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United States Code, Volume 6