Table 15.-INDIVIDUAL RETURNS FOR 1951 WITH BUSINESS (SOLE PROPRIETORSHIP), BY SIZE OF TOTAL RECEIPTS; BUSINESSES WITH NET PROFIT BY SELECTED INDUSTRIAL GROUPS, AND BUSINESSES WITH NET LOSS IN AGGREGATE:

RECEIPTS, AND NET PROFIT OR NET LOSS

Continued

NUMBER OF BUSINESSES TOTAL

14 Income from annuities and pensions is only the portion of amounts received during the year, which is to be included in gross income. Amounts received to the extent of 3 percent of the total cost of the annuity are reported as income annually, until the aggregate of amounts received and excluded from gross income in this year and prior years equals the total cost. Thereafter, the entire amount received is taxable and must be included in gross income. Annuities, pensions, and retirement pay upon which a tax is withheld may be reported in salaries and wages.

15 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.

16 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.

17 Business net profit is the net result of all sole proprietorship operations carried on by the taxpayer, the combined result of which is a net profit. A net loss from one business activity offsets the net profit of another.

Deductions from total receipts from business 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 not reported as a business deduction for 1951; it is now a component part of adjusted gross income or deficit.)

13 Business net loss is the net result of all sole proprietorship operations carried on by the taxpayer, the combined result of which is a net loss. A net profit from one business activity offsets the net loss of another. Deductions allowable against gross receipts from business are mentioned in paragraph 2, note 17.

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

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

21 Net operating loss deduction reported in the current year is only that portion of net operating loss from business, profession, and partnership, sustained after January 1, 1948, which is not absorbed by the required carrybacks and carryovers into years prior to 1951.

Net gain from sales or exchanges of capital assets is the net gain reported in adjusted gross income. 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 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 capital gain and loss received through partnerships.

"Net loss from sales or exchanges of capital assets is the allowable loss used in computing adjusted gross income. 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 (adjusted gross income if tax is determined from the tax table) computed without regard to gains and losses from sales of capital assets, or to $1,000, whichever is smallest. (Also see par. 2, note 22.)

"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.

Net loss from sales or exchanges of property other than capital assets is the net loss from sales of property listed in note 24.

Income from estates and trusts is the current earnings credited or paid to the taxpayer as beneficiary under an estate or a trust. The amount of such income reported excludes partially tax-exempt interest on Government obligations.

"Number of returns in adjusted gross income classes under $5,000 includes 581,354 returns, Form 1040A, showing other income consisting of wages not subject to withholding, dividends, and interest

28 Miscellaneous income includes alimony received, prizes, rewards, sweepstakes winnings, gambling profits, recoveries of bad debts and insurance received as reimbursement for medical expenses if deduction for either was taken in the prior year, and taxable income not elsewhere tabulated. Also, in adjusted gross income classes under $5,000, there are included $27,094,000 of wages not subject to withholding, dividends, and interest, not exceeding in total $100 per return, reported as other income on returns, Form 1040A.

29 Amount of exemption, allowed for purposes of normal tax and surtax, includes a per capita exemption of $600 for the taxpayer, his spouse and each dependent, together with additional exemptions, for the taxpayer and/or spouse, of $600 if blind and $600 if 65 years of age or more.

30 Income tax liability is the combined normal tax and surtax or the alternative tax after tax credits for income tax paid at source on interest from tax-free covenant bonds and for income tax paid to a foreign country or possession of the United States. Such credits are allowed only on returns with itemized deductions. "Self-employment tax is levied on the net earnings from selfemployment and is independent of the income tax liability. It is imposed regardless of the amount of income (or deficit) subject to income tax.

32 Tax withheld includes the over withholding of social security tax, that is, the excess over the maximum tax of $54, withheld because the taxpayer worked for more than one employer.

33 Number of returns (Form 1040) with payment on 1951 declaration of estimated tax includes returns showing cash payment only, returns showing only a credit for overpayment of prior year tax, and returns showing both.

34 Payments on 1951 declaration of estimated tax, reported by the taxpayer on Form 1040, include the credit for overpayment of prior year income tax, as well as the aggregate cash payments made on the 1951 declaration, Form 1040-ES.

35 Returns classified as returns with itemized deductions are long-form returns, Form 1040, on which nonbusiness deductions are itemized; long-form returns, Form 1040, without deductions (standard or itemized); and all returns with no adjusted gross income whether or not deductions are itemized.

38 Total deductions are the sum of the allowable deductions for contributions, interest paid, taxes, medical and dental expenses, losses from fire, storm, or other casualty, or from theft, and other authorized deductions against adjusted gross income.

"Net income reported on long-form returns, Form 1040, which have adjusted gross income in excess of itemized deductions. Returns with net income under $600 occur among taxable returns because of the self-employment tax.

38 Returns with net deficit occur among taxable returns for 1951, because of the self-employment tax. This tax is levied on the net earnings from self-employment regardless of the amount of net income (or deficit) subject to income tax.

"Net deficit, reported on returns, Form 1040, classified as returns with itemized deductions, consists of adjusted gross deficit on short-form returns and net deficit on long-form returns resulting from the combination of adjusted gross deficit and itemized deductions or from the excess of itemized deductions over the adjusted gross income.

40 Nontaxable returns are returns without taxable self-employment earnings which show (1) adjusted gross deficit, or (2) adjusted gross income which income when reduced by deductions (standard or itemized) and exemptions results in no income tax liability, or (3) a foreign tax credit that eliminates the income tax.

41 Number of returns is subject to sampling variation of more than 100 percent. The number of returns and data associated with such returns are not shown since they are considered too unreliable for general use; however, they are included in totals. For description of sample, see pp. 19-21.

42 Less than $500.

43 Other income comprises, for returns Form 1040A, wages not subject to withholding, dividends, and interest, reported in one sum but not exceeding in total $100 per return; and, for returns Form 1040. other income is the amount of income resulting from a combination of profit or loss from rents and royalties, from business, from sales of property, and from partnerships, together with the net operating loss deduction and income from annuities, estates and trusts, and miscellaneous sources.

"Other loss, occurring only on Form 1040, is the amount of loss resulting from a combination of profit or loss from rents and royalties, from business, from sales of property, and from partnerships, together with the net operating loss deduction and income from annuities, estates and trusts, and miscellaneous sources.

* Average income tax is based on income tax liability only; selfemployment tax is not included. The income tax base is after the tax credits for tax paid at source and tax paid to foreign countries or possessions of the United States, allowed only to taxpayers who

46 In this section of the table, returns with only self-employment tax are tabulated in their proper adjusted gross income classes regardless of the grouped class, $10,000 or more, in the section for returns with only self-employment tax.

47 Returns with normal tax and surtax are returns on which the regular combined normal tax and surtax (including the optional tax paid in lieu thereof) is reported, whether or not such returns also show a self-employment tax.

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

19 Returns with only self-employment tax are returns which have no income tax liability but which, nevertheless, do have the independently imposed self-employment tax on net earnings from selfemployment, irrespective of other income or loss.

50 The three classifications for taxpayment status as well as the various types of taxpayments are fully explained on pages 14-15.

51 Joint returns of husbands and wives include joint returns filed on Form 1040A even though the collector determined the tax on the basis of separate incomes of husband and wife.

52 Separate returns of husbands and wives include community and noncommunity income returns filed separately by husband and wife; but exclude joint returns, Form 1040A, wherein the collector determined the tax on the basis of separate incomes of husband and wife. Unequal numbers of returns for men and for women are the result of insufficient information to identify returns of married persons and the use of samples as a basis for compiling statistical data.

53 Number of exemptions for age and blindness is the number of additional exemptions allowed the taxpayer and his spouse on a joint return, for age 65 or over and for blindness.

54 Number of exemptions other than age or blindness is the number of per capita exemptions for each taxpayer and each dependent and includes the per capita exemption for the spouse on a joint return. (This is the same basis that was used for a similar frequency distribution in former years.)

55 Returns with normal tax, surtax, or alternative tax include all returns with income tax liability whether or not there is also a self-employment tax. (See notes 47 and 48.)

56 Surtax net income classes correspond to the surtax net income brackets. To provide for split-income, classes for joint returns are double the range of those for other returns.

57 Surtax net income is the amount of net income in excess of the credit for exemptions.

59 Returns with net loss from sales of capital assets are returns, Form 1040, that have a deduction from gross income on account of a statutory capital loss arising from sales and exchanges of capital assets and the allowable capital loss carryover. (Refer to note 23.)

59 Returns with net gain from sales of capital assets are returns, Form 1040, on which the adjusted gross income includes a statutory gain derived from current year sales and exchanges of capital assets combined with capital loss carryover. (Refer to note 22.)

60 Short-term applies to gains and losses from 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 includes

61 Long-term applies to gains and losses from 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.

62 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 (adjusted gross income, if tax is determined from tax table) computed without regard to capital gains and losses. A net capital loss may be carried forward as a short-term capital loss for 5 succeeding years to the extent not previously eliminated.

63 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 short-term 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 used to determine the excess long-term gain.

Data for Washington include data for returns from Alaska. 65 Business activity of the sole proprietor is classified according to the description given by the taxpayer. If the taxpayer is engaged in more than one kind of business, each kind is classified independently for its respective industrial activity.

66 The number of businesses is the actual number of different kinds of businesses reported. Where the sole proprietor operates two or more businesses of the same kind, they are counted as one business. In case of a community property return where the business income is divided between spouses, the business is counted only once.

67 For businesses with net profit for which no schedule is submitted, the amount of net profit is tabulated both as total receipts and as net profit.

68 An industrial subgroup is not shown when the number of returns with business in the subgroup is subject to sampling variation of more than 30 percent, since these data are considered too unreliable for general use. However, data for the subgroup thus omitted are included in the total for its respective industrial group. For description of sample, see pp. 19-21.

Businesses with net profit are not shown separately when the number of returns in the subgroup is subject to variations of more than 30 percent, since these data are considered too unreliable for general use. However, data thus omitted are included in the total for the subgroup as well as in the total for its respective industrial group. For description of sample, see pp. 19–21.

Size of total receipts is based on the amount of receipts from each kind of business owned. In case of business with net profit which has no supporting schedule, net profit is substituted for total receipts.

71 Businesses with net loss include the number of businesses and the net loss from businesses for which no schedule is submitted but the total receipts are not available.

72 Size of net profit is based on the amount of current year net profit from each kind of business owned by the taxpayer. (Net operating loss deduction is not a business deduction on 1951 schedule.)

73 Data for taxable returns in this section of the table include 36,741 returns with net gain from sales of capital assets which have self-employment tax only; however, these returns are not shown