A deed transferring title to property to a building and loan association for the purpose of securing a loan on the property so conveyed, which property is immediately reconveyed to its owner, is not subject to tax, the deed of reconveyance being likewise exempt. A deed given by a husband and wife to a "straw man" who immediately executes a deed reconveying the property to the wife is not subject to tax if given for no valuable consideration or merely the nominal consideration of $1, and, likewise, the deed of reconveyance is exempt. Instructions relative to form of declaration to be used by mannfacturers. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, To collectors of internal revenue: Washington, D. C., January 8, 1915. You are informed that the form of declaration to be used by manufacturers at the end of the month for manufactures taxable under Schedule B of the act of Congress approved October 22, 1914, is contained in T. D. 2108. Such form should be followed by manufacturers in making declaration of goods removed during the month of December. It is expected that this form will be issued by this office to collectors during the present month and will be available for manufactures removed during January. T. D. 2108 provides that the wholesale dealer, jobber, importer, or other person who puts goods in suitable condition in proper containers for sale to the ultimate consumer at retail will be deemed the manufacturer of such goods. It would, therefore, appear to be necessary for manufacturers, wholesale dealers, jobbers, importers, or others putting goods in condition, as above stated, for sale to the ultimate consumer at retail to make declaration of such goods removed during the month. It will not be held, however, to include retail dealers whose chief business is vending, but who occasionally compound in relatively small quantity, taxable articles under the statute. This form of declaration is required by the statute to be made to the collector of the district, and the same should, therefore, be retained as a part of his files. A copy will not be required for this office. W. H. OSBORN, (T. D. 2117.) Emergency revenue law-Theaters. Special-tax stamp of theater at lower rate may be redeemed upon such theater increas ing its seating capacity and taking out additional stamp at higher rate. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., January 11, 1915. SIR: This office is in receipt of your communication of the 30th ultimo, in which you state that the Co. of Quincy, qualified as proprietor of theater, paying tax on a seating capacity of over 500 and not exceeding 800, and that during the month of December this concern moved their theater to a building of larger capacity, and have tendered additional tax on seating capacity of over 800. You request to be advised as to redeeming the first special-tax stamp issued. Replying, you are informed that the first special-tax stamp should be transferred to the new location, and upon proponents taking out special tax at the higher rate from November 1, 1914, they may present special-tax stamp at the lower rate for redemption. Respectfully, Mr. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2118.) Emergency revenue law-Articles subject to stamp tax. Penalty for selling or offering for sale unstamped articles subject to tax. TREASURY DEpartment, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., January 11, 1915. To collectors of internal revenue and others concerned: DOMESTIC AND IMPORTED WINES, LIQUEURS, OR CORDIALS. The attention of this office has been called to the fact that many dealers in wines, liqueurs, and cordials taxable under the act of October 22, 1914, continue to sell such taxable articles unstamped and to forward the required stamps to collectors with Form 672, prescribed in T. D. 2027. The privilege of thus paying the tax was accorded dealers only until they were able to procure the necessary stamps to affix to bottles or other containers in which such articles were offered for sale. Sufficient time has elapsed for this purpose, and all unstamped wines, liqueurs, or cordials now offered for sale are subject to seizure under the provisions of section 2 of said act. Collectors will see that the provisions of this statute are hereafter strictly enforced and that all returns (Form 672), with attached stamps, now on file in their respective offices are at once forwarded to this office. SCHEDULE B ARTICLES. The attention of collectors is also called to the penalties imposed by section 19 of said act, for sale of unstamped articles taxable under Schedule B, and they will see that the requirements of the act with respect to these articles are also strictly enforced. Schedule of such unstamped articles, if on file in collectors' offices, should also be at once forwarded to this office. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2119.) Emergency revenue law-Insurance policies. Tax held to accrue upon the issuance of a continuous or long-term policy of insurance in proportion to the amount of premium due and payable when issued; stamps shall be affixed upon receipts covering payment of subsequent premiums or assessments. When whole premium due in advance, taxable upon issuance of policy. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., January 11, 1915. To collectors of internal revenue and others concerned: A ruling has lately been requested of this office concerning the manner of collection of the tax imposed upon policies of insurance by the act of October 22, 1914, in the case of long-term policies, continuous policies, and policies of indefinite duration, and also in the case of assessments upon mutual and other policies of insurance. The question has been raised as to whether, in case of policies covering a long period, stamps will be required upon the issuance thereof in proportion to the total amount of premium that might be collected under their terms during the life of such policies. Such a rule is manifestly impracticable in the case of continuous policies or policies of indefinite duration, and since it is impossible to tax policies indefinite in duration in proportion to the total amount of premiums ultimately collectible thereunder, it would be obviously unjust to apply such a ruling to policies covering a long term of years, but of definite duration, when most of the premiums thereon are not due and payable until after the expiration of the act. It is therefore held that as to policies issued subsequent to December 1, 1914, and running for an indefinite period, or for a period ending later than the date of expiration of the act, stamps shall be affixed upon the issuance of such a policy in an amount proportioned to the sum which shall be due and payable as premiums thereon when issued. Stamped receipts shall be issued covering the payment of further premiums falling due and assessments levied under such policies during the life of the act, such receipts to be filed with the original policies. This is not to be understood to affect in any way previous rulings by this office that when, by terms of a policy of insurance, taxable under the act in question and covering a number of years, the whole premium due under such policy is payable in advance, tax is due upon the issuance of such policy in proportion to the total premium charged. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2120.) Emergency revenue law-Gins. Instructions relative to taxation of gins under section 2, act of Congress approved October 22, 1914, as similar compounds to liqueurs and cordials. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, To collectors of internal revenue: From investigation made by the chemist of this bureau it would appear that a small amount of sugar is commonly added by rectifiers to gins in order to give them a smooth or finished taste. Where, however, sugar or glycerin is added by rectifiers to a gin which does not contain flavoring material other than that usually incorporated in the process of the manufacture of gin by rectifiers, this office will not hold the same to be a cordial or similar compound unless the obscuration of proof exceeds 10 degrees. This will permit the addition by rectifiers of approximately 1.8 per cent of sugar in 80-degree proof gin. If other solid or extractive material is present, it will, of course, affect the proof thereof. Therefore, in adding sugar or glycerin account should be taken by the rectifier of such material, as in all cases of an obscuration of over 10 degrees of proof this office will hold same to be a cordial or similar compound, taxable at the rate of 24 cents per gallon. Buchu gins, as now compounded, are intended to be included in this decision, and such gins, unless showing more than 10 degrees obscuration, will not be taxable as similar compounds to liqueurs and cordials. It will be understood that this ruling applies to gins only compounded by rectifiers and to no other alcoholic compounds. W. H. OSBORN, Commissioner of Internal Revenue. (T. D. 2121.) Special excise tax on corporations—Decision of court. 1. DEDUCTION OF TAXES DUE FROM STOCKHOLDERS. The State tax on capital stock of banks under the Massachusetts statute falls directly on the stockholders, and these taxes can not be legally deducted from gross income in returns made by banks under the corporation tax act. The tax is not upon the banks and in paying it they act as agents. 2. RETURNS. The Commissioner of Internal Revenue, upon evidence produced before him, is authorized to amend incorrect returns or make a return, as the case may be. 3. ASSESSMENTS. The Commissioner of Internal Revenue is authorized to make additional assessments after the taxes have been assessed and paid on the original returns, even though the errors in the original returns were made without any intention to deceive or mislead. 4. FALSE OR FRAUDULENT Returns. In the provision in question relative to assessments the word "false" includes returns which are merely incorrect. In some instances the term "false" as used in the act means willfully and intentionally false. 5. THE THREE YEARS' LIMITATION. The statute does not require the additional assessment to be made within the three years' period. The limitation is upon the discovery of the error by the commissioner within three years. 6. DECISION OF UNITED STATES DISTRICT COURT SUSTAINED. The decision of the United States District Court for the District of Massachusetts (210 Fed., 933; T. D. 1936) is affirmed. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington, D. C., January 12, 1915. The appended decision of the United States Circuit Court of Appeals for the First Circuit is published for the information of all concerned. W. H. OSBORN, Commissioner of Internal Revenue. |