BY TOTAL INCOME CLASSES AND BY RETURNS WITH NET LOSS OR WITH NET GAIN FROM SUCH SALES: NUMBER OF RETURNS, NET GAIN OR LOSS FROM SALES OF CAPITAL ASSETS, NET SHORT- AND LONG TERM CAPITAL GAIN AND LOSS, AND CAPITAL LOSS CARRY-OVER- Continued

750,000 under 1,000,000..

193

160

144

325

'Less than 0.05 percent.

Dividends, foreign and domestic, exclude dividends received through partnerships and other fiduciaries.

Interest received includes that on bank deposits, notes, mortgages, bonds, and taxable and partially tax-exempt Government obligations, as well as such Government interest received through partnerships and other fiduciaries.

'Rents and royalties net profit is the combined profit from these two sources, neither of which is reported separately. Deductions against gross rents and gross royalties received are allowable for taxes, interest, repairs, depreciation, depletion, and other expenses pertaining to the respective income. A net loss from either source offsets net profit of the other; the net profit reported is the combined result.

*Rents and royalties net loss is the combined loss from these two sources, neither of which is reported separately. Allowable deductions for taxes, interest, repairs, depreciation, depletion, and other expenses pertaining to the respective income exceed the gross rents and gross royalties received. A net profit from either source offsets net loss of the other; the net loss reported by the taxpayer is the combined result.

Trade or business net profit is the net result of all trade and business activities in which the estate or trust is engaged, the combined result of which is a net profit. A net loss in one business offsets net profit of another.

Deductions from total receipts are allowed for expenses of doing business, such as cost of merchandise sold, employees' salaries, interest, taxes, rent, repairs, depreciation, obsolescence, depletion, bad debts, and losses on business property. (Net operating loss deduction is reported in miscellaneous deductions.)

10 Trade or business net loss is the net result of all trade and business activities in which the estate or trust is engaged, the combined result of which is a net loss. A net profit from one activity offsets net loss of another. Business deductions are mentioned in par. 2, note 9.

11 Partnership net profit excludes taxable and partially tax-exempt interest on Government obligations and net gain or loss from sales of capital assets.

"Partnership net loss excludes taxable and partially tax-exempt interest on Government obligations and net gain or loss from sales of capital assets.

13 Net gain from sales or exchanges of capital assets is the net gain reported in total income. It is the result of combining net short- and long-term capital gain and loss and any capital loss carryover from years 1946-50, inclusive, not previously deducted.

Sales of capital assets include worthless stocks, worthless bonds if they are capital assets, nonbusiness bad debts, certain distributions from employees' trust plans, and each participant's share of net short- and long-term gain and loss received through partnerships.

14 Net loss from sales or exchanges of capital assets is the allowable loss used in computing net income taxable to the fiduciary. It is the result of combining net short- and long-term capital gain and loss and any capital loss carryover from the years 1946-50, inclusive, not previously allowed. Deduction for the loss, however, is limited to the amount of such loss, or to the net income computed without regard to gains and losses from sales of capital assets, or to $1,000, whichever is smallest. (Also see par. 2, note 13.)

15 Net gain from sales or exchanges of property other than capital assets is that from the sales of (1) property used in trade or business of a character which is subject to the allowance for depreciation, (2) obligations of the United States or any of its possessions, a State or Territory or any political subdivision thereof, or the District of Columbia, issued on a discount basis and payable without interest at a fixed maturity date not exceeding 1 year from date of issue, (3) real property used in trade or business, and (4) certain copyrights or artistic compositions.

18 Net loss from sales or exchanges of property other than capital assets is the net loss from sales of property listed in note 15. 17 Income from other fiduciaries excludes taxable and partially

18 Miscellaneous income includes taxable income from sources not elsewhere tabulated.

19 Interest paid is that paid on debts, mortgages, notes, and bank loans; it excludes interest reported in schedules for business and rent income, and interest on indebtedness incurred to buy taxexempt securities or a single premium life insurance or endowment contract.

20 Taxes paid include State income taxes, certain retail sales taxes, and real estate taxes except those levied for improvements which tend to increase the value of property. This deduction excludes Federal income taxes, estate, inheritance, legacy, succession taxes, and gift taxes; taxes deducted in schedules for business and rent income; and income taxes paid to a foreign country or possession of the United States if any portion thereof is claimed as a tax credit.

21 Miscellaneous deductions include bad debts, net operating loss deductions, losses from fire, storm, shipwreck, or other casualty, or from theft, not compensated by insurance or otherwise, and other authorized deductions except interest and taxes.

22 Balance income is the excess of total income over total deductions, that is, income before the amount distributable to beneficiaries is deducted.

23 Net income taxable to fiduciary is the net income remaining in the hands of the fiduciary after deductions for allowable expenses and amount distributable to beneficiaries.

24 Amount of exemption is $600 for each estate and $100 for each trust, in the form of a credit against net income taxable to fiduciary for purposes of both normal tax and surtax.

25 Less than $500.

26 Net income classes are based on the amount of net income taxable to fiduciary (see note 23).

27 Average tax is based on the tax liability after the deduction for tax credits relating to income tax paid at source on interest from tax-free covenant bonds and to income tax paid to a foreign country or possession of the United States.

28 Returns with normal tax and surtax are returns on which the regular normal tax and surtax is reported, that is, all returns except those on which the alternative tax is imposed.

29 Returns with alternative tax are returns showing a net longterm capital gain or an excess of net long-term capital gain over net short-term capital loss, on which the alternative tax is less than the regular normal tax and surtax computed on net income which includes all net gain from sales of capital assets. (Alternative tax is not effective on returns with surtax net income under $16,000.)

30 Returns with net loss from sales of capital assets are those showing a deduction from gross income on account of a statutory capital loss resulting from the combined net short- and long-term capital gain and loss and the allowable carryover. (See also note 14.)

31 Short-term applies to gains and losses from the sales or exchanges of capital assets held 6 months or less and 100 percent of the recognized gain or loss thereon is taken into account in computing net short-term capital gain or loss. The amount reported is a combination of short-term gains and losses for the current year, together with those received through partnerships.

32 Long-term applies to gains and losses from the sales or exchanges of capital assets held more than 6 months and 50 percent of the recognized gain or loss thereon is taken into account in computing net long-term capital gain or loss. The amount reported includes such gain or loss received through partnerships.

23 Capital loss carryover reported on the 1951 returns is a combination of the 1950 net capital loss and the remaining capital loss carryovers from 1946-49, not offset by net capital gains of the succeeding years 1947-50. A net capital loss of any year, to be used as a capital loss carryover, is the excess of current year capital losses over the sum of (1) current year capital gains and (2) the smaller of $1,000 or current year net income computed without regard to capital gains and losses. A net capital loss may be carried forward as a short-term capital loss for five succeeding years to the extent not previously eliminated.

34 Returns with net gain from sales of capital assets are returns showing a statutory capital gain in total income, resulting from the combination of net short- and long-term capital gain and loss and the allowable carryover. (See also note 13.)

35 This excess is the approximate amount subject to the 50 percent alternative tax rate; it is the excess of the net long-term capital gain over the net short-term capital loss (before carryover) tabulated in this table. This arbitrary method overstates the excess in cases where a carryover was combined with a shortterm loss to determine the excess long-term gain, or where a carryover exceeded the short-term gain resulting in a short-term loss which was used to determine the excess long-term gain, or where there was no short-term gain or loss but a carryover was