The net gain and the net loss from sales of capital assets reported for the computation of adjusted gross income for 1948 is a combination of the net short- and long-term capital gain and loss of 1948 and the capital loss carry-over from 1943-1947, inclusive. Deduction for the loss, however, is limited to the smaller of $1,000 or the net income (adjusted gross income, if tax is determined from the tax table) computed without regard to capital gains and losses. The amounts of net gain and of net loss from sales of capital assets are tabulated among the specific sources comprising adjusted gross income in basic table 2; and frequency distributions of returns with such net gain or loss are shown in basic tables 3 and 4. Additional data are supplied in basic table 10 which shows the net short-term capital gain, net short-term capital loss, net long-term capital gain, net long-term capital loss, and the capital loss carry-over from 1943-1947, as reported by the taxpayer in schedule D(1), the schedule for sales of capital assets. Schedule D(1) for 1948 is set up in a different manner from that used in former years and the net short-term gain or loss is not combined with the capital loss carry-over from 1943-1947. Therefore, the net short-term capital gain and the net short-term capital loss tabulated in basic table 10 are the result of 1948 transactions and are not combined with the carry-over. For the income year 1948, there are 586,123 returns which show a deduction from gross income of $298,569,000 on account of a net loss from sales or exchanges of capital assets. The deduction is only that portion of the statutory capital loss conforming to the provision of section 117 (d) (2) of the Code which places a limitation on the amount which may be deducted to the smaller of $1,000 or net income (adjusted gross income if tax is determined from tax table) computed without regard to gains and losses from sales of capital assets. capital loss before limitation is $911,625,000 computed as provided in section 117 (b) and (e); this amount includes capital loss carry-overs of $430,449,000 reported on 103,413 returns. The On approximately 72 percent of the 586,123 returns, the net loss from sales of capital assets on each return is within the $1,000 limitation and therefore the aggregate loss of $135,733,000 (including capital loss carry-overs of $22,733,000 on 37,348 returns) is deducted in its entirety for the computation of adjusted gross income. The remaining returns show that the net loss from sales of capital assets on each return is such that the deduction is limited to the smaller of $1,000 or 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; and the aggregate loss deducted for the computation of adjusted gross income is $162,838,000 which includes an indetermi There are 1,694,230 returns with a net gain from sales or exchanges of capital assets of $2,499,662,000, computed as provided under section 117 (b) and (e), and included in gross income. On 15,447 of these returns, capital loss carry-overs of $20,001,000 are reported as shortterm capital losses and have reduced the gains to that extent. Alternative tax provided under section 117 (c) is imposed on 30,896 returns which show a net gain from sales of capital assets amounting to $555,472,000, including slightly less than $550,206,000 net long-term capital gain or excess over net short-term capital loss which is taxed at the 50 percent alternative rate. The amount subject to the alternative rate, computed in basic table 10, is a combination of the net long-term capital gain and net short-term capital loss before the carry-over. This combination results in a slight overstatement of the amount subject to the alternative rate in cases where a carry-over was combined with a short-term loss to determine the excess of longterm gain, or where a carry-over exceeded the short-term gain resulting in a short-term loss which was used to determine the excess of longterm gain, or where there is no short-term gain or loss but a carry-over was used to determine the excess long-term gain. Returns with net gain from sales of capital assets Amount 15, 447 20,001 11, 718 12, 265 2, 022 1,707 2, 034 The total capital loss carry-over from the 5-year period 1943-1947, inclusive, reported on 118,860 returns, amounts to $450,450,000. Carry-overs of $20,001,000 reported on 15,447 returns with net gain from sales of capital assets are completely absorbed; but the carryovers of $430,449,000 reported on 103,413 returns with net loss from sales of capital assets are absorbed to an unknown extent. In some cases, the carry-over may be completely absorbed, in others partly absorbed, and in others none is absorbed. Any carry-over from 1943 not absorbed in 1948 cannot be carried forward to 1949, since the five succeeding years are terminated. MEDICAL AND DENTAL EXPENSES The deduction for medical and dental expenses reported by taxpayers who itemize deductions on long-form returns, Form 1040, pertains to the amount actually paid for medical expenses during 1948, regardless of when the illness or other event which occasioned the expenses occurred, and includes the medical expenses of the taxpayer, his spouse, and dependents if not compensated for by insurance or otherwise. Medical expenses include amounts paid for diagnosis, cure, treatment, prevention of disease, and alleviation of a defect, including services rendered by physicians, surgeons, dentists, chiropractors, and osteopaths, as well as hospital expenses and amounts paid for health, accident, and hospitalization insurance, also the cost of eyeglasses, artificial limbs, hearing aids, dentures, X-ray, nursing service, medical supplies, drugs, ambulance service, and the like. Any reimbursement received by means of insurance must be applied to reduce the total medical expenses after which a deduction is allowable for that portion of the medical expenses which exceeds an amount equal to 5 percent of the adjusted gross income. However, the maximum deduction allowed under the 1948 act is limited to $1,250 multiplied by the number of exemptions other than those for age and blindness with a maximum deduction of $2,500, except that on a joint return the maximum is $5,000. No medical expenses are reported by taxpayers who elect to use the standard deduction. The deduction for medical and dental expenses together with the number of returns on which the deduction is reported and the adjusted gross income associated with such returns is tabulated below for taxable and nontaxable returns, by adjusted gross income classes. There are 4,133,535 returns showing deductions for medical expenses of $1,304,227,000. Of these returns, 8,187 show an adjusted gross deficit and presumably the medical deduction thereon amounting to $3,711,000 is reported in its entirety, without regard to the qualification relating to the 5 percent of the adjusted gross income. The remaining 4,125,348 returns have adjusted gross income of $15,518,688,000 and medical deductions of $1,300,516,000. The entire amount of medical expenses paid by these taxpayers may be determined by adding to the deduction an amount equal to 5 percent of the adjusted gross income, or $775,934,000. This indicates that the medical expenses paid by taxpayers who itemized their deductions are a minimum of $2,080,161,000; minimum because there are cases in which the limitation of the deduction was effective. No data are available for the medical expenses of taxpayers who filed Form 1040A, short-form 1040, or the long-form Individual returns for 1948 showing a deduction for medical and dental expenses, by adjusted gross income classes: Number of returns, amount of medical deduction, and adjusted gross income [Adjusted gross income classes and money figures in thousands of dollars] TYPES OF TAX The tax liability includes the normal tax, surtax, and the alternative taxes paid in lieu thereof; namely, the optional tax provided under supplement T, and the alternative tax on income which includes a gain from sales of capital assets held for more than 6 months, provided under section 117 (c)(2). The tax liability tabulated in this report is the tax after the two 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. These credits are reported only by taxpayers who itemized deductions. The amounts of these credits are not available this year. Normal tax and surtax is the sum of the two separate taxes, which are jointly computed and reported on the income tax return. The tentative normal tax rate is 3 percent of the net income in excess of the credits for exemptions and for partially tax-exempt interest and dividends. The tentative surtax rates range from 17 percent of the first $2,000 of net income in excess of credit for exemptions, increasing, at graduated rates, to 88 percent of such income over $200,000. Although each tax is a separate entity, the instructions accompanying the return for the computation of tax provide a rate schedule wherein the two tax rates are integrated and the tentative normal tax and surtax liability is computed jointly; after which the first $400 of combined tentative tax is reduced by 17 percent, and the combined tentative tax over $400 but not more than $100,000 is reduced by 12 percent, and the combined tentative tax over $100,000 is reduced by 9.75 percent. The resultant tax, computed without regard to tax credits, cannot exceed an amount equal to 77 percent of the net income. net income includes partially tax-exempt interest and dividends, the combined tentative tax is reduced by an amount equal to 3 percent of the partially tax-exempt income, before the tax reduction percentages are applied. In the case of a joint return of husband and wife, the combined normal tax and surtax liability is twice the combined normal tax and surtax that would be determined if the net income and applicable credits against net income were reduced by one-half. If The optional tax, paid in lieu of the normal tax and surtax, is tabulated without distinction as normal tax and surtax. The optional tax table states the tax liability for the various adjusted gross income brackets and the number of exemptions, and the tax table may be used at the election of the taxpayer whose adjusted gross income from whatever source is less than $5,000. The optional tax automatically allows for the standard deduction, which is 10 percent of the amount of the midpoint of the adjusted gross income bracket, and for the exemptions, after which the optional tax is determined (to the nearest dollar) in the same manner and at the same rates as those otherwise used for computing the tax. The tax liability on 39,448,606 returns is determined from the tax table; however the income on 14,129,674 returns is such as to result in no tax. Alternative tax on net income containing a net gain from sales of capital assets held more than 6 months is imposed when there is a net long-term capital gain or an excess of net long-term capital gain over the net short-term capital loss if, and only if, 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. The alterna |