(b) Definitions.--To "dispense" is to deal out or divide out generally, while to "distribute" is to deal or divide out in proportion or in shares.

(b) The mere issuance of a prescription by a physician for a narcotic drug, to be filled by any druggist, without participation by the physician in the sale made under it is not a sale or such dispensing or distribution as amounts to a sale within the meaning of Harrison Narcotic Act, December 17, 1914, section 2.

States, 255 Fed. 621, 1918.)

(Foreman v. United

SECTION 6-NARCOTIC CONTENT INCURRING LIABILITY.

SEC. 6. That the provisions of this act shall not be construed to apply to the sale, distribution, giving away, dispensing, or possession of preparations and remedies which do not contain more than two grians of opium, or more than one-fourth of a grain of morphine, or more than one-eighth of a grain of heroin, or more than one grain of codeine, or any salt or derivative of any of them in one fluid ounce, or, if a solid or semisolid preparation, in one avoirdupois ounce; or to liniments, ointments, or other preparations which are prepared for external use only, except liniments, ointments, and other preparations which contain cocaine or any of its salts, or alpha or beta eucaine or any of their salts, or any synthetic substitute for them: Provided, That such remedies and preparations are sold, distributed, given away, dispensed, or possessed as medicines and not for the purpose of evading the intentions and provisions of this act. The provisions of this act shall not apply to decocainized coca leaves or preparations made therefrom, or to other preparations of coca leaves which do not contain cocaine.

SEC. 7. That all laws relating to the assessment, collection, remission, and refund of internal-revenue taxes, including section thirty-two hundred and twenty-nine of the Revised Statutes of the United States, so far as applicable to and not inconsistent with the provisions of this act, are hereby extended and made applicable to the special taxes imposed by this act.

Under the provisions of section 6 the sale or dispensing of large and unusual quantities of the drugs, unaccompanied by explanation as to the necessity therefor, is the sale and dispensing thereof for the very purpose of evading the intent of the act and unlawful. (United States v. Curtis, 229 Fed. 288, 1916.)

See also cases under heading "Indictments."

"Preparations and remedies," contained in section 6 of this act, held not to include clear morphine, but to relate to actual medicinal preparations and remedies not containing more than a quarter of a grain of morphine, remedies such as a physician or druggist would normally dispense.

In a prosecution for violation of the Harrison Narcotic Drug Act, defendant not being charged as a physician or a druggist, and the indictment not negativing the exception of section 6 of the act, it was open to him to show he was merely dispensing medicinal preparations and remedies containing not more than the amount of morphine permitted by section 6.

Objection to indictment for violating the Harrison Narcotic Drug Act, in that it did not negative the exception of section 6 relative to

the dispensing of preparations and remedies not containing more than a quarter of a grain of morphine, held technical, unsubstantial, and unprejudicial, and within the terms of Judicial Code, section 269. as amended February 26, 1919. (Stetson v. United States, 257 Fed. 689, 1919.)

SECTION 8-POSSESSION OF NARCOTICS.

SEC. 8. That it shall be unlawful for any person not registered under the provisions of this act, and who has not paid the special tax provided for by this act, to have in his possession or under his control any of the aforesaid drugs; and such possession or control shall be presumptive evidence of a violation of this section, and also of a violation of the provisions of section one of this act: Provided, That this section shall not apply to any employee of a registered person, or to a nurse under the supervision of a physician, dentist, or veterinary surgeon registered under this act, having such possession or control by virtue of his employment or occupation and not on his own account; or to the possession of any of the aforesaid drugs which has or have been prescribed in good faith by a physician, dentist, or veterinary surgeon registered under this act; or to any United States, State, county, municipal, District, Territorial, or insular officer or official who has possession of any said drugs, by reason of his official duties or to a warehouseman holding possession for a person registered and who has paid the taxes under this act; or to common carriers engaged in transporting such drugs: Provided further, That it shall not be necessary to negative any of the aforesaid exemptions in any complaint, information, indictment, or other writ or proceeding laid or brought under this act; and the burden of proof of any such exemption shall be upon the defendant.

SEC. 9. That any person who violates or fails to comply with any of the requirements of this act shall, on conviction, be fined not more than $2,000 or be imprisoned not more than five years, or both, in the discretion of the court.

SEC. 10. That the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is authorized to appoint such agents, deputy collectors. inspectors, chemists, assistant chemists, clerks, and messengers in the field and in the Bureau of Internal Revenue in the District of Columbia as may be necessary to enforce the provisions of this act.

SEC. 11. That the sum of $150,000, or so much thereof as may be necessary, be, and hereby is, appropriated, out of any moneys in the Treasury not otherwise appropriated, for the purpose of carrying into effect the provisions of this act.

SEC. 12. That nothing contained in this act shall be construed to impair, alter, amend, or repeal any of the provisions of the act of Congress approved June thirtieth, nineteen hundred and six, entitled "An act for preventing the manufacture, sale, or transportation of adulterated or misbranded, or poisonous, or deleterious foods, drugs, medicines, and liquors, and for regulating traffic therein, and for other purposes,' and any amendment thereof, or of the act approved February ninth, nineteen hundred and nine, entitled "An act to prohibit the importation and use of opium for other than medicinal purposes," and any amendment thereof.

Approved, December 17, 1914.

See also the heading "Evidence" and "Indictments."

Section 8 refers only to those who produce, import, manufacture, compound, deal in, dispense, sell, distribute, or give away as enumerated in section 1; hence the mere keeping of a small quantity of opium for personal use does not constitute an offense within the meaning of the act.

149707-19-PT II

Section 8 establishes the rule of evidence that, upon proof that a defendant was producing, importing, manufacturing, dealing in, dispensing, selling, distributing, or giving away, as mentioned in section 1, clause 1, opium or coca leaves, and that a narcotic was found in his possession, he is presumptively guilty of violating the act that then the burden of proof is upon defendant to show affirmatively that he is not one of the class mentioned in section 1 as being required to register, or, if so, that he had registered and paid the special tax. In a prosecution under this act the uncontradicted evidence that defendant obtained the opium found in her possession from a Chinaman, and that she had it for her personal use and consumption, and that she never sold, gave away, or dealt in it in any form was held to overcome the presumption of guilt arising from the possession of opium under section 8 of the act, providing that possession or control of opium shall be presumptive evidence of a violation of the act. (United States v. Wilson, 225 Fed. 82, 1915.)

Held, that section 8 has no relation to the failure of a registered physician to keep a duplicate of an order given by him for the prescribed drugs, or a record of the amount of any such drugs dispensed and distributed by him as required by section 2. (United States v. Charter, 227 Fed. 331, 1915.)

The words "any person not registered" in section 8 of the opium registration act of 1914 do not mean any person in the United States, but refer to the class dealt with by the statute-those required to register and one not in that class is not subject to the penalties prescribed by the statute. (United States v. Jin Fuey Moy, 241 U.S. 394, 1916.) 225 Federal 1003, affirmed. See later case between same parties pending in United States Supreme Court.

The provisions of section 8 apply only to the classes of persons required by the act to register and pay the tax. (United States v. Denker, 255 Fed. 339, 1918.)

Under Revised Statutes, section 1025, providing that defects of form, not prejudicing defendant, shall not invalidate indictments, and Harrison Narcotic Act, section 8, relative to negativing exceptions in an indictment, an indictment under sections 1 and 2 of the Harrison Act need not negative exceptions in those sections. (United States v. Loewenthal, 257 Fed. 444, 1919.)

In a prosecution for violation of the Harrison Narcotic Drug Act, section 8, defendant not being charged as a physician or a druggist, and the indictment not negativing the exception of section 6 of the act, it was open to him to show he was merely dispensing medicinal preparations and remedies containing not more than the amount of morphine permitted by section 6. (Stetson v. United States, 257 Fed. 689, 1919.)

See also the case of United States v. Woods, 224 Federal 278, under section 1 of this act.

INCOME, ESTATE, MUNITION MANUFACTURER'S, AND

SPECIAL TAXES.

INCOME TAX-ACT OF SEPTEMBER 8, 1916.

[Repealed by Act of Feb. 21, 1919.]

INCOME DEFINED.

SEC. 2. (a) That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits, and income derived from any source whatever: Provided, That the term "dividends" as used in this title shall be held to mean any distribution made or ordered to be made by a corporation, joint-stock company, association, or insurance company, out of its earnings or profits accrued since March first, nineteen hundred and thirteen, and payable to its shareholders, whether in cash or in stock of the corporation, joint-stock company, association, or insurance company, which stock dividend shall be considered income to the amount of its cash value.

Construction.

Where an income tax law is doubtful, doubt should be resolved in favor of the taxpayer against the Government. (Miller v. Gearin, 258 Fed. 225, 1919.)

Section 2 (a)-Income defined-"Stock dividends."

United States District Court of New York. The provision of this section taxing stock dividends to the same extent as cash dividends was attacked as unconstitutional on the grounds that to tax "stock dividends" is to tax capital or principal, and that such a tax may not be imposed except as other direct taxes are laid, namely, by apportionment among the several States according to population. (Macomber v. Eisner, pending in U. S. Supreme Ct. Govt's demurrer overruled, on authority of Towne v. Eisner, in Dist. Ct.)

Section 2 (a)-Income defined.

Where, in 1907, the owner of land leased the same for 23 years under an agreement requiring the tenant to construct an expensive brick building, and on the tenant's default the owner retook possession in 1916, the value of the building can not be deemed income accruing in the year 1917, within this section, for under the lease the title to the building vested in the owner immediately upon construction, and the lessee's default caused the owner a loss. (Miller v. Gearin, 258 Fed. 225, 1919.)

SECTION 8 (e)—RETURNS.

SEC. 8. (e) Persons carrying on business in partnership shall be liable for income tax only in their individual capacity, and the share of the profits of the partnership to which any taxable partner would be entitled if the same were divided, whether divided or otherwise, shall be returned for taxation and the tax paid under the provisions of this title: Provided, That from the net distributive interests on which the individual members shall be liable for tax, normal and additional, there shall be excluded their proportionate shares received from interest on the obligations of a State or any political or taxing subdivision thereof, and upon the obligations of the United States and its possessions, and all taxes paid to the United States or to any possession thereof, or to any State, county, or taxing subdivision of a State, and that for the purpose of computing the normal tax there shall be allowed a credit, as provided by section five, subdivision (b), for their proportionate share of the profits derived from dividends. And such partnership, when requested by the Commissioner of Internal Revenue, or any district collector, shall render a correct return of the earnings, profits, and income of the partnership, except income exempt under section four of this act, setting forth the item of the gross income and the deductions and credits allowed by this title, and the names and addresses of the individuals who would be entitled to the net earnings, profits, and income if distributed.

The provision of the 1916 act that members of partnerships shall be allowed credit for their proportionate share of partnership gains and profits derived from corporations taxable on their net income Held, to be a mere declaration of the rule under the 1913 act and not legislative recognition of a change. (U. S. v. Coulby, 251 Fed. 982, affirmed in 258 Fed. 27, 1919.)

SECTION 12 (a)—DEDUCTIONS.

SEC. 12. (a) In the case of a corporation, joint-stock company or association, for insurance company, organized in the United States, such net income shall be ascertained by deducting from the gross amount of its income received within the year from all sources

* * *

Second. All losses actually sustained and charged off within the year and not compensated by insurance or otherwise, including a reasonable allowance for the exhaustion, wear and tear of property arising out of its use or employment in the business or trade; (a) in the case of oil and gas wells a reasonable allowance for actual reduction in flow and production to be ascertained not by the flush flow, but by the settled production or regular flow; (b) in the case of mines a reasonable allowance for depletion thereof not to exceed the market value in the mine of the product thereof which has been mined and sold during the year for which the return and computation are made, such reasonable allowance to be made in the case of both (a) and (b) under rules and regulations to be prescribed by the Secretary of the Treasury: Provided, That when the allowance authorized in (a) and (b) shall equal the capital originally invested, or in case of purchase made prior to March first, nineteen hundred and thirteen, the fair market value as of that date, no further allowance shall be made; and (c) in the case of insurance companies, the net addition, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts: Provided, That no deduction shall be allowed for any amount paid out for new buildings, permanent improvements, or betterments made to increase the value of any property or estate, and no deduction shall be made or any amount of expense of restoring property or making good the exhaustion thereof

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