mentality thereof which is wholly owned by the United States, or (2) any mutual fund established under the authority of the laws of any State. (ee) Long-term capital gains. In the case of a taxpayer other than a corporation, the deduction for long-term capital gains provided in section 117 (b). (ff) Deduction of exploration expenditures. (1) In general. In the case of expenditures paid or incurred during the taxable year for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, and paid or incurred prior to the beginning of the development stage of the mine or deposit, so much of such expenditures as does not exceed $75,000. This subsection shall apply only with respect to the amount of such expenditures which, but for this subsection, would not be allowable as a deduction for the taxable year. This subsection shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation provided in section 23 (1), but allowances for depreciation shall be considered, for the purposes of this subsection, as expenditures paid or incurred. In no case shall this subsection apply with respect to amounts paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of oil or gas. (2) Election of taxpayer. If the taxpayer elects, in accordance with regulations prescribed by the Secretary, to treat as deferred expenses any portion of the amount deductible for the taxable year under paragraph (1), such portion shall not be deductible under paragraph (1) but shall be deductible on a ratable basis as the units of produced ores or minerals discovered or explored by reason of such expenditures are sold. An election made under this paragraph for any taxable year shall be binding for such year. (3) Limitation. This subsection shall not apply to any amounts paid or incurred in any taxable year if in any four preceding years the taxpayer, or any individual or corporation who has transferred to the taxpayer any mineral property under circumstances which make the provisions of paragraph (7), (8), (11), (13), (15), (17), (20), or (22) of section 113 (a) applicable to such transfer, has either (A) been allowed a deduction under paragraph (1) of this subsection or (B) made the election provided under paragraph (2) of this subsection. (4) Adjusted basis of mine or deposit. The amount of expenditures which are treated under paragraph (2) as deferred expenses shall be taken into account in computing the adjusted basis of the mine or deposit, but such amounts, and the adjustments to basis provided in section 113 (b) (1) (M) shall be disregarded in determining the adjusted basis of the property for the purpose of computing a deduction for depletion under section 114. (53 Stat. 12; June 29, 1939, 10 p. m., E. S. T., ch. 247, title II, §§ 211 (a), 224, 53 Stat. 867, 880; Oct. 8, 1940, 11 p. m., E. S. T., ch. 757, title III, § 301, title V, § 506 (b), 54 Stat. 998, 1008; Mar. 7, 1941, ch. 10, § 10 (b), 55 Stat. 27, eff. Oct. 8, 1940, 11 p. m., E. S. T.; Sept. 20, 1941, 12:15 p. m., E. S. T., ch. 412, title II, § 202 (a), 55 Stat. 700; Oct. 21, 1942, 4:30 p. m., E. W. T., ch. 619, title I, §§ 105 (c), 120 (b), 121 (a, c), 122, 123 (a), 124 (a), 125, 126 (a), 127 (a, c), 128, 134 (d), 158 (b), 162 (b), 56 Stat. 806, 817, 819, 820, 822, 825, 826, 830, 857, 863; Feb. 25, 1944, 12:49 p. m., E. W. T., ch. 63, title I, §§ 111, 112 (a), (b), 113 (a), 114, 115, 58 Stat. 34-36; May 29, 1944, 7 p. m., E. W. T., ch. 210, part I, §§ 8 (b), (c), 9 (a), 58 Stat. 236; Nov. 8, 1945, 5:17 p. m., E. S. T., ch. 453, title I, § 102 (b) (1), 59 Stat. 558; Dec. 29, 1945, ch. 652, title II, § 202 (a), 59 Stat. 673; Feb. 26, 1947, ch. 7, §§ 1, 2, 61 Stat. 6; Aug. 8, 1947, ch. 515, § 16, 61 Stat. 920; Apr. 2, 1948, 3:18 p. m., E. S. T., ch. 168, title II, § 202 (e), title III, §§ 302, 304, 62 Stat. 114, 116; Oct. 25, 1949, ch. 720, § 3 (a), 63 Stat. 892; Sept. 23, 1950, 3:15 p. m., E. D. T., ch. 994, title II, §§ 204 (a), 216 (b), title III, pt. III, § 332 (a, b), 64 Stat. 929, 941, 959; Jan. 3, 1951, 10:13 a. m., ch. 1199, title III, § 303, 64 Stat. 1219; May 12, 1951, ch. 56, § 1, 65 Stat. 40; Oct. 20, 1951, 2:07 p. m., E. S. T., ch. 521, title III, §§ 307 (a), 308 (a), (b), 309 (a), 313 (e)—(g), 322 (a) (1), 342 (a), 65 Stat. 485, 490, 499, 515; July 8, 1952, ch. 588, §§ 2, 4 (a), 66 Stat. 442; July 9, 1952, ch. 598, § 101, 66 Stat. 467.) DERIVATION Act May 28, 1938, ch. 289, § 23, 52 Stat. 460. REFERENCES IN TEXT Chapter 2E, referred to in the text of subsections (a) (1) (C) and (c) (1) (B), relating to excess profits tax, was repealed as follows: sections 741 and 752 by act Oct. 21, 1942, 4:30 p. m., E. W. T., ch. 619, title II, §§ 224 (b), 228 (b), 229 (a) (1), 56 Stat. 920, 925, 931; sections 710-736, 740, 742-744, 750, 751, 760, 761 and 780-784 by act Nov. 8, 1945, ch. 453, title I, § 122 (a), 59 Stat. 568. Title II of the Revenue Act of 1917, referred to in the text of subsection (c) (1) (B), refers to act Oct. 3, 1917, ch. 63, title II, § 200 et seq., 40 Stat. 302. Title III of the Revenue Act of 1918, referred to in the text of subsection (c) (1) (B), refers to act Feb. 24, 1919, ch. 18, title III, § 300 et seq., 40 Stat. 1088. Title III of the Revenue Act of 1921, referred to in the text of subsection (c) (1) (B), refers to act Nov. 23, 1921, ch. 136, title III, § 300 et seq., 42 Stat. 271. Section 216 of the National Industrial Recovery Act, referred to in the text of subsection (c) (1) (B), refers to act June 16, 1933, ch. 90, § 216, 48 Stat. 208. Section 702 of the Revenue Act of 1934, referred to in the text of subsection (c) (1) (B), refers to act May 10, 1934, ch. 277, § 702, 48 Stat. 770. AMENDMENTS 1952-Subsec. (a) (1) (A) amended by act July 8, 1952, § 2, to allow under this subparagraph the deduction of such expenses as are described in section 22 (b) (16) of this title only to the extent they exceed the amount excluded from gross income. Subsec. (k) amended by act July 9, 1952, which added paragraph (6). Subsec. (0) amended by act July 8, 1952, § 4 (a), by increasing the limit of charitable deductions from gross income from 15 per cent to 20 per cent. 1951-Subsec. (a) (1) (C) amended by act Jan. 3, 1951, to make it conform to the addition of subchapter D of this chapter. Subsec. (c) (3) amended by act May 12, 1951 to allow consumers of gasoline or other motor vehicle fuel to deduct, for income-tax purposes, State taxes imposed on wholesalers and passed on to consumers. Subsec. (k) (1) amended by act Oct. 20, 1951, § 313 (e), to add last sentence. Subsec. (r) amended by act Oct. 20, 1951, § 313 (f), to insert subparagraph (1) and make former text of subsection subparagraph (2). Subsec. (x) amended by act Oct. 20, 1951, § 307 (a), to remove the 5 per cent limitation for any taxpayer if either the taxpayer or his spouse is aged 65 or over. Subsec. (aa) (3) amended by act Oct. 20, 1951, § 308 (a), to strike out of subparagraphs (A) and (B) the word "only" preceding "if the taxpayer", and to provide in subparagraph (C) that a taxpayer's failure to signify his election to take the standard deduction shall be considered his election not to take the standard deduction. Subsec. (aa) (7) added by act Oct. 20, 1951, § 308 (b). Subsecs. (cc), (dd), (ee), (ff), added by act Oct. 20, 1951, §§ 309 (a), 313 (g), 322 (a) (1), 342 (a), respectively. 1950 Subsec. (o) (2) amended by act Sept. 23, 1950, § 332 (a), which substituted "legislation. For disallowance of certain charitable, etc., deductions otherwise allowable under this paragrpah, see sections 3813 and 162 (g) (2);" in lieu of "legislation:". Subsec. (q) (2) amended by act Sept. 23, 1950, § 332 (b), which substituted "legislation. For disallowance of certain charitable, etc., deductions otherwise allowable under this paragraph, see sections 3813 and 162 (g) (2); or" in lieu of “legislation:". Subsec. (t) amended by act Sept. 23, 1950, § 216 (b), which substituted "section 124 and section 124A" in lieu of "section 124." Subsec. (bb) added by act Sept. 23, 1950, § 204 (a). 1949 Subsec. (q) amended by act Oct. 25, 1949, which added last two sentences to liberalize the rule respecting time for payment of charitable contributions. 1948 Subsec. (x) amended by act Apr. 2, 1948, § 304, which increased the deductions allowable where there is a joint return to $3,750 if there are three exemptions under section 25 (b) of this title, and to a maximum $5,000 if there are four or more exemptions under said section 25 (b). Subsec. (y) repealed by act Apr. 2, 1948, § 202 (e), related to exemptions for the blind, and is now covered by section 25 (b) of this title. Subsec. (aa) (1) amended by act Apr. 2, 1948, § 302 (a), which increases the standard deduction from $500 to $1,000 or an amount equal to 10 per centum of the adjusted gross income whichever is the lesser. Subsec. (aa) (4) amended by act Apr. 2, 1948, § 302 (b), which splits up former subsec. (aa) (4) into two new subpars., namely (4) and (6), and makes both husband and wife itemize their deductions, rather than take the standard deduction, if one of them so itemizes. Subsec. (aa) (6) added by act Apr. 2, 1948, § 302 (c), and relates to the determination of the status of individuals as husband and wife which formerly was contained in the last sentence of subsec. (aa) (4). 1947-Subsec. (q) (2) amended by act Aug. 8, 1947, which substituted for the war termination clause the specific date of Dec. 31, 1948. Subsec. (q) (4) added by act Feb. 26, 1947. 1945 Subsec. (p) (2) amended by act Dec. 29, 1945, which struck out "January 1, 1943" and "December 31, 1942" and inserted in lieu thereof "January 1, 1942" and "December 31, 1941" respectively. Subsec. (x) amended by act Nov. 8, 1945, § 102 (b) (1) which struck out "surtax" wherever appearing therein. 1944 Subsec. (c) (1) amended by act Feb. 25, 1944, which struck out "and" at end of subpar. (D), struck out period at end of subpar. (E) and inserted in lieu thereof "; and”, and added subpar. (F). Subsec. (g) (4) (B) amended by act Feb. 25, 1944, which added material within parentheses following "rents" and "interests", respectively. Subsec. (k) (1) amended by act Feb. 25, 1944, which closed parenthesis after "Commissioner" instead of after "bad debts", and changed "become worthless within" to read "charged off”. Subsec. (k) (5) (B) amended by act Feb. 25, 1944. which added material within parenthesis following "rents" and "interests", respectively. Subsec. (o) (5) amended by act May 29, 1944, which struck out "net income as computed without the benefit of this subsection or of subsection (x)" following "15 per centum of the taxpayer's" and inserted in lieu thereof "adjusted gross income." Subsec. (q) amended by act Feb. 25, 1944, which inserted "veteran rehabilitation service" following "scientific" in second par., added "or" at end of second par., and added par. (3). Subsec. (x) amended generally by act May 29, 1944, which among other changes deleted subds. (1) and (2). Subsec. (y) added by act Feb. 25, 1944. Subsec. (aa) added by act May 29, 1944. 1942-Subsecs. (a), (c) (1, B, C), (g) (4), (k), (l), (0) — (q) amended and subsecs. (c) (3), (g) (4), (u)—(x), (z) added by act Oct. 21, 1942. 1941-Subsec. (a) (3), added by act Mar. 7, 1941. Subsec. (c) amended by act Sept. 20, 1941. 1940 Subsec. (c) (1) amended by act Oct. 8, 1940, § 506 (b). Subsec. (t) added by act Oct. 8, 1940, § 301. 1939-Subsec. (o) (1), (2) amended by act June 29, 1939. Subsec. (q) amended by act June 29, 1939. EFFECTIVE DATE OF 1952 AMENDMENTS Amendment of subsection (k) was made applicable with respect to taxable years beginning after Dec. 31, 1951, by section 101 of act July 9, 1952. Section 3 of act July 8, 1952, provided in part that the amendment of subsection (a) (1) (A) should apply only with respect to sports programs conducted after July 8, 1952, under agreements entered into after such date. Section 4 (c) of act July 8, 1952, provided in part that the amendment of subsection (o) should apply only with respect to taxable years beginning after Dec. 31, 1951. EFFECTIVE DATE OF 1951 AMENDMENTS Section 2 of act May 12, 1951 provided that the amendment of subsection (c) (3) by section 1 of said act May 12, 1951, should apply to taxable years beginning after Dec. 30, 1951. Amendments of subsecs. (k) (1), (r), and (dd) made applicable only with respect to taxable years beginning after Dec. 31, 1951, by section 313 (j) of act Oct. 20, 1951. Amendment of subsec. (x) was made applicable only with respect to taxable years beginning after Dec. 31, 1950, by section 307 (b) of act Oct. 21, 1951. Amendment of subsec. (aa) made applicable only with respect to taxable years beginning after Dec. 31, 1949, by section 308 (c) of act Oct. 20, 1951. Addition of subsec. (cc) made applicable only with respect to taxable years ending after Dec. 31, 1950, by section 309 (d) of act Oct. 20, 1951. Addition of subsec. (ee) made applicable only with respect to taxable years beginning on or after Oct. 20, 1951, by section 322 (d) of act Oct. 20, 1951. Addition of subsec. (ff) made applicable to taxable years beginning after Dec. 31, 1950, by section 342 (c) of act Oct. 20, 1951. EFFECTIVE DATE OF 1950 AMENDMENT Section 204 (c) of act Sept. 23, 1950, provided that: "The amendments made by this section [amending this section and section 113 of this title] shall be applicable with respect to taxable years beginning after December 31, 1945, except that in the case of any taxable year beginning prior to January 1, 1950 "(1) the amendments shall not be applicable with respect to expenditures for which a deduction was not allowed the taxpayer for such year, if allowance of credit or refund with respect to such year is barred on the date of the enactment of this Act [Sept. 23, 1950] by reason of any law or rule of law; and "(2) the election provided in section 23 (bb) of the Internal Revenue Code [subsec. (bb) of this section] shall not (despite the last sentence of such section) be applicable with respect to any expenditure for which a deduction was claimed by the taxpayer under his latest treatment, prior to the date of the enactment of this Act [Sept. 23, 1950], of such expenditure in connection with his tax liability for such taxable year." Amendment of subsection (t) as applicable with respect to taxable years ending after Dec. 31, 1949, see note set out under section 124A of this title. EFFECTIVE DATE OF 1949 AMENDMENT Section 3 (c) of act Oct. 25, 1949, provided that: "The amendments made by this section [to sections 23 (q), 102 (d) (1) (B), 336 (a) (2), 505 (a) (2)] shall be applicable with respect to taxable years beginning after December 31, 1942. If the election provided for in such amendments is made for any taxable year beginning before January 1, 1949— "(1) the election for such year may be made (in lieu of at the time of the filing of the return for such year) at any time within one year after the date of the enactment of this Act [Oct. 25, 1949]; but "(2) such election shall not be allowed unless the taxpayer, in accordance with regulations prescribed by the Commissioner with the approval of the Secretary, consents in writing to the assessment (within such period as may be agreed upon) of any deficiency, to the extent resulting from such election, for any other taxable year of the taxpayer, even though on the date of the filing of such consent such assessment is otherwise prevented by the operation of any law or rule of law." EFFECTIVE DATE OF 1948 AMENDMENTS Section 203 of act Apr. 2, 1948, provided that amendments made by sections 201 and 202 of said act Apr. 2, 1948, to sections 23 (y), 25 (b) (1), (2), 51 (a), 58 (a), 142 (a), 147 (a), 163 (a) (1), and 1622 (h) (1) of this title should be applicable to taxable years beginning after Dec. 31, 1947, and that taxable years beginning in 1947 and ending in 1948 shall be governed by subsec. (d) of section 108 of this title. Section 305 of act Apr. 2, 1948, provided in part that the amendments to this section by sections 302 and 304 of said act Apr. 2, 1948, should be applicable with respect to taxable years beginning after Dec. 31, 1947, and that taxable years beginning in 1947 and ending in 1948 shall be governed by section 108 (d) of this title. EFFECTIVE DATE OF 1945 AMENDMENTS Amendment of subsec. (p) (2) by act Dec. 29, 1945, § 202 (a) was made effective as if it had been made a part of section 162 (b) of act Oct. 21, 1942, by section 202 (b) thereof. Amendment of subsec. (x) by act Nov. 8, 1945, § 102 (b) (1) was made applicable to taxable years beginning after Dec. 31, 1945, by section 102 (c) thereof. For treatment of taxable years beginning in 1945 and ending in 1946, see sections 108 and 710 of this title. EFFECTIVE DATE OF 1944 AMENDMENTS Act May 29, 1944, §§ 8 (b), (c), 9 (a), made applicable to taxable years beginning after Dec. 31, 1943, by section 2 thereof. Act Feb. 25, 1944, § 111, made applicable to taxable years beginning after Dec. 31, 1943, by section 101 thereof. Act Feb. 25, 1944, § 112 (a, b), made applicable to taxable years beginning after Dec. 31, 1941, by section 112 (c) thereof. Act Feb. 25, 1944, § 113 (a), made effective to taxable years beginning after Dec. 31, 1938, by section 113 (b) thereof. Act Feb. 25, 1944, § 114, made applicable to taxable years beginning after Dec. 31, 1943, by section 101 thereof. Act Feb. 25, 1944, § 115, made applicable to taxable years beginning after Dec. 31, 1943, by section 101 thereof. EFFECTIVE DATE OF 1942 AMENDMENT Amendments to subsecs. (c) (1) (B), (2, 3), (g) (4), (o), (q), (v), (x), (z) by act Oct. 21, 1942, §§ 105 (c, C 2), 122, 123 (a), 127 (c), 125, 126 (a), 127 (a), 128, were all made applicable to taxable years beginning after Dec. 31, 1941, by section 101 thereof. Amendments of subsec. (a) and subsec. (1), first sentence, by act Oct. 21, 1942, made applicable to taxable years beginning after Dec. 31, 1938, by section 121 (d) thereof. Amendment of subsec. (c) (1) (C) by act Oct. 21, 1942, § 158 (b), made applicable to taxable years beginning after Dec. 31, 1940, by section 158 (c) thereof. Amendment of subsec. (k) by act Oct. 21, 1942, § 124 (a), made effective by section 124 (d) thereof as follows: "(d) The amendments made by this section adding the last sentence of section 23 (k) (1) and adding section 23 (k) (4) shall be effective only with respect to taxable years beginning after December 31, 1942; the amendment inserting section 23 (k) (5) and amendments related thereto shall be applicable only with respect to taxable years beginning after December 31, 1941; and the other amendments made by this section (to sections 204 (c) (6) and 3771 (d)) shall be effective with respect to taxable years beginning after December 31, 1938." Amendment of subsec. (p) by act Oct. 21, 1942, § 162 (b), made effective by section 162 (d) thereof as amended by acts Dec. 17, 1943, ch. 346, § 3, 57 Stat. 602; Dec. 20, 1944, ch. 616, § 2, 58 Stat. 830, as follows: "(d) The amendments made by this section (to sections 22 (b) (2) (B), 23 (p), 165 of this title and section 80a-3 (c) (13) of Title 15) shall be applicable as to both the employer and employees only with respect to taxable years of the employer beginning after December 31, 1941, except that "(1) In the case of a stock bonus, pension, profit-sharing, or annuity plan in effect on or before September 1, 1942, "(A) such a plan shall not become subject to the requirements of section 165 (a) (3), (4), (5), and (6) until the beginning of the first taxable year beginning after December 31, 1942. "(C) if the contribution of an employer to such a plan in the employer's taxable year beginning in 1942 exceeds the maximum amount deductible for such year under section 23 (p) (1), as amended by this section, the amount deductible in such year shall be not less than the sum of "(i) the amount paid in such taxable year prior to September 1, 1942, and deductible under section 23 (a) or 23 (p) prior to amendment by this section, and "(ii) with respect to the amount paid in such taxable year on or after September 1, 1942, that proportion of the amount deductible for the taxable year under section 23 (p) (1), as amended by this section, which the number of months after August 31, 1942, in the taxable year bears to twelve. "(B) 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 beginning of the first taxable year following December 31, 1942, and ending June 30, 1945, if the provisions thereof satisfy such requirements by June 30, 1945, and if by that time all provisions of such plan which are necessary to satisfy such requirements are in effect and have been made effective for all purposes with respect to the portion of such period after December 31, 1943. "(2) A stock bonus, pension, profit-sharing, or annuity plan "(A) put into effect after September 1, 1942, and prior to January 1, 1945, shall be considered as satisfying the requirements of section 165 (a) (3), (4), (5), and (6) for the period beginning with the date on which it was put into effect and ending with June 30, 1945, if all provisions of the plan which are necessary to satisfy such requirements are in effect by the end of such period and have been made effective for all purposes with respect to the portion of such period after December 31, 1943; "(B) put into effect after December 31, 1944, shall be considered as satisfying the requirements of section 165 (a) (3), (4), (5), and (6) for the period beginning with the date on which it was put into effect and ending with the 15th day of the third month following the close of the taxable year of the employer in which the plan was put in effect, if all provisions of the plan which are nec essary to satisfy such requirements are in effect by the end of such period and have been made effective for all purposes with respect to the whole of such period." Amendment adding subsec. (u) by act Oct. 21, 1942, § 120 (b), was made effective by section 120 (g) thereof as follows: "(g) The amendments made by this section (to sections 22 (b) (2), (k), 23 (u), 25 (b) (2) (A), 171 and 3797 (a) (17)) shall be applicable only with respect to taxable years beginning after December 31, 1941; except that if the first taxable year beginning after December 31, 1941, of the husband does not begin on the same day as the first taxable year beginning after December 31, 1941, of the wife, such amendments shall first become applicable in the case of the husband on the first day of the wife's first taxable year beginning after December 31, 1941, regardless of the taxable year of the husband in which such day falls." Amendment adding subsec. (w) by act Oct. 21, 1942, § 134 (d), made applicable to taxable years ending after Dec. 31, 1942, by section 134 (f) thereof. EFFECTIVE DATE OF 1941 AMENDMENTS Section 205 of act Sept. 20, 1941, provided that the amendment of this section was made applicable to taxable years beginning after Dec. 31, 1940. Section 17 of act Mar. 7, 1941, provided that the amendment of subsec. (a) (3) should be effective as of Oct. 8, 1940, 11 p. m., E. S. T., and applicable to taxable years beginning after Dec. 31, 1939. EFFECTIVE DATE OF 1940 AMENDMENT Section 506 (b) of act Oct. 8, 1940 provided that the amendment of subsec. (c) (1) should be effective as of Feb. 10, 1939. EFFECTIVE DATE OF 1939 AMENDMENTS Section 229 of act June 29, 1939 provided that the amendment of subsecs. (o) (1), (2) and (q) were made applicable only with respect to taxable years beginning after Dec. 31, 1939. TRANSFER OF FUNCTIONS All functions of all officers of the Department of the Treasury, and all functions of all agencies and employees of such Department, were transferred, with certain exceptions, to the Secretary of the Treasury, with power vested in him to authorize their performance or the performance of any of his functions, by any of such officers, agencies, and employees, by 1950 Reorg. Plan No. 26, §§ 1, 2, eff. July 31, 1950, 15 F. R. 4935, 64 Stat. 1280, set out in note under section 241 of Title 5, Executive Departments and Government Officers and Employees. Commissioner of Internal Revenue, referred to in this section, is an officer of the Treasury Department. SIMILAR PROVISIONS The 1936-June 22, 1936, ch. 690, § 23, 49 Stat. 1658. 1935-Aug. 30, 1935, ch. 829, § 102 (c) (h), 49 Stat. 1015. 1934-May 10, 1934, ch. 277, § 23, 48 Stat. 688. 1932-June 6, 1932, ch. 209, § 23, 47 Stat. 179. 1928-May 29, 1928, ch. 852, § 23, 45 Stat. 799. 1926-Feb. 26, 1926, ch. 27, §§ 214, 234, 44 Stat. 26, 41. 1924-June 2, 1924, ch. 234, §§ 214, 234, 43 Stat. 269, 283. 1922-Sept. 19, 1922, ch. 346, § 27, 42 Stat. 856. 1921-Nov. 23, 1921, ch. 136, §§ 214, 234, 42 Stat. 239, 254. 1919-Feb. 24, 1919, ch. 18, §§ 214, 234, 40 Stat. 1066, 1077. 1917-Oct. 3, 1917, ch. 63, §§ 1201, 1207, 40 Stat. 330, 334. 1916 Sept. 8, 1916, ch. 463, §§ 5, 12, 39 Stat. 759, 767. 1913 Oct. 3, 1913, ch. 16, § II, B, G, 38 Stat. 167, 172. CESSATION OF HOSTILITIES The cessation of hostilities of World War II, referred to in former subsec. (q) (2) of this section, relating to deduction of certain contributions by corporations, was proclaimed at 12 o'clock noon of December 31, 1946, by Proc. No. 2714, 12 F. R. 1, set out as note under section 601 of Appendix to Title 50, War and National Defense. NON-TRADE, ETC., DEDUCTIONS UNDER PRIOR REVENUE ACTS Section 121 (e) of act Oct. 21, 1942, provided as follows: "(e) For the purposes of the Revenue Act of 1938 or any prior revenue Act the amendments made to the Internal Revenue Code by this section (amending sections 23 (a), (l), and 24 (a) (5)) shall be effective as if they were a part of such revenue Act on the date of its enactment." TREATY OBLIGATIONS Section 615 of act Oct. 20, 1951, provided that: "No amendment made by this Act shall apply in any case where its application would be contrary to any treaty obligation of the United States." Similar provisions were contained in the following acts: 1950-Sept. 23, 1950, 3:15 p. m., E. D. T., ch. 994, title II, § 214, 64 Stat. 937. 1944-Feb. 25, 1944, 12:49 p. m., E. W. T., ch. 63, title I. § 136, 58 Stat. 53. 1942-Oct. 21, 1942, 4:30 p. m., E. W. T., ch. 619, title I, § 109, 56 Stat. 808. CROSS REFERENCES Federal employment taxes not deductible in computing net income, see section 1402 of this title. Withholding tax as nondeductible by employer or employee, see section 1622 (e) of this title. § 24. Items not deductible-(a) General rule. In computing net income no deduction shall in any case be allowed in respect of— (1) Personal, living, or family expenses, except extraordinary medical expenses deductible under section 23 (x); (2) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate except expenditures for the development of mines or deposits deductible under section 23 (cc); (3) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; (4) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy; (5) Any amount otherwise allowable as a deduction which is allocable to one or more classes of income other than interest (whether or not any amount of income of that class or classes is received or accrued) wholly exempt from the taxes imposed by this chapter, or any amount otherwise allowable under section 23 (a) (2) which is allocable to interest (whether or not any amount of such interest is received or accrued) wholly exempt from the taxes imposed by this chapter; (6) Any amount paid or accrued on indebtedness incurred or continued to purchase a single premium life insurance or endowment contract. For the purposes of this paragraph, if substantially all the premiums on a life insurance or endowment contract are paid within a period of four years from the date on which such contract is purchased, such contract shall be considered a single premium life insurance or endowment contract; or (7) Amounts paid or accrued for such taxes and carrying charges as, under regulations prescribed by the Commissioner with the approval of the Secretary, are chargeable to capital account with respect to property, if the taxpayer elects, in accordance with such regulations, to treat such taxes or charges as so chargeable. (b) Losses from sales or exchanges of property—(1) Losses disallowed. In computing net income no deduction shall in any case be allowed in respect of losses from sales or exchanges of property, directly or indirectly (A) Between members of a family, as defined in paragraph (2) (D); (B) Except in the case of distributions in liquidation, between an individual and a corporation more than 50 per centum in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual; (C) Except in the case of distributions in liquidation, between two corporations more than 50 per centum in value of the outstanding stock of each of which is owned, directly or indirectly, by or for the same individual, if either one of such corporations, with respect to the taxable year of the corporation preceding the date of the sale or exchange was, under the law applicable to such taxable year, a personal holding company or a foreign personal holding company; (D) Between a grantor and a fiduciary of any trust; (E) Between the fiduciary of a trust and the fiduciary of another trust, if the same person is a grantor with respect to each trust; or (F) Between a fiduciary of a trust and a beneficiary of such trust. (2) Stock ownership, family, and partnership rule. For the purposes of determining, in applying paragraph (1), the ownership of stock (A) Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries; (B) An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family; (C) An individual owning (otherwise than by the application of subparagraph (B)) any stock in a corporation shall be considered as owning the stock owned, directly or indirectly, by or for his partner; (D) The family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and (E) Constructive ownership as actual ownership.— Stock constructively owned by a person by reason of the application of subparagraph (A) shall, for the purpose of applying subparagraph (A), (B), or (C), be treated as actually owned by such person, but stock constructively owned by an individual by reason of the application of subparagraph (B) or (C) shall not be treated as owned by him for the purpose of again applying either of such subparagraphs in order to make another the constructive owner of such stock. (c) Unpaid expenses and interest. In computing net income no deduction shall be allowed under section 23 (a), relating to expenses incurred, or under section 23 (b), relating to interest accrued (1) If such expenses or interest are not paid within the taxable year or within two and one half months after the close thereof; and (2) If, by reason of the method of accounting of the person to whom the payment is to be made, the amount thereof is not, unless paid, includible in the gross income of such person for the taxable year in which or with which the taxable year of the taxpayer ends; and (3) If, at the close of the taxable year of the taxpayer or at any time within two and one half months thereafter, both the taxpayer and the person to whom the payment is to be made are persons between whom losses would be disallowed under section 24 (b). (d) Holders of life or terminable interest. Amounts paid under the laws of any State, Territory, District of Columbia, possession of the United States, or foreign country as income to the holder of a life or terminable interest acquired by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction allowed by this chapter (except the deductions provided for in subsections (1) and (m) of section 23) for the purpose of computing the net income of an estate or trust but not allowed under the laws of such State, Territory, District of Columbia, possession of the United States, or foreign country for the purpose of computing the income to which such holder is entitled. (e) Tax withheld on tax-free covenant bonds. For nondeductibility of tax withheld on tax-free covenant bonds, see section 143 (a) (3). (f) Sale of land with unharvested crop. Where an unharvested crop sold by the taxpayer is considered under the provisions of section 117 (j) (3) as "property used in the trade or business", in computing net income no deduction (whether or not for the taxable year of the sale and whether for expenses, depreciation, or otherwise) attributable to the production of such crop shall be allowed. (53 Stat. 16; Oct. 21, 1942, 4:30 p. m., E. W. T., ch. 619, title I, §§ 121 (b), 127 (b), 129, 130 (a), 56 Stat. 819, 826, 827; Oct. 20, 1951, 2:07 p. m., E. S. T., ch. 521, title III, §§ 309 (c), 323 (b) (1), 65 Stat. 487, 501.) DERIVATION Act May 28, 1938, ch. 289, § 24, 52 Stat. 464. 1951 Subsec. (a) (2) amended by act Oct. 20, 1951, § 309 (c), to add "except expenditures * section 23 (cc)" following "estate". Subsec. (f) added by act Oct. 20, 1951, § 323 (b) (1). 1942-Subsec. (a) (1, 4, 5, 7) amended and par. (6) thereof was added by act Oct. 21, 1942. EFFECTIVE DATE OF 1951 AMENDMENT Amendment of subsec. (a) (2) made applicable to taxable years ending after Dec. 31, 1950, by section 309 (d) of act Oct. 20, 1951. Amendment of subsec. (f) made applicable to any taxable year for which a deduction is disallowed by reason of |