Footnotes for tables 1 through 6 Adjusted gross income classes are based on the amount of adjusted gross income (see note 2), regard less of the amount of net income or net deficit when computed; returns with adjusted gross deficit are designated "No adjusted gross income" and the size of the deficit is disregarded. 2 Adjusted gross income means gross income minus allowable trade and business deductions, expenses of travel and lodging in connection with employment, reimbursed expenses in connection with employment, deductions attributable to rents and royalties, certain deductions of life tenants and income beneficiaries of property held in trust, and allowable losses from sales or exchanges of property. Should these allowable deductions exceed the gross income, there is an adjusted gross deficit. 3 Tax liability after deducting tax credits relating to income tax paid at source on tax-free covenant bond interest and to income tax paid to a foreign country or possession of the United States. Such credits are reported on individual returns, Form 1040, with itemized deductions. 4 This class includes the nontaxable returns with $4,500 or more adjusted gross income. 5 Returns with no adjusted gross income are returns showing adjusted gross deficit (see note 2); that is, returns on which the deductions allowable for the computation of adjusted gross income equal or exceed the gross income. 6 Less than 0.005 percent. 7 Not computed. 8 Adjusted gross deficit. • Adjusted gross income less adjusted gross deficit. 10 Salaries and wages include annuities, pensions, and retirement pay reported in the schedule for salaries, but exclude wages not exceeding $100 per return from which no tax was withheld, reported as other income on Form 1040A (see note 20). 11 Dividends, foreign and domestic, include partially tax-exempt dividends on share accounts in Federal savings and loan associations, but exclude dividends not exceeding $100 per return reported as other income on Form 1040A (see note 20) and all dividends received through partnerships and fiduciaries. 12 Interest received includes interest on notes, mortgages, bank deposits, corporation bonds before amortization of bond premium, and taxable and partially tax-exempt interest on Government obligations before amortization of bond premium; also, includes, when received through partnerships and fiduciaries, partially tax-exempt interest on Government obligations and partially tax-exempt dividends on share accounts in Federal savings and loan associations. Excludes interest, not exceeding $100 per return reported as other income on Form 1040A (see note 20). 13 Income from annuities and pensions is only the taxable portion of amounts received during the year. Amounts received to the extent of 3 percent of the total cost of the annuity are reported as income for each taxable year, until the aggregate of amounts received and excluded from gross income in this and prior years equals the total cost. Thereafter, entire amounts received are taxable and must be included in adjusted gross income. Annuities, pensions, and retirement pay upon which tax is withheld may be reported in salaries and wages. 14 Net profit from rents and royalties is the excess of gross rents received over deductions for depreciation, repairs, interest, taxes, and other expenses attributable to rent income; and the excess of gross royalties over depletion and other royalty expenses. Conversely, net loss from these sources is the excess of the respective expenses over gross income received. 15 Net profit from business is the excess of gross receipts from business over deductions for business expenses and the net operating loss deduction due to the unabsorbed net operating loss from business, partnership, and common trust funds for the two preceding years. Conversely, net loss from business is the excess of business expenses and net operating loss deduction over total receipts from business. 16 Partnership net profit or loss excludes partially tax-exempt interest on Government obligations, partially tax-exempt dividends on share accounts in Federal savings and loan associations, and net gain or loss from sales of capital assets. In computing partnership profit or loss, charitable contributions are not deductible nor is the net operating loss deduction allowed. 17 Net gain or loss from sales or exchanges of capital assets is the net gain or the allowable loss used in computing adjusted gross income. Each is the result of combining net short- and long-term capital gain and loss and any capital loss carry-over from the Deduction for the loss, however, is limited to the years 1943-47, inclusive, not previously deducted. amount of such loss, or to the net income (adjusted gross income if taxed under Supplement T) computed without regard to gains and losses from sales of capital assets, or to $1,000, whichever is smallest. Sales of capital assets include worthless stocks, worthless bonds if they are capital assets, nonbusiness bad debts, certain distributions from em ployees' trust plans, and each participant's share of net short- and long-term capital gain and loss to be taken into account from partnerships and common trust funds. 18 Net gain or loss from sales or exchanges of property other than capital assets is that from the sales which is subject to the allowance for depreciation, of (1) property used in trade or business of a character (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 or after March 1, 1941, on a discount basis and payable without interest at a fixed maturity date not exceeding 1 year from date of issue, and (3) real property used in trade or business. 19 Income from estates and trusts excludes partially tax-exempt interest on Government obligations and partially tax-exempt dividends on share accounts in Federal savings and loan associations. (The net operating loss deduction is allowed to estates and trusts and is deducted in computing the distributable income.) 20 Miscellaneous income includes alimony received, prizes, rewards, sweepstakes winnings, gambling profits, recoveries of bad debts or insurance received as reimbursement for medical expenses if deduction for either was taken in a prior year. For returns with standard deduction, there is included $40,448,000 of wages not subject to withholding, dividends, and interest, not exceeding in total $100 per return, reported as other income on 896,400 returns, Form 1040A. 21 Amount of exemption, allowed for purposes of exemption of the taxpayer, his spouse, and each deboth normal tax and surtax, includes the per capita pendent, together with additional exemptions of $600 for blindness and $600 for age over 65, of the taxpayer and his spouse. 22 Payments on 1948 declaration of estimated tax include the credit for overpayment of prior year tax as well as the aggregate payments made on the declaration, Form 1040-ES. The frequency of returns with such payments includes returns showing credit only, cash payments only, and those showing both. 23 Returns with standard deduction are optional returns, Form 1040A, and short-form returns, Form 1040, with adjusted gross income under $5,000, on both of which the tax is determined from the tax table; and long-form returns, Form 1040, with adjusted gross income of $5,000 or more on which the Footnotes for tables 1 through 6—Continued standard deduction is used. On the latter returns, the standard deduction is the smaller of $1,000 or 10 percent of adjusted gross income, except that on the return of a married person filing a separate return the standard deduction is $500. 24 Returns with itemized deductions are long-form returns, Form 1040, on which nonbusiness deductions are itemized; long-form returns, Form 1040, with no deductions filed by spouses of taxpayers who itemized deductions (such spouses are denied the standard deduction); and returns, Form 1040, with no adjusted gross income whether or not deductions are itemized. 25 Contributions, reported on returns with itemized deductions, include each partner's share of charitable contributions of partnerships, but cannot exceed 15 percent of the adjusted gross income. 28 Interest, reported on returns with itemized deductions, is that paid on debts, bank loans, or mortgages, but excludes interest paid on business debts reported in schedules for rents and business, and interest on loans to buy tax-exempt securities, single-premium life insurance, or endowment contracts. 27 Taxes paid, reported on returns with itemized deductions, include personal property taxes, 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 does not include Federal income taxes; estate, inheritance, legacy, succession, or gift taxes; taxes on shares in a corporation which are paid by the corporation without reimbursement from the taxpayer; taxes deducted in the schedules for rents and busi ness; income taxes paid to a foreign country or possession of the United States if any portion thereof is claimed as tax credit; nor Federal social security and employment taxes paid by or for the employee. which, when reduced by deductions, standard or itemized, and exemptions, results in no tax liability. The 1,204,775 nontaxable returns with adjusted gross income and with itemized deductions include 41,470 returns with net deficit. 34 Number of returns associated with this item is subject to sampling variation of more than 100 percent. Such items are not shown separately since they are considered too unreliable for general use; however, they are included in totals. For description of sample see pp. 10-11. 35 Less than $500. income reported as other income (see note 20). 37 Includes 896,400 returns, Form 1040A, showing other income consisting of wages not subject to withtotal $100 per return. holding, dividends, and interest not exceeding in 33 Number of returns is subject to maximum sampling variation of 30 to 100 percent, depending on the number in the cell. For description of sample, see pp. 10-11. 39 Number of returns is subject to sampling variation of more than 100 percent and is considered too unreliable for general use; therefore the number is not shown separately, but is included in the totals. For description of sample, see pp. 10-11. 40 Average tax is based on the tax liability after deducting the two tax credits relating to the 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. Such credits are allowed only on returns with itemized deductions. 41 Returns with normal tax and surtax consist of (1) the optional returns, Form 1040A, and short-form returns, Form 1040, wherein the optional tax is paid in lieu of normal tax and surtax, and (2) long-form returns, Form 1040, on which the regular normal tax and surtax are reported; that is, all taxable long-form returns except those on which the alternative tax is 28 Losses resulting from fire, storm, shipwreck, or other casualty, or theft, reported on returns with itemized deductions, are the actual nonbusiness losses sustained, that is, the value of such property less salvage value and insurance or other reimburse-imposed (see note 42). ment received. 29 Medical and dental expenses, reported on returns with itemized deductions, paid for the care of the taxpayer, his spouse, or dependents, not compensated by insurance or otherwise, which exceed 5 percent of the adjusted gross income. The deduction cannot exceed $1,250 multiplied by the number of exemptions other than those for age and blindness with a maximum deduction of $2,500, except on a joint return of husband and wife the maximum is $5,000. 30 Miscellaneous deductions, reported on returns with itemized deductions, include alimony payments, expenses incurred in the production or collection of taxable income or in the management of property held for the production of taxable income, amortizable bond premium, the taxpayer's share of interest and real estate taxes paid by a cooperative apartment corporation, and gambling losses not exceeding gambling gains reported in income. 31 Net income, reported on returns with itemized deductions, is the excess of adjusted gross income over itemized deductions. 32 Net deficit reported on nontaxable returns, Form 1040, consists of adjusted gross deficit on shortform returns and the 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 adjusted gross income. There is a net deficit on 367,779 returns of which 326,309 show no adjusted gross income and 41,470 show adjusted gross income of various amounts and itemized deductions of larger amounts. 42 Returns with alternative tax are long-form cludes a net long-term capital gain or an excess of returns, Form 1040, wherein (1) the net income innet long-term capital gain over net short-term capital loss, and (2) the alternative tax is less than the regular normal tax and surtax computed on net inassets. Alternative tax (not effective on returns come which includes net gain from sales of capital (1) a partial tax computed at the regular normal tax with surtax net income under $22,000) is the sum of and surtax rates on net income reduced for this purpose by such long-term gain and (2) 50 percent of the long-term gain. 43 Includes Alaska. 44 Total income classes are based on the amount of total income tabulated for taxable fiduciary returns (see note 52). 45 Dividends, foreign and domestic, exclude partially tax-exempt dividends on share accounts in Federal savings and loan associations and all dividends received through partnerships and fiduciaries. 46 Interest on bank deposits, notes, mortgages, corporation bonds, taxable and partially tax-exempt interest on Government obligations, and partially tax-exempt dividends on share accounts in Federal savings and loan associations. Also includes such Government interest and partially tax-exempt dividends on share accounts received through partnerships and fiduciaries. 47 Trade or business profit or loss is the current year profit or loss. (Net operating loss deduction is reported in miscellaneous deductions.) 33 Nontaxable returns are those with no adjusted 48 Partnership net profit or loss excludes taxable gross income and returns with adjusted gross income and partially tax-exempt interest on Government Footnotes for tables 1 through 6—Continued obligations, partially tax-exempt dividends on share accounts in Federal savings and loan associations, and net gain or loss from sales of capital assets. In computing partnership profit or loss, charitable contributions are not deductible nor is the net operating loss deduction allowed. 53 Interest is that paid on debts, mortgages, and bank loans; it does not include interest reported in schedule for business or rent income, nor interest on indebtedness incurred to buy tax-exempt securities, single-premium life insurance, or endowment contracts. 49 Net gain or loss from sales or exchanges of capital 54 Taxes paid include State income taxes, certain assets is the net gain or the allowable loss used in retail sales taxes, and real estate taxes except those computing the net income taxable to the fiduciary. levied for improvements which tend to increase the Each is the result of combining net short- and long-value of property. This deduction does not include term capital gain and loss and any capital loss carry- Federal income tax, estate, inheritance, legacy, sucover from the years 1943-47, inclusive, not previously cession, or gift taxes; nor taxes imposed upon shares deducted. Deduction for the loss, however, is in a corporation which are paid by the corporation limited to the amount of such loss, or to the net in- without reimbursement from the taxpayer; taxes come computed without regard to gains and losses deducted in the schedules for business and rent from sales of capital assets, or to $1,000, whichever income, nor income taxes paid to a foreign country is smallest. or possession of the United States if any portion thereof is claimed as a tax credit. Sales of capital assets include worthless stock, worthless bonds if they are capital assets, nonbusiness bad debts, certain distributions from employee's trust plans, and each participant's share of net short- and long-term capital gain and loss to be taken into account from partnerships and common trust funds. 50 Income from fiduciaries excludes taxable and partially tax-exempt interest on Government obligations, and partially tax-exempt dividends on share accounts in Federal savings and loan associations. 51 Miscellaneous income includes taxable income from sources other than those specified on the return form. 53 Total income is the amount resulting from the combination of profit or loss from rents and royalties, from trade or business, from partnerships, from sales or exchanges of property, together with income from dividends, interest, estates, and from miscellaneous income. (Total income is an approximation of the adjusted gross income tabulated for individual returns.) TABLE 7.-Individual returns and taxable fiduciary returns, with net income, by net income classes: Number of returns, 1914-43, net income and tax, 1916-43; individual returns with adjusted gross income by adjusted gross income classes: Number of returns, adjusted gross income, and tax, 1944-48; also aggregates for individual returns with no net income, 1928–43 (including fiduciary returns for 1943), and for individual returns with no adjusted gross income, 1944-48 [Income classes and money figures in thousands of dollars] |