Annual Report 

of the 

Commissioner' of Internal Revenlle 

for the 

Fiscal Year Ended June 30, 1954 

UNITED STATES GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1955 

IRS Publication No. H 
LETTER OF TRANSMITTAL 

TREASURY DEPARTMENT 

Document No. 3195 

Internal Revenue 

TREASURY DEPARTMENT, 

OFFICE OF COMMISSIONER OF INTERNAL REVENUE, 

Washington, D. C. April 22, 1955 

Dear MR. SECRETARY: I submit herewith the "Annual Report of the 

Commissioner of Internal Revenue for the fiscal year 1954." 

The year will be noted, particularly, for a modernization and recodification of the Internal Revenue Code. The cooperative efforts of the legislative and executive branches have yielded significant changes in, and 

clarification of, substantive provisions and streamlining of administrative 

provisions. 

At the same time, improvements were made in many procedures and 

policies. Our auditing forces were augmented in numbers and strengthened 

through clarification of many intricate internal relationships. In the appellate field, large backlogs were put under control and reduced substantially. 

Numerous services to taxpayers were improved and many facilities for 

economical administration were added during the year. In our deployment 

of personnel, we have systematically reduced our overhead staff in Washington so as to increase our enforcement activities. 

We also have made many investments in the future of the Revenue 

Service, particularly by our establishment of an advanced training program 

and by our studies of simplified methods in handling the huge masses of 

tax returns which flood in to us every year. 

Commissioner of Internal Revenue. 

HOD. GEORGE M. HUMPHREY, 

Secretary of the Treasury. 

For sale by the Superintendent of Documents, U. S. Government Printing Office 

Washington 26, D. C. - Price 35 cents (paper cover) 
CONTENTS 

REPORT ON OPERATIONS 

Page 

Internal revenue collections 3 

General 3 

Collections from income, profits, and employment taxes 4 

Corporation income and profits taxes 5 

Individual income taxes 5 

Employment taxes 5 

Other internal revenue 5 

Receipt and recording of returns 5 

General 5 

Returns filed 5 

Processing of returns 6 

Mathematical verification 7 

Information documents 7 

Supervision and control of the alcohol and tobacco industries 8 

General 8 

Authorization of operations 8 

On-premises supervision 9 

Inspection of establishments 9 

Chemical analysis 10 

Enforcement work 10 

Returns examined 10 

General 10 

Selection of returns for examination 10 

Examination of returns 10 

Fraud 12 

General 12 

Regular tax fraud other than alcohol and tobacco tax 13 

Wagering tax work 13 

Alcohol and tobacco tax 14 

Cases involving criminal prosecution 14 

Delinquent returns and collection of delinquent accounts 15 

Delinquent returns 15 

Warrants for distraint 16 

Firearms program 16 

Appeals and civil litigation 17 

General 17 

Summary of appeals procedure 17 

Appellate Division consideration of cases not before the Tax Court 18 

Cases petitioned to the Tax Court 19 

Other courts 20 

Claims for relief from excess profits tax 21 

Changes in tax liability 22 

Additional taxes 22 

Overassessments and overpayments 23 

General 23 

Refunds and repayments 23 

Excessive prepayments of individual income tax 24 

Tentative adjustments 24 

Other claims 25 

Review of overassessments exceeding $200,000 25 

Offers in compromise 25 

Rulings, regulations, and related functions 27 

Regulations program 27 

Tax rulings 28 

Legal services 28 

Tax Conventions affecting the Internal Revenue Service 29 

V 
VI REPORT OF COMMISSIONER OF INTERNAL REVENUE 

CONTENTS VII 

Page 

30 

30 

31 

31 

31 

31 

31 

31 

32 

32 

32 

33 

33 

33 

33 

34 

35 

35 

36 

37 

44 

70 

73 

76 

78 

80 

81 

81 

81 

82 

82 

Important legislation affecting the Internal Revenue Service 

Legislation enacted during fiscal 1954 

Preparation for other legislation 

Internal Revenue Code of 1954 

Social Security Amendments of 1954 

Other acts 

Administrative and internal control functions 

Personnel 

Training 

Advanced Training Center 

Other training activities 

Records management 

Cost of administration 

General 

Rewards to informers 

Enrollment of practitioners 

Internal audit and security 

Internal audit 

Internal security 

General management improvements and policy changes 

STATISTICAL TABLES 

Internal Revenue Collections 

Table 

1. Internal revenue collections by sources and by internal revenue regions, 

districts, States, and Territories, fiscal year 1954 

2. Internal revenue collections by sources and by months, fiscal year 1954 

3. Internal revenue collections, fiscal years ending June 30, 1953 and 1954, by 

sources 

4. Internal revenue collections by principal sources, fiscal years 1940 through 

1954 

5. Internal revenue tax on manufactured products from Puerto Rico, fiscal 

years 1953 and 1954, by objects of taxation 

Alcohol and Tobacco Taxes 

6. Number of establishments qualified to engage in the production, distribution, 

storage, or use of alcohol and alcoholic liquors as of June 30, 1953 and 1954, 

or to engage in the production or distribution of tobacco products as of 

December 31, 1952 and 1953 

7. Number of permits under the Federal Alcohol Administration Act, fisrs1 year 

1954 

8. Number of permits under sections 3070 through 3125, Internal Revenue 

Code of 1939, as amended, fiscal year 1954 

9. Enforcement, Alcohol and Tobacco Tax Division: Seizures and arrests, 

fiscal years 1953 and 1954 

10. Label activity under Federal Alcohol Administration Act, fiscal year 1954 

11. Number of tobacco, cigar, and cigarette factories in business, calendar year 

1953 

Table 

16. Results obtained in cases docketed by the Tax Court and disposed of by 

stipulation (agreed settlement), fiscal year 1954 

17. Income, profits, estate, and gift tax appeals docketed, stipulated, defended on 

the merits before the Tax Court, fiscal years 1940 to 1954 

18. Appellate Division receipt and disposal of compromise and final closing 

agreement cases, fiscal year 1954 

19. Receipt and disposal of nondocketed, docketed, and compromise cases (income, profits, estate, and gift taxes) by Appellate Division, fiscal years 

1945-54 

20. Receipt and disposal of cases in the Tax Court, fiscal year 1954 

21. Results obtained in cases disposed of in the Tax Court, fiscal year 1954 

22. Tax Court (Ices on review in courts of appeals or Supreme Court, fiscal 

year 1954 

23. Receipt and disposition of Tax Court cases reviewed in courts of appeals or 

in Supreme Court, fiscal year 1954 

24. Receipt and disposal of suits filed by taxpayers in Federal courts, fiscal year 

1954 

25. Receipt and disposal of units filed by the United States in Federal courts, 

fiscal year 1954 

26. Receipt and disposal of lien cases, fiscal year 1954 

27. Receipt and disposal of insolvency and other debtor proceedings, fiscal year 

1954 

28. Results obtained in insolvency and other debtor proceedings closed, fiscal 

year 1954 

Cost of Administration 

29. Obligations incurred by the Internal Revenue Service, fiscal year ended 

June 30, 1954 

30. Cost of printing and binding for Internal Revenue Service, fiscal years 1953 

and 1954 

Page 

95 

96 

96 

97 

97 

98 

98 

99 

99 

100 

100 

101 

101 

104 

105 

Stamp Taxes 

12. Number of each class of special-tax payers purchasing special-tax stamps 

covering the fiscal year 1954, or portion thereof, under the various annual 

rates, by internal revenue districts and States 

Cases Receiving Appellate Consideration or in Litigation 

13. Receipt and disposal of Appellate Division income, profits, estate, and gift 

tax cases not before the Tax Court (pre-90-day and statutory notice cases), 

fiscal year 1954 

14. Results obtained in disposal of Appellate Division income, profits, estate, 

and gift tax cases not before the Tax Court, fiscal year 1954 

15. Appellate Division receipt and disposal of cases docketed by the Tax Court 

(pending settlement or trial), fiscal year 1954 

84 

94 

94 

95 
COMMISSIONERS OF INTERNAL REVENUE FROM JULY 1862 TO 

DECEMBER 1954 

Name 3 State 

Service 

From- ToGeorge S. Houten11 Massachusetts July 17,1862 Mar. 4, 1863 

Joseph J. Lewis Pennsylvania Mar. 18,1883 June 30,1885 

William Orton New York July 1,1865 Oct. 31,1885 

Edward A. Rollins New Hampshire Nov. 1,1885 Mar. 10, 1889 

Columbus Delano Ohio Mar. 11,1869 Ian. 2, 1871 

Alfred Pleasanton New York Jan. 3,1871 Aug. 8.1871 

John W. Douglass Pennsylvania Aug. 9,1871 May 14,1875 

Daniel D. Pratt Indiana May 15,1875 July 31.1878 

Green B. Ream Illinois Aug. k 1870 Apr. 30,1883 

Walter Evans Kentucky May 21,1883 Mar. 19.1885 

Joseph S. Miller West Virginia Mar. 20,1885 Mar. 20, 1889 

John W. Mason do Mar. 21,1889 Apr. 18,1833 

Joseph S. Miller do Apr. 19,1893 Nov. 20,1896 

W. St. John Forman Illinois Nov. 27,1896 Dec. 31.1897 

Nathan B. Scott West Virginia Jan. 1,1898 Feb. 28,1899 

George W. Wilson_ Ohio Mar. 1,1899 Nov. 27,1900 

John W. Yerkes Kentucky Dec. 23,1900 Apr. 30,1907 

John G. Capers South Carolina June 5,1907 Aug. 31,1909 

Royal E. Cobol] Virginia Sept. 1,1909 Apr. 27,1913 

William H. Osborn North Carolina Apr. 28,1913 Sept. 25,1917 

Daniel C. Roper South Carolina Sept. 26.1917 Mar. 31,1920 

William AI . WilliaMs Alabama Ar. 1,1 920 Ar. 11,1921 

David H. Blair North Carolina 

M

p

ay 27,1921 

Mp

ay 31,1929 

Robert H. Lucas Kentucky June 1,1929 Aug. 15,1930 

David Burnet Ohio Aug. 20,1930 May 15,1933 

Guy T. Helvering Kansas June 6,1933 Oct. 8,1943 

Robert E. Hannegan Missouri Oct. 9,1943 Jan. 22,1944 

Joseph D. Nunan, Jr New York Mar. 1,1944 June 30,1947 

George J. Schoeneman Rhode Island July 1,1947 July 31,1951 

John B. Dunlap Texas Aug. 1,1951 Nov. 18,1952 

T. Coleman Andrews Virginia Feb. 4,1953 

Mont-Office of Commissioner of Internal Revenue created by Act of Congress, July 1, 1882. 

1 In addition, the following were Acting Commissioners during periods o time when there was no real 

Commissioner holding the office: John W. Douglass, of Pennsylvania, from November 1 1870 to January 

2, 1871; Henry C. Rogers, rs of Pennsylvania, from May 1 to May 10, 1883; John J. Knox, of Minnesota, from 

F. 

May 

West, 

ll 

MKentu

ay, , 20c

ky, 

 1883- 

f,rom 

Robert 

 April 12 t 

Willia

o 

 ms May  Jr., 

 28, 

of

1 92 

Ob

1;H

io, from

Mires, of Washington 

November 28 to Decemberr 19, 1900; Millar d to 

of . F. , 

gust 20, 1930; Prassly R Baldridge, of Iowa, from May 15 to June 5 1933; Harold N. Graves, of Illinois, 

from January 23 to February 29, 1944; John S. Graham, of North Carolina, from November 19, 1952, to 

January 19, 1953; and Justin F. Winkle, of New York, from January 20 to February 3, 1953. 

VIII 

Report 

on 

Operations 
INTERNAL REVENUE COLLECTIONS 

GENERAL 

Collections of the Internal Revenue during the fiscal year ended June 30 

1954, totaled $69,919,991,000, slightly more than last year and the greates 

amount collected in any fiscal year. The collections represent payment 

actually received during the period specified, including taxes, penalties 

interest, costs, court fines, judgments, offers in compromise, proceeds fron 

seizures, etc. In addition to remittances made by cash, check, or money 

order, the amounts include payments made in the form of Treasury saving 

notes, Treasury tax anticipation bills, Federal Reserve Bank notes in ex 

change for tax anticipation bills, and Federal depositary receipts. 

Employers whose total monthly liability for income tax withheld anc 

old-age insurance taxes exceeds $100 are required to make monthly deposit 

of such taxes in the Federal Reserve Banks or certain authorized commercia 

banks. As evidence of such deposits the employers receive depositary 

receipts, which they later forward with their quarterly tax returns in pay 

meat of the taxes reported thereon. Amounts represented by the depositary 

receipts are not reported as collections until the returns are filed, althougi 

the money is actually received by Treasury depositaries and reported a; 

tax receipts in the Daily Treasury Statement at an earlier date. This 

the principal reason for the difference between the internal revenue receipt 

shown in the Daily Treasury Statement and the internal revenue collection: 

as reported herein for the fiscal year 1954. 

Under revised accounting procedures effective July 1, 1954, the tax pay 

ments made to Treasury depositaries are to be included in Internal Revenut 

Service reports for the month in which the depositary receipts were issued 

thus eliminating the difference in concept. The amount of depositary 

receipts issued by the Federal Reserve Banks but not taken into account by 

Internal Revenue offices totaled $3,944,000,000 as of June 30, 1954, o . 

which $3,414,000,000 related to withheld income and Federal Insuranct 

Contributions Act taxes, $97 million to railroad retirement taxes anc 

$433 million to excise taxes. 

3 
4 HEPORT OF COl\IMISSlONER OF INTERNAL REVENUE 

The accompanying table shows the internal revenue collections by major 

groups of taxes for the fiscal years 1953 and 1954. 

In/ernal revenue collcction~, fiscal years 1953 (uld 1954 

[In tbOUSllJ1ds or dol 

1964 

21,6441,322 

10[,3 

21,61).t.515 

60ural 

FIscllI year 

In,lI~'ld\lnJ:

Wlthh~ld by omrloYflll! '._..•••••••..••••••••. _•••••••••. _.•. _•• _•• __••• 21.132. 275 22, Oil!. 32ll 

Othor _ ••••_•.••••••••••••,•.•••••-.--•••••••••••••• _..... 11.403.942 10, i3lI, 678 

ToLII.llndlvldu!ll tnc:ome lft.1'llS _ _ ••• 32.63G,2Ii 32.812.1107 

ToLllllncome IlJld prnflls taxcs 64.130.732 64.3M1:'m 

= Em~f~nl~::.'~~Ct' ,.•_ : , . nemployment Insumnoo . W'rl~"" l(lxCS-n),I·c.ge bonollt!- - J I 

Total emr,\oymenl taxC) . !l:lIsCl"lhmcnus Intcr(\(lI rc\'WUC: ES\.l.t~ tax•..__ -.- -- , . OUt tIU... 10Cl.W4 il,77ll 

A \co1101 tnxQS: 

Dl.tllJ''<! splnta (Impnrted exrl>t) _.................. ..• 204. i94 ~. G86 

Dlotlll<'tlsplrlts (dt)ITlI'.tlciUCL'l8) __ '1,64.1.933 l,lHo3,OM 

Dl'tllkld splrl\.5 rcctiftClltl(jn Utx ••••_ _....... '26. 84~ 2A,ll5l 

WiIlGS •.. "'" _ c.. 80. [,35 m. G78 .Floor tille~. wloes. c.nd ll'luor-t __ _.... 27. WAl 306 

Bottkl or eonlAlner samps._ _...... 14.393 14.132 ~lalt IICluo~... ?62. ?"g, nt 

S/X'ch\i or OCCuJlatioollll:ll<lS._........................................... 21.487 21,639 

Total nJeohollaxl!5 _ __ •••. _...... 2, 780. 92-5 2, 7ll3.012 

*~~~t~:·.::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: l.~::n I, = 

6tBmp tBx('~ 00 doounwnl.<. other ID.!tnml('Jlt.~. and playing cards............ 00.311) 90.000
 lI1anorac~ul'f·".· OIc:lge tn,;('.>l _ _...................... 2,fl6'l.;sg 2,088.:262
 

nelaUe",' elfcL'I8laxe&_ _......... {96.00ll 438,
 

Other U\l~S (communlclItlons. tnlnsportotlon. ILdmJs.slons, olcomarxnrlna. ctc.• l\od I'Cpealed t:l.<es uot IL-;lod abovo)..... 2. oro. 68ll 1. \l27.lHO 

Total m1soeJ.J.nneom; InICI'Il:lI reVeDUO __ _ 10.837.<101 IO.{M.364 0== 

Orand totfil. __ G9,686,~ 69,0111,l1li1 

COLLECTIONS fROM INCOME, PROFITS, AND EMPLOYMENT TAXES 

The 1954 collections ofincome, profits, and employment taxes aggregated 

S59,468,OOO,OOO, about S618 miIlion more than 1953 collections of these 

taxes. This increase more than 0tIsct the 5385 million decrease in eollcetion~ of other internal revenue. 

REPORT ON OPERATIONS 5 

Corporation income and profits taxes.-Corporation income and profits taxes 

collected during fiscal year 1954 were only slightly below 1953 collections. 

e termination of excess profits taxation On Dec.ember 31,1953, had little 

effect on fiscal 1954 collections uut should be more evident in the 1955 

fimJrcs. 

"'Individual income ta.l"/.'s.-lndividual income taxes withheld by employers 

during fiscal 1954 were S626 million greatcr than 1953. The higher levels 

of salaries and wages subject to withholding more than off~et tbe lower 

withholding rates effective January 1, 1954. Individual income taxes not 

withheld declined slightly as a rcsult of the effect on quartt:r1y declaration 

paymt:nts of the lower tax rates ~pplicable to calendar year 1954 incomes. 

Employment taxt's.-Increased rates under the Federal Insurance ContTibutions Act, effective January 1, 1954, were mainly responsible for the 8 

percent increase in employment taxes during 1954 as compared to 1953. 

OTHER INTERN/\L UEVENUE 

Collections of taxes other than income, profits, and employment taxes 

were somewhat below last year's. This decrease is caused by the differing 

pattern of cxcise tax collections during 1954, which came as a result of the 

change from monthly to quarterly filing of excise tax returns and reporting 

of excise tax liability. The reduction in excise tax rates under the Excise 

Tax Act of 1954, effective April t, 1954, had little effect on fiscal year 1954 

collections. 

RECEIPT AND RECORDING OF RETURNS 

GENERAL 

Our system of collecting taxes is unique in its dcpende.ncc on voluntary 

sclf-<tssessmem and reponing of taxes by the taxpayers. The tax liability of 

individuals and of concerns is generally determined from a return flied by 

the individual or concern, on wh.ieh the tax due has been computed and 

reponed or all information nccc;<;sary for determination of tax liability is 

furnished so that thc Government can accurately determine the tax due. 

A large pan of the work of the Internal Revenue Service revolves around 

the vast number of these returns filed each year and the man}' so-called 

"housekeeping activities" necessary to the proper control and physical handling of the returns. 

, Rt'lurT/S filtd.-During the fiscal year 1954 there were 89 million returns 

hIed of which 67 million were income tax returns, inCluding 6 u'ilJion 

declarations of estimated tax. The employers' tax returns, which totaled 

17 11Iillion made up the nc.xt largest group. Excise tax returns, which 

t~:)(aled nearly 8 million for fiscal 1953, were only 3 million in number for 

fiscal 1954, due to the change from monthly to quarterly filings of thcsc 

rcturns effcctive with the fiJ'st qUClner of fiscal 1954. 

Thc income tax returns filed in anyone fiscal year are, for the most part, 

returns for the tax year cnding 6 months carlit-r. Returns fiIed in fiscal year 

1954 arc largely those filed for calendar year 1953 and part·year returns and 

fiscal-year returns for which the filing period ends in the latter part of the 

calendar year 1953. The number al;<;o includes delinquent returns for prior 

tax years and amended returns which show an increase in tax. Amended 
7 6 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

returns showing a decrease in tax are considered as claims and are not 

counted as rcturns flIed. 

The employers' tax rcturns filed in the fiscal year 1954 include employers' 

quarterly returns of tax withheld on wages (a combined return covering 

both income and Federal Insurance Contributions Act taxes withheld), 

employers' quarterly j·cturns of railroad retirement ta.'\{; and annual ret'lrns 

of unemployment tax filed by employers of eight or more individuals. 

The table that follows shows the number of returns filed by principal type 

of return for fiscal years 1953-54, 

Number of returns filed by 7Jrincipal type oj return, fiscal yea·r,~ 1958 and 1951, 

[In tbousandsl 

Fisc<I] )'Ollr 

Type of return 

19~3 119M 

. , -,--­ Income tax:
 Indlvidufll:
 

CitIzens and resident alien.. .--..---...-------- -- -- ---. -- I 58, M8
 58,493 NOIJTcsldent alien. • • • • • •• ..... 93 180r 

Total incllvlrluallncomo ~u ..... .. . • • __ 58.641 58,1.73" Dcc)lIr11tioDS of estimllted tax . _ 6,109 6,162 (2~ 411­ J,002 osa 11 1)

!!!*~~::~:~E~~:.:_:~~:::::::::::::::::~::::::::::::::: :::::::=::::::: 790 738 Pel'sonfll Jlolding company .. .... __ . __ • _.. _ 10 7 

745 Army~~~~~j:~l~r~cis::::::::::::::::::::::::::::::::::::::::::.:::::~:::::::: <')800 

<,> JJ6 126 ~:g:::~~_~r_g_~~f.Z_~~~~~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 13 J3 

Total income tax returns •__ . ._. . . .-1 67,176 I- 67,127­

EmpJoym(lllt lax:
 Withheld income und old-uge lnsurllJ1cc_. .... _.. ..... _... " ..._",
 16,286 16,4;2 Ctlrricrs ...... __ .. .. .. __ .. . ,;. " ... 27 

Unemployment Insumnce_ .-.---- -- -. -•• ,= ---_---.-----..--- -._.1 5SS 1 5113_ 

Total employment t!lX rctuTrul_ -.. _--.---. -- .. _-. _- --. --- ---. . -_ --I 16,808 

24 

Ii, 092­ 37 39 ~ii~~I;~~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 49 48 7,734 3,197 :;~~l \~~~.::::::::::: ::::::::::::::::::::::::::::::::::::::::::: ~::::::: :.::::::::: 1,303 82 All other • __ _••• _.. . .. .. __ 1,2~

Orand total .. • .• __ ._~ • • __ . __ .• 1 93,208 I 88,SS7 

I Less than WO. 

• Includes all t)'pes of returns formerly rCI)Orted I1S miscelluneous. 

PROCESSING OF RETURNS 

As returns are received in Internal Revenue offices, they arc routed 

through a number of processing stages before being audited for accuracy. 

Remittances accompanying the returns must be checked, recorded, and 

deposited. The returns must be sorted, classified, and numbered; alphabetical index cards are prepared and numbered to correspond with the 

identification on the returns. Any balances due as shown by the taxpayers' 

computations must be recorded and billed to the taxpayers. Overpayments 

of tax must be recorded and arrangements made for refunding the amounts 

of overpayment by Treasury disbursing authorities, 

In the case of individuals filing income tax returns on form 1040A, the 

amounts of tax liability must be computed, the amounts of overprepayment

• 

REPORT ON OPERATIONS 

or balances due determined, and arrangements made for billing the taxpayers for any amounts of tax due or refunding any amounts of overpaymcnt. There were more than 11 million such determinations made on 

forms 1040A filed by taxpayers covering 1953 incomes. 

MATHEMATICAL VERIFICATION 

One step in the processing of returns filed is the verification of the 

mathematics shown in taxpayers' computations. In this process, consideration is limited to the mere arithmetical and similar mechanical aspects of 

computing the amount of tax due, and corrections made are not subject to 

review in the appellate processes. Thercfore, the notices sent to taxpayers 

with respect to such corrections state that the adjustments are the result of a 

mathematical verification of the returns anci that if subsequent audit 

discloses that additional information is necessary or further changes must 

be made, the taxpayers will be notified. 

The mathematical verification is not always a preliminary action but is 

sometimes deferred and combined with a subsequent examination. \\fhen 

this is done, of course, any mathematical corrections are induded in the 

notice sent to the ta.'\{payer, as part of the overall proposed adjustments in 

tax. 

There is no mathematical verification with respect to individual income 

tax returns filed on form l040A, since the original tax computations are 

made on such returns in Intcrnal Rcvenue offices_ 

The results of the mathematical verification of income tax returns during 

1954 arc shown in the following table: 

Income lax returns mathematically verified, fisC(J,lyear 1954 

IFi~ul'()S In tbouso.nds] 

Class or return NlIlllborof 

returns 

,"erilled 

Numbcrof 

rel.llnlSOn 

whleb 

ehllngos

weremudc 

A.mou.1I1 or tax In­ crease IAmount of tax de­ cro.aso 

In<l''"idn''landJldueiary ... ... • CorPOratlon.. 

TotllL •• -. •• 

•. __ 

_ 

~8'2241 633 

48, S.~7

1,270 IG 

1,2j6 

$77,ID1 1.281 

78,485 

$1S,542 453 

18,005 

INFORMATION DOCUMENTS 

In addition to the 89 million tax returns, an even greater number of 

"information documents" (about 230 million) is received by Directors of 

Internal Revenue reporting information relative to wage and salary payments, dividends paid, and various other payments to recipients of income 

by banks, other corporations, partnerships, 01' individuals. These returns 

are filed under the "information at source" provisions of the Internal 

Revenue Code which require every individual, partnership, or corporation 

to report certain payments to the Commissioner of Internal Revenue. 

A large portion of this information is obtained through use of t.....·o form 

the Form \oV-2, Withholding Statement, and Form 1099, Inform~ 10D 

Return.- As these documents are received a sort is made so that comparisons 

can be made with the income tax returns of taxpayers, thereby assisting the 

Service in determining the accuracy of the returns. 
8 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

SUPERVISION AND CONTROL OF THE ALCOHOL AND 

TOBACCO INDUSTRIES 

GENERAL 

The Internal Revenue Service is charged with the administration of 

comprehensive laws and regulations relating to industrial alcohol, alcoholic 

beverages, tobacco products, and related products, including the determination of liability for taxes imposed by these laws. Specifically, it is 

responsible for the regulation of approximately 500,000 persons or concerns 

operating under the internal revenue alcoholic beverage laws, and approximately 750,000 persons or concerns carrying on business as dealers in leaf 

and other tobacco materials, manufacturers of tobacco products and cigarette papers and tubes, wholesalers, retailers, and peddlers of such articles, 

and proprietors of bonded internal revenue tobacco warehouses. 

The regulation of the alcoholic beverage industries involved, among 

other things, consideration of 34,744 applications for certificates of label 

approval (each bottler is required to have all labels in use on interstate 

shipments of liquor approved) and 113,620 items of advertising material 

(disseminated or proposed for dissemination by producers, importers, and 

wholesalers of alcoholic beverages) to determine whether the labels and 

advertising conformed to the Federal Alcohol Administration Act and 

regulations thereunder. Corrective action was taken with respect to 

1,131 cases where irregularities in published advertisements were found. 

In addition, action was taken on 40 applications for approval of interlocking directorates, which are required to be filed whenever individuals seek 

to hold office as officers or directors in more than one company engaged 

in the production or bottling of distilled spirits, or under certain other 

circumstances specified by such Act. 

New procedures were developed to streamline and simplify the audit, 

in field offices, of reports relating to operations of establishments subject to 

alcohol and tobacco supervision; extensive recommendations were made 

for revisions of tobacco and liquor laws; operating functions were decentralized from the National Office to field offices, and a reduction in the number 

of field offices was made on the basis of alcohol and tobacco industry concentration and law enforcement problems; and surveys were conducted in 

regional offices to determine the effectiveness of liquor law enforcement 

within each region. 

Detailed tabulations relating to the production of alcohol, distilled 

spirits, beer, wines, and tobacco manufactures during the fiscal year 1954 

(corresponding to the tables which appear in the appendix of issues of this 

report for the fiscal year 1952, and earlier years) are presented in a separate 

Internal Revenue Service publication entitled "Statistics Relating to the 

Alcohol and Tobacco Industries" which may be obtained from the Superintendent of Documents, Washington 25, D. C. 

AUTHORIZATION OF OPERATIONS 

The regional alcohol and tobacco tax offices are responsible for the examination and processing of all registrations and all applications, notices, 

bonds, consents of surety, plats, plans, permits, and other qualifying documents filed, as required by law, in connection with the establishment and 

continuing operations of plants and premises used for the production, 

storage, treatment, packaging, and distribution of industrial alcohol, 

REPORT ON OPERATIONS 9 

alcoholic beverages, and tobacco products, for the use and transportation 

of specially denatured alcohol and tax-free alcohol, for the manufacture 

and use of liquor bottles, and for the manufacture of volatile fruit-flavor 

concentrates and vinegar by the vaporizing process. 

Final administrative review of actions taken with respect to applications, 

notices, bonds, plats, plans, and other related documents amounted to 

19,860 items. Appendix table 6, page 80, shows the number of establishments qualified under the internal revenue laws at the end of the year. 

ON•PREMISES SUPERVISION 

Day-to-day supervision of the operations of registered distilleries, fruit 

distilleries, internal revenue bonded warehouses (including bottling-inbond departments), industrial alcohol plants, and bonded warehouses, 

denaturing plants, distillery denaturing bonded warehouses, rectifying 

plants, taxpaid bottling houses (and bonded wineries when brandy or other 

wine spirits are added to wine) is provided by a force of United States 

storekeeper-gaugers. The purpose of such supervision of these plants and 

premises is to insure protection of the revenue and, in the case of beverage 

distilled spirits, to provide an incidental measure of control over labeling 

to assure compliance with the Federal Alcohol Administration Act. 

During the fiscal year 1954, such supervision was provided at establishments (other than bonded wineries) which at the end of the year accounted 

for the production of 378,499,045 proof gallons of ethyl alcohol, the denaturation of 386,229,157 proof gallons of ethyl alcohol, the warehousing of 

52,118,911 proof gallons of ethyl alcohol, the production of 184,997,028 

tax gallons of distilled spirits of various kinds, the warehousing of 864,328,167 

tax gallons of distilled spirits, the taxpayment of 158,790,672 tax gallons of 

distilled spirits, including alcohol, the rectification of 90,410,552 proof 

gallons of distilled spirits and wines, and the bottling of 173,581,930 wine 

gallons of distilled spirits. 

While on-premises supervision is not provided at breweries, at bonded 

wineries except when wine spirits are added to wine, or at tobacco products 

establishments, the operations of all such establishments are subject to 

periodic inspections. During the year (fiscal year 1954 for alcoholic 

products and calendar year 1954 for tobacco products) such establishments 

accounted for the production of 92,561,067 barrels (of 31 gallons each) of 

beer, 117,133,731 wine gallons of still wine, 31,032,920 half-pint units of 

effervescent wines, 3,253,061 wine gallons of vermouth, 249,445 wine 

gallons of aperitif wines other than vermouth, 6,039,403,299 cigars, 

423,097,890,611 cigarettes, and 208,141,561 pounds of other tobacco 

products (including smoking and plug tobacco, and snuff). 

INSPECTION OF ESTABLISHMENTS 

A force of inspectors is utilized to provide facilities for the investigation 

of applicants for permits and registrants to determine their qualifications 

under law and regulations, for the inspection of operations of establishments, for the supervision of activities where required by law or regulation, 

and for the investigation of violations of the internal revenue laws or the 

Federal Alcohol Administration Act, or both, by proprietors of qualified 

establishments. 

During the year a total of 61,840 inspections was made, of which 2,640 

were made pursuant to original applications and notices filed by persons 

seeking to qualify for permit privileges or registering for the first time. 

827465-85-2 
10 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

CHEMICAL ANALYSES AND RESEARCH 

Facilities for chemical research and laboratory work are provided by 

laboratories in the National Office and in each of the regions. The staffs 

of these laboratories are primarily concerned with research useful in determining the tax status of many products, and in the enforcement program. 

Analyses and examinations of articles are performed for other divisions of 

the Service, for the Bureau of Narcotics and, in the liquor and narcotic 

fields, for various law enforcement agencies. The laboratories also collaborate with the Association of Official Agricultural Chemists in developing 

and selecting methods of analysis for official adoption, and with the United 

Nations to improve methods of assaying opium and determining countries 

of origin. Other Federal agencies and the committees for the revision of 

Pharmacopoeia of the United States and the National Formulary often 

confer with the staff of the laboratories. 

The regional laboratories received 36,826 samples during the year. The 

National Office laboratory received 6,103 samples. 

ENFORCEMENT WORK 

RETURNS EXAMINED 

General.—The exceptionally high degree of voluntary and conscientious 

tax compliance by the majority of American taxpayers makes it unnecessary 

to examine thoroughly all of the many millions of tax returns filed each 

year. However, there remain substantial numbers of returns requiring 

corrections because of doubtful issues, and of carelessness, ignorance, or 

willfulness on the part of the taxpayers filing the returns. 

Since it is incumbent upon the Internal Revenue Service to insure maximum compliance with the tax laws, those returns believed to be most in 

need of correction are segregated through a preliminary inspection process, 

and as many are examined each year as the resources of the Service will 

permit. 

Selection of returns for examination. —It is neither necessary nor possible to 

examine thoroughly every tax return filed. Thus, a basis must be established for selecting returns to be examined. A return may be questioned 

if there is reason to believe either that the dollar amounts are not correct 

or that any item has not been handled in accordance with the laws and 

regulations. Those returns in which there are indications of substantial 

errors are selected for examination, along with those returns requiring audit 

because of related claims, taxpayers' requests, or other features which 

make examination mandatory. 

During the fiscal year 1954 the preliminary inspection of the returns 

processed resulted in 3,389,244 returns being selected for more thorough 

consideration by examining officers. 

Examination of returns.—As the term is used by the Internal Revenue Service an examination may be defined as an audit of a tax return which involves contact with the taxpayer or his representative to determine the accuracy of items on the return and to make certain that such items conform 

with the laws and regulations. In the case of income tax returns, items of 

income, exemption and deduction are verified. 

Examinations are of two types—office audits and field examinations. 

The former involve contact with taxpayers through correspondence or inREPORT ON OPERATIONS 11 

terview on Internal Revenue premises, while the latter involve examination 

of the taxpayers' books, records, bank accounts, etc., in their homes or 

places of business. Returns of great complexity and those involving the 

large businesses usually require field examination. In field examinations, 

wherever practicable, all Federal tax returns of a taxpayer are audited at 

one time, regardless of the types of taxes to which they relate. 

Where the examination discloses errors in items reported or application 

of laws, the agent makes the necessary corrections. If a tax increase results, 

the agent computes the deficiency owing the Government. If a tax decrease 

is indicated, the agent computes the overassessment for refund to the 

taxpayer or for credit against any other taxes he may owe. 

At the conclusion of an examination, the agent discusses his findings with 

the taxpayer and, if a proposed deficiency or overassessment is involved, 

affords the taxpayer an opportunity to execute the appropriate agreement 

form. If the taxpayer does not agree or does not wish to execute an 

agreement form, he is advised of his right to an informal conference and is 

furnished a statement identifying the proposed adjustment. 

The purpose of the informal conference is to provide an opportunity to 

resolve issues at the earliest possible time, in an atmosphere of informality, 

in order that the case may be disposed of as simply as possible under the 

law. Hence, the conferences are held prior to the preparation of the 

examining agent's final report, without issuance of any formal notification 

of proposed adjustments by the District Director, and without requiring the 

filing of any written protest or brief by the taxpayer. 

If the taxpayer agrees with the decision reached at the informal conference, the appropriate agreement form is executed and the examining agent 

prepares a report giving effect to the conference conclusions. Following a 

review of the entire file, the case is made ready for closing, and a copy of 

the examination report is mailed to the taxpayer. 

Where no agreement is reached with the taxpayer at the time of examination or as a result of informal conference, a 30-day preliminary notice 

of adjustment is forwarded to the taxpayer, accompanied by a copy of the 

examination report. This notice affords the taxpayer a period of 30 days 

in which to sign an acceptance or file a formal protest requesting a conference under the appellate procedures described on pages 17-18. Where 

an overassessment is the only tax adjustment proposed and the taxpayer 

signs an acceptance or fails to respond to the 30-day notice, the taxpayer's 

account is adjusted to give effect to the overassessment and a refund of 

tax and interest is made if required. 

Where the adjustment involves a deficiency in income, profits, estate or 

gift tax and the taxpayer fails to respond to the preliminary 30-day notice, 

a statutory notice of deficiency is issued providing a period of 90 days in 

which the taxpay'er may sign an acceptance or file an appeal with the Tax 

Court of the United States. If the taxpayer signs an agreement, or fails 

to respond to the statutory notice within the 90-day period, the amount 

of the deficiency plus interest due is listed for assessment and collection. 

However, if the taxpayer appeals to the Tax Court of the United States 

for a redetermination of the tax, assessment of the deficiency is deferred 

pending final determination of tax liability (see pp. 17-18). 
12 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

The following table shows the number of returns examined during the 

fiscal year 1954. 

Number of returns examined, fiscal year 1954 

[In thousands] 

Type of return Number 

Income and profits tax: 

Corporation 125 

Individual and fiduciary s 1,648 

Total income and profits tax 1,673 

Other than Income and profits tax: 

Estate and gift tax I 85 

Miscellaneous 144 

Total other than Income and profits tax . 220 

Grand total 1,902 

s Excludes partnership returns. During 1954 the examination of individual income tax returns involved 

the examination of 31,030 partnership returns. 

Includes an estimated 127,003 returns which were reported as examined during the July-September 

period of 1953 but which were determined to be only mathematical corrections. 

Includes 54,000 gilt tax returns verified in the national once. 

The number of returns examined during 1954 is not comparable to 

prior years due to the revision of audit criteria and procedures, and to 

transitional problems incident to the reorganization. Prior to reorganization the audit of individual income tax returns was divided between two 

separate and independent jurisdictions, the former collectors' offices and 

revenue agents' offices. In the collectors' offices there was a close relationship between office audit and mathematical corrections, and each 

case handled, whether it was an office audit or a change in tax resulting 

from a mathematical error, was counted as one case examined. With 

the reorganization, which started in fiscal 1953, a separation was made 

between mathematical error cases and examined cases in reporting procedures. However, the transition from the old to the new organization 

was not fully complet ed until early in fiscal 1954, so that the fiscal year 

1953 audit data contained a substantial number of mathematical verifications, though far fewer than the data for other prior years. All but an 

estimated 127,000 of these mathematical verifications have been eliminated 

from the 1954 totals and are reported separately on page 7. However, it 

is not possible to readjust the reports of earlier periods for the purpose of 

placing them on a basis comparable with present reports. 

In addition, since reorganization the classes of returns formerly audited in 

collectors' offic es have been handled under procedures which insure a more 

thorough examination and give greater consideration to the appellate 

rights of taxpayers. While this revision has increased the examination 

time required for these returns, it has improved substantially the quality 

of the audits. As a result, 1954 examinations of these returns are not 

comparable with those made in prior years. 

FRAUD 

General.—The willingness of the average taxpayer voluntarily to pay 

his correct tax depends to a large extent on his belief that it is his 

duty and the right thing to do, and this willingness is kept high by the 

REPORT ON OPERATIONS 13 

knowledge that all others are paying their fair share. Thus, special meas- ures are taken against those who willfully attempt to evade payment of 

their proper tax liability. The Internal Revenue Service maintains 

special groups of enforcement agents whose main duties relate to the development of evidence suitable for presentation in court against those 

suspected to be guilty of evading taxes. The tax fraud work of the Service 

is described in three categories: (1) regular tax fraud other than alcohol 

and tobacco tax; (2) wagering tax; and (3) alcohol and tobacco tax fraud. 

Regular tax fraud other than alcohol and tobacco tax.— In addition to the regular examination of income, estate, gift, and excise tax returns, special 

consideration is given the returns of taxpayers who attempt to evade the 

tax properly due from them. When such fraud is suspected, the tax returns are subjected to a joint investigation by regular examining agents 

and special agents to determine the extent to which fraud is actually involved. The special agents' duties relate primarily to the search for and 

development of evidence suitable for presentation in court against those 

found to be evading taxes. 

Where such evidence is thought to warrant prosecution, the case is 

forwarded to the Department of Justice with a recommendation that the 

individuals involved be prosecuted under the appropriate sections of the 

Internal Revenue Code. 

This fraud work is reported on a case basis rather than on number of 

returns as regular examinations are reported. A case may involve several 

returns of one taxpayer and/or returns of several taxpayers. (These returns are included in the examinations shown in the table on p. 12.) The 

following table shows the disposition of income, estate, gift, excise, and 

wagering tax cases involving suspected fraud during the fiscal years 1953 

and 1954. 

Number of tax fraud investigations initiated and closed, fiscal years 1953 and 1954 

(excludes alcohol and tobacco tax fraud) 

Item 

Fiscal year 

1053 

(1) 

1964 

(2) 

Investigations Initiated during year 

3,203 4,353 Disposals recommended):' 

non I 

Fraud penalty (no prosecution) 1,276 1,9588 

Deficiency (no fraud penalty) 

No change 

1,223977 

196

237 

219

8 

Fraud investigation not warranted 148 468 

439 588 

Total 

3,296 4,057 

Includes wagering tax fraud cases. Prior to Sept. 1, 1964, reporting procedures on tax fraud did not 

distinguish wagering tax fraud from regular tax fraud. 

s Represent cases referred to regional counsel by Intelligence Division with a recommendation for criminal 

prosecution. For regional counsel action on Intelligence Division recompundationS 

see PP. 14-15. 

Wagering tax work. —The wagering tax provisions of the Internal Revenue 

Code require that certain persons engaged in the business of receiving 

wagers or engaged in receiving wagers for or on behalf of a person so engaged 

purchase excise stamps evidencing the fact of being engaged in this business. 

The Code also requires each person engaged in the business of accepting 

wagers to file a monthly return and to pay a tax on the gross amount of wagers accepted, 
63,390 

34, 768 

5

5

01,384 

$16,304, 634 

90,408,315 

20,920,502 

$25. 204,048 

98,765,978 

23, 560,040 

55,016 

480, 621 

819,111 

1, 099, 542 854, 748 147,590,072 127,633,431 

Amount of taxes, interest, 

and penalties Number 

Type of tax 

Fiscal year 

lima Fiscal year 

1954 

Fiscal year 

1953 

Fiscal year 

1954 

Income 

Payroll 

Miscellaneous 

Total 

14 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Where persons are suspected of attempting to evade these taxes, special 

agents attempt to develop evidence regarding the evasion. In those cases 

where sufficient evidence is obtained, the cases are forwarded to the United 

States District Attorney with recommendations for prosecution. The 

1,475 wagering tax fraud cases on which investigation was completed during 

fiscal 1954 are included in the foregoing table. 

Alcohol and tobacco tax.—In addition to its regulatory controls over the 

legal liquor and tobacco industries, the Internal Revenue Service is responsible for the suppression of the non-tax-paid liquor traffic, the control of 

materials intended for use in the illegal manufacture of spirits, the enforcement of the Liquor Enforcement Act of 1936 which prohibits the 

transportation of intoxicating liquor into a dry State, and the enforcement 

of the National and Federal firearms acts. 

Seizures and arrests for liquor, tobacco, and firearms law violations 

during the fiscal years 1953 and 1954 were as follows: 

Seizures and arrests for liquor law violations, fiscal years 1953 and 1954 

Item 

Fiscal year 

1953 1954 

Seizures: 

Stills (number) 10,699 11, 266 

Illicit liquors (wine gallons) 172,951 186,447 

Mash (wine gallons) 6,151,082 6,722, 850 

Vehicles (number) 2, 333 2,409 

Property (appraised value) $3,104,525 $3,197,771 

Arrests (number) 9,370 9,344 

Includes arrests for violations of tobacco tax and firearms laws. 

tobacco violations and 245 for firearms violations. 

The 1954 figure includes 41 arrests for 

In addition, enforcement personnel, as an incidental duty in their 

regular enforcement work, made 102,515 inspections of retail liquor 

dealers and 739 inspections of nonpermittee wholesale liquor dealers. 

The Liquor Enforcement Act of 1936 prohibits the importation, or 

attempts at importation, of liquors into a dry State except in accordance 

with provisions of State law implementing that act. Oklahoma is the 

only State now entitled to such protection. During the year 31 arrests 

were made and 2,047 wine gallons of taxpaid distilled spirits and 23 

vehicles were seized, the seized property being valued at $65,832, for 

violations of this act. 

In its tobacco enforcement program, the Internal Revenue Service made 

231 investigations of alleged violations, resulting in 41 arrests and the 

collection of $17,172 in taxes and penalties. 

CASES INVOLVING CRIMINAL PROSECUTION 

During the year, 1,931 cases, involving 2,075 proposed defendants and 

relating principally to income and wagering tax violations, were forwarded 

by Regional Counsel to the Department of Justice and United States Attorneys. Of these cases 1,861 were recommended for prosecution and 70 

were transmitted as related subject matter. Included in the cases referred 

were 1,097 wagering tax cases. The previous high involved 1,503 cases, 

with 1,635 proposed defendants, transmitted during the fiscal year ended 

June 30, 1953, with prosecution recommended in 1,405 of the cases and 

not recommended in 98 cases. 

REPORT ON OPERATIONS 15 

Conclusion against prosecution by mutual agreement between the offices 

of regional counsel and regional commissioners was reached in 169 cases, 

and the Department of Justice returned 76 cases without prosecution. A 

total of 1,629 cases was closed and at the end of the year the closing inventory totaled 3,802 cases of which 2,799 were awaiting closing, or were 

pending in the Department of Justice or United States Attorneys' offices, 

or were pending in the courts. 

Grand juries returned indictments against 1,561 defendants, and no true 

bills involving 14 proposed defendants. On trial, 190 defendants were 

convicted and 1,101 defendants, in 1,061 cases, entered pleas of guilty or 

nolo contendere, while 77 defendants were acquitted. Included in the acquittals were defendants in cases involving other defendants convicted. In 

70 cases, principally involving related cases in which pleas or convictions 

of other defendants were obtained, indictments involving 96 defendants 

were dismissed or nol-prossed. Exclusive of wagering tax cases, sentences 

were imposed involving $2,856,177 in fines and prison sentences totaling 

512 years, and 893 years were imposed in suspended sentences and probation cases. 

DELINQUENT RETURNS AND COLLECTION OF DELINQUENT ACCOUNTS 

Delinquent returns.—Although a very high percentage of tax returns is received in timely fashion, another branch of enforcement work relates to the 

obtaining of delinquent returns. Several methods for detecting delinquent 

returns, including information documents, canvassing, etc., are utilized. 

When an internal revenue officer finds that a taxpayer is delinquent in 

filing a tax return, the taxpayer is requested to prepare and sign a return. 

To avoid delay or assist the taxpayer, the officer may prepare the return 

from information secured from the taxpayer's records and then request him 

to sign it. If the taxpayer refuses to prepare a return or sign one prepared 

by the internal revenue officer, a substitute return must be prepared by the 

Internal Revenue Service. 

In case of failure to make and file a return within the prescribed time, a 

penalty is added to the tax unless failure to file is shown to be due to reasonable cause and not to willful neglect. The penalty is 5 percent if the failure 

is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof, not to exceed 25 percent in the aggregate. 

During the year, 854,748 delinquent returns were obtained on which 

taxes, interest, and penalties totaling $127,633,451 were reported. A 

comparison of these amounts, according to classes of tax, with the preceding 

year, is shown below: 

Delinquent returns secured, fiscal years 1953 and 1954 
Amount 

1,075, 773 

818.961 

222, 819 

33, 993 

718,749 

114, 214 

29,143 

923,707 a* 029 

45,673 

1,051,201 

790,739 

210.667 

43,895 

16 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Warrants for distraint.—Generally, internal revenue taxes are paid at the 

time or before the tax return is filed by the taxpayer. If a return is submitted without full payment of tax, if additional tax is found to be due upon 

audit and investigation, or if tax is assessed on a delinquent return which is 

not accompanied by payment, the law requires the issuance of a notice 

calling for payment of the unpaid balance within 10 days after mailing of 

the notice. Except in a few instances, such as payments on declarations of 

estimated tax, no statutory provision is made for installment payments. 

In the interest of economical administration, other notices of delinquent 

accounts are also issued if the taxpayer fails to make payment within the 

10 days specified in the first notice. However, the law in effect during 1954 

authorized, in the event payment was not received after the first 10-day 

notice, the issuance of a warrant for distraint, which empowered forcible 

collection of the delinquent account by levy on wages, seizure of real and 

personal property, etc. The warrant was issued over the signature of the 

District Director and set forth the name and address of the taxpayer and 

the amount of tax which was to be collected. Shortly after the close of the 

year, enactment of the Internal Revenue Code of 1954 eliminated the 

warrant for distraint and made other modifications in the system for handling delinquent accounts. 

The following table provides comparative statistics on warrants for distraint for the fiscal years 1953 and 1954. 

Warrants for distraint collected, uncollectible, and outstanding, fiscal years 1953 

and 1954 

[Dollars In thousands] 

Fiscal year 

Item 

Collected, total 

111001110 taxes 

Payroll taxes (withholding and unemployment) _ Miscellaneous taxes including distilled spirits 

Returned as uncolleetible 

On hand, end of period, total 

Income taxes 

Payroll taxes (withholding and unemployment)._ 

Miscellaneous taxes, Main ding distilled-spirits 

FIREARMS PROGRAM 

The National Firearms Act was enacted to prevent fully automatic firearms, such as machineguns and machine pistols, and sawed-off shotguns and 

rifles from being acquired and used by criminals. The law provides for the 

mandatory registration of such weapons and the imposition of a prohibitive 

transfer tax, thus discouraging traffic in such weapons except to military and 

law enforcement agencies. The law further provides for the imposition of a 

tax on the manufacture of firearms by other than qualified manufacturers. 

REPORT ON OPERATIONS 17 

The Federal Firearms Act was enacted to prevent criminals from obtaining firearms and ammunition. It deals exclusively with the transportation, 

shipment, or receipt of firearms or ammunition in interstate or foreign 

commerce. 

The Act of August 9, 1939 (49 U. S. C. 781-788) makes it illegal to 

transport, carry, conceal, convey, or possess any contraband article (including any weapon within the classification of a firearm under the National 

Firearms Act, with respect to which there has been committed any violation 

of said act or the regulations issued pursuant thereto) in or upon any vessel, 

vehicle or aircraft or upon the person of anyone therein, and subjects the 

vessel, vehicle, or aircraft to seizure and forfeiture. 

During the year 2,497 investigations were conducted. Many cases 

originated with local law enforcement agencies or were investigated jointly 

with them. A total of 298 cases of violations of the National and Federal 

Firearms Acts was referred to the Department of Justice for prosecution, and 

49 vehicles were seized. Registrations of firearms, during the year, totaled 1,928. 

APPEALS AND CIVIL LITIGATION 

GENERAL 

The primary purpose of the appeals procedure is to provide within the 

Internal Revenue Service an administrative means whereby a taxpayer 

who does not agree with a proposed adjustment to his tax liability may 

obtain a review of the proposal for the purpose of reaching an agreement 

with respect to the amount of the adjustment. 

The appeals function is decentralized and operates at two organizational 

levels. In the audit division of each district director's office any taxpayer 

who does not agree with the findings of the examining officer may request 

an informal conference with the examiner's superior or a designated conferee 

(see p. 11). In the Appellate Division, which is independent of the district 

director's office, a taxpayer who is in disagreement with the proposed 

determination of the district director may ask for a hearing on his case. 

Conference opportunities are available in the Appellate Division in cases 

docketed in the Tax Court of the United States as well as in cases not so docketed. 

The jurisdiction of both the audit divisions of the district directors' offices 

and of the Appellate Division extends to all internal revenue taxes except 

those involving alcohol, tobacco, firearms, narcotics, and wagering. It 

applies to disagreements involving overassessrnents as well as deficiencies. 

SUMMARY OF APPEALS PROCEDURE 

A taxpayer who does not agree with the findings of the examining officer 

or has been unable to reach a settlement by the informal conference procedure may file a written protest with the district director and request 

consideration of his case by the Appellate Division; or may file a petition 

seeking a redetermination of any deficiency by the Tax Court of the United 

States. An alternative to these avenues of appeal is to pay the tax, file 

claim for refund, and bring suit in a United States district court or in the 

United States Court of Claims. 
Number of cases 

Received 

Opening inventory 

Dispositions, total 

Closed 

Petitioned 

Closing inventory 

18 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Any taxpayer who has petitioned the Tax Court also may request a 

conference in the Appellate Division for the purpose of arriving at a settlement without a trial. If such a settlement is reached, and is concurred in 

by Regional Counsel, the court will enter a decision in accordance with the 

stipulation entered into by the parties and no hearing is necessary. If no 

agreement is reached at such a conference, or if no conference is desired by 

the petitioner, a hearing is conducted before the Tax Court. 

If a hearing is held, the Tax Court may sustain the Commissioner's 

determination, may reverse the entire determination, or may call for recomputation of tax in accordance with its findings and opinion. 

A taxpayer who does not agree with the decision of the Tax Court may 

file a motion for rehearing or for reconsideration by the division which 

heard the case; may file a motion for review by the full court; and may file 

a petition with the United States court of appeals for review of the decision. 

If the taxpayer desires to appeal from the decision of the court of appeals 

or the Court of Claims, a petition for writ of certiorari must be filed with 

the Supreme Court of the United States. The granting of the petition is in 

the discretion of the Supreme Court. Such a review is granted only for 

special and important reasons. 

A taxpayer desiring Appellate Division consideration of a case involving 

excise or employment taxes must first file claim for abatement or pay the 

tax and file claim for refund. The procedure differs primarily because the 

jurisdiction of the Tax Court does not extend to these levies. Judicial 

review is restricted to the United States district courts and the Court of 

Claims; with appeals as described above. 

The Appellate Division has no jurisdiction in any case once suit is brought 

on a claim for refund, and it may not act in any case in which criminal 

prosecution is under consideration. In cases involving issues arising under 

section 722 of the Internal Revenue Code of 1939, settlement authority 

within the Internal Revenue Service is vested in the Excess Profits Tax 

Council. 

APPELLATE DIVISION CONSIDERATION OF CASES NOT BEFORE THE 

TAX COURT 

In cases not docketed in the Tax Court the Appellate Division acts on 

behalf of the Commissioner to review protested determinations of tax 

liability. Any settlement effected by the Appellate Division is final and 

will not be reopened unless it is shown that the disposition involved fraud, 

malfeasance, concealment or misrepresentation of material fact, or an 

important mistake in mathematical calculations. The Appellate Division 

will not eliminate the ad valorem fraud or negligence penalties except 

with concurrence of Regional Counsel. 

The Appellate Division's activities for 1954 in the disposition of protested 

income, profits, estate, and gift tax cases not before the Tax Court are 

summarized below. (For additional information, see table 13, p. 94.) 

REPORT ON OPERATIONS 19 

Appellate Division receipt and disposition of protested income, profits, estate, and gift 

tax cases not before the Tax Court, fiscal years 1953 and 1954 

I Receipts for fiscal year 1958 include 10,069 cases transferred from internal revenue agents' conference 

sections merged into Appellate Division during fiscal 1963 under Reorganization Plan No. 1 of 1952. 

NOTE.—A case may include several tax years of one taxpayer. 

There were 13,578 nondocketed cases on hand June 30, 1954, of which 

12,251 cases, involving $561,875,000 additional taxes and $116,367,000 

proposed overassessments, were awaiting action by the Appellate Division, 

and 1,327 cases involving $49,312,000 additional taxes and $2,923,000 

proposed overassessments were awaiting taxpayers' action on statutory 

notices. 

The following table shows results of Appellate Division actions with 

respect to excise tax cases: 

Appellate Division receipt and disposal of protested excise tax cases, fiscal year 1954 

Status 

Number of cases 

Refund 

claims 

Abatement 

claims 

Opening inventory 

Received 

Dispositions, total 

Settled by agreement 

Partial allowance—no agreement 

Claims rejected—no agreement 

Other 

Closing inventory 

45 

187 

102 

197 

81 124 

16 

1 

57 

7 

48 

6 

64 

16 

101 175 

CASES PETITIONED TO THE TAX COURT 

A taxpayer who does not agree to a deficiency determined by the Internal 

Revenue Service in a case involving income, profits, estate, or gift taxes 

and desires a judicial opinion of his case may file a petition asking a redetermination of the tax by the Tax Court of the United States, an independent 

agency having no connection with the Internal Revenue Service. 

After a petition is filed with the Tax Court, the Appellate Division, with 

concurrence of Regional Counsel, may effect a settlement of a case by 

stipulation before it goes to trial. However, the Appellate Division may 

not modify any determination of an issue under section 722 except with 
Number of cases 

Status Fiscal 

year 

1953 

Fiscal 

year 

1954 

Pending, beginning of year 

Received dining year 

Disposals: 

Settled by stipulation 

Closed by dismissal or default 

Tried before Tax Court on merits 

Total disposals 

Pending settlement or trial, end of year 

9,006 

7,077 

10,920 

4,433 

4, 229 

520 

1,014 

5,887 

300 

1,191 

5, 763 C 858 

10,920 8, 495 

20 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

concurrence of the Excess Profits Tax Council and may not act in any case 

in which criminal prosecution is under consideration. 

The Chief Counsel's office has exclusive authority to represent the 

Commissioner in the defense of all cases pending before the Tax Court of 

the United States which represent appeals from determinations by the 

Commissioner with respect to income, excess profits, estate, and gift taxes. 

The defense of such cases includes the preparation of motions, answers, and 

other pleadings, the conduct of hearings thereon, the trial of the cases in 

the Tax Court, the preparation and submission of briefs and recomputations, and the conduct of hearings on recomputations, motions, etc. 

The following table shows the disposition of cases in the Tax Court by 

the Appellate Division and the Chief Counsel during the fiscal year 1954. 

Receipt and disposition of petitioned income, profits, estate, and gift tax cases by the 

Appellate Division and by the Office of the Chief Counsel, fiscal years 1953 and 1954 

The total number of cases decided on merits by the Tax Court during 

1954 was 947, consisting of 348 cases in which the Commissioner's determination was wholly sustained, 384 in which the Commissioner's determination was partly sustained, and 215 cases in which the Commissioner's 

determination was reversed. 

If the Tax Court decision is adverse to the position taken by the Commissioner, it is the policy of the Commissioner to publish in his official publication, the Internal Revenue Bulletin, a listing of the cases in which he acquiesces in the court decision and therefore regards the case as having precedent 

value in the consideration of other cases of a similar nature. 

During the fiscal year 1954 there were published in the Internal Revenue 

Bulletin acquiescences of the Commissioner in 202 adverse decisions of the 

Tax Court and nonacquiescences in 46 adverse decisions. 

OTHER COURTS 

The progress of cases in appellate courts on appeals from decisions of the 

Tax Court for 1954 is indicated by the following table: 

REPORT ON OPERATIONS 21 

Cases in appellate courts on appeals from decisions of the Tax Court, fiscal year 1954 

Status 

Number of cases 

In Courts 

of 

Appeals 

In Supum 

Court

a 

Pending July 1, 1958 

Appealed 

Total to be accounted for 

Disposed of during year: 

-Favorable to Commissioner 

Favorable to taxpayers 

Modified 

Settled 

Dismissed 

Total 

Pending June 30, 1954 

410 

327 

3 

743 4 

153 

64 

105 

20 

4 

3 

336 3 

407 

During the fiscal year 1954 there were 511 cases involving tax issues 

decided by other Federal civil courts (exclusive of bankruptcy; receivership, 

insolvency, compromise, and liquor tax cases). 

The distribution of these cases, by court involved and according to the 

nature of the decision, is as follows: 

Cases involving tax issues decided by Federal civil courts, fiscal year 1954 

Courts For the 

Governmeat 

Against the 

Governmeat 

Partly for 

and partly 

against the 

Government 

/Paid 

District courts 

Courts of appeal 

Court of Claims 

Supreme Court 

Total 

161 

45 

30 

1 

188 

51 

16 

19 

1gs*. 

237 255 19 511 

As of June 30, 1954, there were 3,034 civil cases involving tax questions 

pending in district and State courts, 107 pending in courts of appeal, and 

477 pending in the Court of Claims. 

CLAIMS FOR RELIEF FROM EXCESS PROFITS TAX 

During the year the Excess Profits Tax Council's efforts were concentrated 

on the pretrial settlement of cases pending in the Tax Court which arose 

under the relief provisions of the excess profits tax of 1940-45 (sec. 722, 

Internal Revenue Code of 1939). Claims petitioned to the Court by about 

200 corporations were closed during the year, the majority without trial. 

At the end of the year there were pending before the Court cases of some 

600 corporations involving about $800 million in claimed reductions of 

excess profits tax. 

Nondocketed section 722 claims of 30 corporations involving over $200 

million in claimed reductions of excess profits tax were disposed of during 

the year. Pending at the end of the year was a relatively small number of 

very large and unusually complex nondocketed cases involving more than $250 million in claimed refunds. 
REPORT ON OPERATIONS 23 

22 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

CHANGES IN TAX LIABILITY 

ADDITIONAL TAXES 

The examination of returns by revenue agents and auditors resulted, in 

a majority of the cases, in assessment of additional tax. Other assessments 

of additional tax resulted from the obtaining of delinquent returns and the 

mathematical verification procedure. 

The total amount of additional taxes, including interest and penities, 

found to be due from taxpayers as a result of these activities during/1954 

was $1,454,539,000. This amount includes duplicate assessments a ainst 

transferees and jeopardy assessments, but these duplicate and jeopar assessments comprise only a slight proportion of the total. ( Jeop dy 

assessments permit immediate collection of tax deficiencies and are imposed 

to protect the interests of the Government in those instances in which there 

is reason to believe that the taxpayer may seek to avoid payment by disposing of or secreting his assets.) 

Occasionally it becomes necessary to enforce collection of additional taxes 

through distraint procedures, but, generally speaking, the amounts represented by additional taxes are not duplicated in distraint warrant collections shown on page 16. 

The following table shows a comparison of additional taxes for the fiscal 

years 1953 and 1954, by general classes of tax. 

Tax, interest, and penalty resulting from enforcement efforts, fiscal years 1953 

and 1954 

fin thousands of dollars] 

Item 

Fiscal year 

1953 1954 

ADDITIONAL TAX, INTEREST, AND PENALTY ASSESSED AS A DIRECT RESULT OF AUDIT 

Income and profits: 

Corporation income and profit s 542,959 579, 279 

Individuals and fiduciaries: 

Prerefund audit 13,618 33,714 

Regular audit 587, 450 498,470 

Total, Income and profits 1,144,026 1,111,462 

Employment taxes I 27, 400 23,580 

Miscellaneous internal revenue: 

Estate and gift 118,382 105,904 

All other 17, 706 7,471 

Total, miscellaneous taxes 136,088 113,376 

Total, as a direct result of audit 1,307, 514 1,248,418 

INCREASE IN TAX RESULTING FROM MATHEMATICAL VERIFICATIONS 

Individual income tax 

Corporation income tax 

97, 683 

3,175 

77, 207 

1,291 

Total 100,858 78,488 

AMOUNTS OP TAX, INTEREST, AND PENALTY ASSESSED ON DELINQUENT RETURNS 

Income taxes 

Employment taxes I 

Miscellaneous taxes 

25,264 

98,766 

23,560 

16,305 

90, 408 

20,921 

Total 147,690 127,633 

Grand total 1,555,962 1,464, 539 

I Includes withheld income tax. 

'Includes fiduciary tax. 

OVERASSESSMENTS AND OVERPAYMENTS 

General.-The policy of the Internal Revenue Service is to collect the 

correct tax prescribed by law, neither more nor less. Accordingly, when, 

as is frequently the case, it is found that a taxpayer has overpaid his tax, 

procedures are provided for determining the overassessment and allowing 

refund or credit as expeditiously as possible, taking into consideration all 

of the laws and responsibilities governing the Revenue Service. 

An overassessment of tax as finally determined may be applied as an abatement of a previous assessment providing the tax has not been paid; as a 

credit of amounts overpaid against other taxes due; as a refund of amounts 

overpaid if all other taxes have been satisfied; or a combination of these 

methods of settlement, as circumstances may require. Interest at the rate 

of 6 percent per annum is allowed on all overpayments, except in cases 

on which interest is restricted or prohibited by law. 

Refunds and repayments.-A total of $3,468,625,000 was refunded (including 

stamp redemptions and drawbacks of tax on exported tobacco and 

alcohol products) during the fiscal year 1954. These repayments were 

made from the appropriation entitled "Refunding Internal Revenue 

Collections, 1954 and Prior Years." 

Following is a summary of the refunds paid, showing the number and 

amounts of refunds and repayments allowed and the amounts of interest 

allowed, with respect to each general class of tax during the fiscal years 

1953 and 1954. 

Number and amount of internal revenue refunds, including interest, during fiscal 

years 1953 and 1954 

fFlBUres In thousands] 

Class of tax 

Number Amount refunded 

or paid 

Interest allowed (Included 

in amounts 

refunded) 

1953 1954 1953 1954 1953 1954 

Corporation income and profits taxes 

Individual income and employment taxes: 

Excessive prepayment Income tax 

Other income tax and old-age insurance 

Railroad retirement 

Unemployment insurance 

Total Individual income and employment tax_ 

Miscellaneous internal revenue: 

Capital stock tax 

Estate tax 

Gift tax 

Alcohol taxes I 

Tobacco taxes I 

Manufacturers' and retailers' excess taxes 

44 

32,237 

1,116 

(6 

16 

53 

31,299 

1,128 

(1) 

17 

$410, 474 

2,586,079 

126,189 

842 

2,132 

$482, 516 

2,687,147 

213,744 

277 

2, 329 

$64, 046 

3,829 

13, 294 

140 

62 

$60, 531 

4,296 

15,211 

40 

61 

33, 369 32, 435 2, 715, 243 2,933, 498 17, 325 19,608 

(2) 

3 

(1) 

 19 

( 6 

1 

0) 

G) 

3 

(I) 

19 

(6

1 

(2) 

3,436 

10,598 

454 

56,748 

24 

557 

8 

41 

11,740 

855 

59,755 

72 

2, 757 

17 

692 

1,006 

47 

24 

1 

52 

(1) 

11 

1.606 

135 

29 

(2) 

(2) 290 Wagering tax (excise) 

Redemption of stamps: 

Alcoho 

Wagering 

Narootics 

Silver 

Tobacco 

Other 

Total stamp redemptions 

Other 

Total miscellaneous internal revenue 

Total refunds of internal revenue 

2 

(12) 

&/ 

1 

2 

2 

9 s) 

r 

2 

2 

714 

3 

3 

3 

2,466 

246 

172 

3 

1 

10 

2,684 

359 

- 0 

LEz 

( 24 

1 

30 

5 5 3, 433 3,229 10 31 

5 5 3,687 4,145 1,161 389 

35 34 78, 947 82,611 2, 993 2,492 

33,448 32, 522 3, 204, 663 3,468, 625 79,363 82,631 

es drawbacks. 5 Less than 500 in number or dollars. 

NOTE. There was also refunded during the fiscal year 1954 the amount of 611,287, with no Interest, from the Puerto Rico trust fund collections. 
24 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Excessive prepa)lmtnts (1 individual income ta.\".-By far, the largest portion of 

the refunds resulted from excessive prepayments of individual income tax 

usually because of ovem'ithholding of tax from wages by employers. t 

The refunds and credits of such excessive prepayments are determined 

from the individual income tax returns and are processed under expedited 

procedures which make it possible to complete this work shortly after the 

close of the annuaL period for filing such r('turns. The following table 

shows the number and amount of these refunds and credits for the tax. 

return years 1950-53. 

Eaccssi!'e 1JTt1l)i/ymcrlt.q of individual income Inx, taxable years 1950-08 

11~igu~5 in thoumnds] 

nt'rull' Cre<ll 

29. 

29, 

30.1 

31, 591 

Kumbl'r IPriuclpal 

(1) (2) 

Tombl~ y, 

lin~r~~~~~~~:~~~:~~~~::~~~~~:~:~~~~~~~~~~~~~~:: 'Rovlscd. 

Tentative adjustments.-Section 3780 of the Intcrnal Revenue Code of 1939 

provided that a taxpayer may file an application for a tentative carryback 

adjustment of the income and profits taxes for preceding taxable years 

affected by a net operating loss carryback or an unused excess profits credit 

car1)l back from any taxable year ending on or after September 30, 1945. 

Within a period of90 days from the date on \\'hich a tentative carryback application is filed, the Internal Revenue Service is required to make a limited 

examination of thl: application (subject to complete audit at a later date) 

and, if it is found acceptable, to determine tht: amount of increase or decrease in tax attributable to the carryback, assess any resulting deficiencieJ, 

and schedule for abatement, credit, or reCund any resulting overassessment. 

A comparison of work done on applications for tCJ1tativc carryback adjustments for fiscal years 1953 and 1954 is shown in the following table. 

Receipt and disposal of tel1011r8 ClITryback adjustments, Jiscal !lears 1958 and /11' 

[Dol.1lm In tholl5:l1l&) 

Slal", 

rlse",. YEAR I~

~~i~1~i~~~~r~~t:.:.~~::~:::..:::::::::::::::::::.:.:::::::::::::::::: ..$34.\ilGi

33i,1I'JS 

II, 34Jl

. 

Arlplk'\tloIL~ ndjllsted. totaL••••••• _ ••••.•• ._._•••.••.•••••••••• Allowed in wholo••••••••••••••.•••••••••••••••••••_ ••••••••••••••••• AJlow~d in rnrl ....••...••••..•..•••......_ _ ...••.••..•••..• 

pcll~ik~~<!nd::::::::::: :::'.:::.:::::=:::::::::::::::::::: 

rl.llCAL Y1:.~R IIl.M 

Pendln~lll b.:Pnnln~•••••• ·•••••••..••_ •...•....••_.•.••••••••••••••••1 0.62$ 67,01;7 I········.·· AJlPUClllJo~ rinIlvoo .••••••-.•••.•••••_ ••...•.---.-•••.•••••_.••••••• 3',2l)Il :l2lI,604 . 'iii-~ .. .\PPllQlltlonsadlwlOO, tolal ••••••••••••-••••• ••• _............ M.?88 3-1'-731 :'1'. 

Allowl!d 10 Wbol<!••••••••••••••••••••••••••• ••__._•••••_•••\ :\2.173 3:ll..~ I :I ~1

~~~~~.~:::::::..::.:::::::::::::::::::::::::::::::::::::::::: H~ :~ , Pcn~ al end.••••••••••••.••••·.••••_•••..••••••••.. _ •••••••••••••••. _ 7,038 50,840 I."'· . . ­

REPORT ON OPERATIONS 25 

Othu claims.-A total of 574,844 other claims (exclusive oj tentative adjustments and claims under sec. 722 of lhe 1939 Code) were processed 

during the year. 

Included in this total were taxpayers' claims on Form 843 for adjusunent 

of tax (including arnended returns showing a reduction in tax which are 

tTeated as Form 843 claims); claims for special refund uncleI' section 1401 (a) 

of the Federal Insurance Contributions Act; claims for redemption of tobacco and liquor' stamps, and claims for drawback of tax on distilled spirits 

used io nonbc.:vcrag(~ products. 

Disposition of these claims by class of tax fOl" fiscal years 1953 and 1954}s 

shown in the table which follows: 

,u.rl1 1058 and 19ii;' 

rl"'!rntlon lnrornll :l.l1d proOloS UU;CJI•••••••••_............................ 25.853 3(.QlI

Jndl\,jduul inOOIDllll.U.Gll••••••,........... ••••. •••••••• 324. ·4(-.6 HI. 037 lJJOOlllC ro, withlH'ld lind old·ago Insllrunoo••••••_........................... (,I,IH 35.324 

UucmpJoymcnllnsuronoo••••••••••_.... ..... .••••.••••.••••••••••••••.•••• 15, lOS 13, OO-l 

Hallroad rellnllllt:ot lOIV$.. .•••••••••••••••...•••••••••••••••••••••••••••••• Ill; 10\) 

Estate and gill t,,'cs.•_ ••••••••••.•_........ ...••••••.•••••••.•••.••••••.• 1,18'J I. 2M 'l·Obo.cco 111'1'$...• ••••••••••••••••••••••••••_••. _ ••••_.................... 1,»52 I, D:17 AJt"Oboll(lXllS..... •••.•••••••••. ••.••• ..•...... ...••••••.••••••.•. .•••.. ..••• 21, ib3 38. SH 

Olher tuICS... _ •.•_ ••• _ •• _ ••••••••••••..•••••.••.••••••••. _...... •••••• 11,42\ 8,804 

'fotul..•• _ ••••••••••••_•••••••••••.••..••..••••••.. '." ••••••••••••••• ~2,934 ~H,S44

RelJim; of ovuassUSmtnts excuding S2OO,OOO.-Thc Inlernal Revenue Code 

of 1939 prO\'ided that in case a refund or cn.:dit of certain taxes exceeded 

8200,000, a report was prepared for the Joint Committee 00 Jnternal 

Revenue Taxation. During 1954, report~ were made to the Commillee in 

200 Cases involving overpayments of $409,017,000. These casc.q include 

overassessments of income, excess profits, estate and gift taxes proposed for 

allowance; alluwances already made of tentative amortization and carry· 

back adjustments of income and excess profits taxes; and interi.1TI refunds 

allowed to taxpayers enlitled to the benditq of section 22(d)(6) of the 

Internal Revenue Code. Any deficiencies coupled with such tax reductions 

under review arc likewise subject to review. 

It should be noted that the Internal Revenue Code of 1954 provides 

that the Committee shall receive reports on cases in which the refund or 

credit exceeds $100,000. 

OFFERS IN COMPROMISE 

An offer in compromise of taxes, interest, ad valorem and specific penalties may be based either on inability to payor doubt as to liability. Offcrs 

in compromise arise, usually, when payments of assessed liabilities are 

demanded, ad valorertl penalties for delinquency in filing returns arc as· 

serted, or specific civil or criminal pcnallics are incurred by taJI.Jl'tyCI"S. A 

criminal penalty will not be compromi:>cd unle"s it involves only lIe regula.­

tory provisions of the Imernal Rcvenul: Code and related stanltes and 

there is doubl as to whether the violation was delib<:rate and with intent 

t'defraud. 

a27ol~llll--8

:\umbl'r or cJaI~ d1s,.oo of 

I.1ss or l.U 

Fiscal year 1\J$l I FUcllI year I 
Accepted Rejected or withdrawn 

Number Liabilities Offers Number Liabilities Offers 

(1) (2) (3) (4) (5) (6) 

Type of tax or penalty 

1, 690 $23, 990 $8,194 2, 793 $73, 062 $13, 330 616 2, 858 763 448 3,575 458 2,185 4, 623 1, 433 1, 628 6, 983 1,127 161 196 32 190 791 39 18, 356 10, 048 1, 490 2,104 2,157 324 5,180 169 94 26 

28,118 41, 714 t2, 089 7, 257 86, 568 15, 301 

Income, profits, estate, and gift taxes 

Excise taxes 

Employment and withholding taxes 

Alcohol taxes 

Delinquency penalties on all taxes 

Specific penalties 

Totals 

26 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Liabilities may not be adjusted or settled by compromise solely because 

a hardship case is presented which arouses sympathy or is merely appealing 

from the standpoint of equity. 

All offers in compromise are filed with or forwarded to the offices of the 

District Directors of Internal Revenue. Decentralized procedures for 

processing offers in compromise became effective July 1, 1953. Offers 

based on the merits of the tax liability and/or inability to pay the total 

amount due are investigated by internal revenue agents. The reports of 

the investigations and the information submitted by taxpayers are considered by the district audit divisions in processing of the offers in compromise All offers involving liabilities of $500 or more, as well as specific 

penalties which are recommended for acceptance, are forwarded to the 

National Office for review. These cases are then forwarded to the office 

of the Chief Counsel for further review and the issuance of the legal opinion 

required under section 3761(b) of the Internal Revenue Code of 1939. 

After the legal opinion is issued, the case is forwarded to the Commissioner 

for approval. 

In the event of rejection or proposed rejection of an offer, the taxpayer is 

notified and is given an opportunity to obtain a reconsideration by the 

Appellate Division. 

Offers relating to violations of administrative provisions of the Internal 

Revenue Code with respect to narcotic, smoking opium, and marihuana 

laws (except those offers relating to delinquency in registration and delinquency in payment of tax) are transmitted to the Commissioner of Narcotics 

for acceptance or rejection. After a case is closed by the Bureau of Narcotics, copies of the letters of acceptance or rejection are forwarded to the 

National Office for adjustment and final processing of the case. Dual 

liability cases, involving both civil and criminal features of the narcotic, 

smoking opium, and marihuana laws, are closed by joint action of the 

Commissioner of Narcotics and the Commissioner of Internal Revenue. 

During the fiscal year 1954, consideration was given to the backlog of 

excise, withholding, and employment tax and penalty offers awaiting action 

in the National Office. In view of the new compromise procedure inaugurated as of July 1, 1953, the conclusion was reached that these offers could 

be more expeditiously processed in the National Office. During the year, 

its backlog of compromise cases was reduced from 11,958 to 1,615. It 

received 7,798 cases and disposed of 17,694. 

The District Directors of Internal Revenue process substantially all tax 

and penalty offers in compromise which were filed on or after July 1, 1953. 

Prior to that date, they processed offers involving income, profits, and 

certain other taxes, provided the liability in each case was $5,000 or less. 

During the year, the regional appellate offices processed offers involving 

income, profits, and certain other taxes, provided the offers were filed prior 

to July 1, 1953, and the liability exceeded $5,000. 

District Directors and the regional appellate offices received 6,918 tax 

offers and disposed of 5,440 offers, leaving a total of 7,251 tax offers on 

hand as of June 30, 1954. In addition, the District Directors received 

13,856 specific and delinquency penalty offers and disposed of 10,040 offers, 

leaving a total of 6,758 specific and delinquency penalty offers on hand as 

of June 30, 1954. 

The Chief Counsel's office considers tax offers in cases in which court 

proceedings, except the Tax Court, are involved, or criminal prosecution 

is pending. During the year, that office received 567 tax offers and disREPORT ON OPERATIONS 27 

posed of 579 offers, leaving a total of 515 offers on hand as of June 30, 1945. 

The Alcohol and Tobacco Tax Division considers all offers involving 

alcohol, tobacco, and firearms taxes, and penalties. During the fiscal year 

1954, it received 1,399 tax and penalty offers and disposed of 1,622 offers, 

leaving a total of 131 offers on hand as of June 30, 1954. 

The following table shows the statistics on all offers in compromise 

processed during the fiscal year 1954: 

Offers in compromise disposed of, fiscal year 1954 

(Dollars in thousands) 

RULINGS, REGULATIONS, AND RELATED FUNCTIONS 

One of the primary functions of the National Office is to provide regulations 

and rulings for the guidance of the public and tax practitioners and to 

enable the decentralized field organization to give uniform application of 

the tax laws throughout the country. 

REGULATIONS PROGRAM 

The tax statutes generally require the Secretary of the Treasury or his 

delegate (ordinarily the Commissioner of Internal Revenue) to prepare 

regulations carrying out the specific provisions of the statutes and, in 

specified instances, establishing detailed rules for the application of generalized objectives. 

Complete regulations prepared and issued during the year were Regulations 118, the first complete revision of income tax regulations since 1943, 

and Regulations 120, the first complete revision of income tax withholding 

regulations since 1944. 

A total of 32 other Treasury Decisions (amendments of regulations) was 

issued, including the following major items: 

(1) Treasury Decision 6034, approved July 29, 1953, prescribing regulations relative to the newly authorized credit for estate tax paid to foreign 

countries. 

(2) Treasury Decision 6037, approved August 18, 1953, conforming 

Regulations 111 to the provisions of section 340 of the Revenue Act of 1951, 

which section had as its purpose the harmonizing of the rules governing 

interests in the so-called family partnership with those generally applicable 

to other forms of property or business. 

(3) Treasury Decisions 6039 and 6040, approved August 27, 1953, 

prescribing regulations under certain provisions of the Technical Changes 

Act of 1953 designed to correct the abuses arising under section 116(a)(2) 
1953 1954 

Fiscal year 

Subject 

Income tax 

Excise tax 

Estate and gift taxes 

Employment taxes 

Excess profits tax 

Firearms 

Alcohol and tobacco taxes 

Miscellaneous 

Total 

se 

as 

4 2 

4 

0 

4 8 

212 

as 

40 

20 

40 

13 

151 432 

28 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

of the Internal Revenue Code of 1939, relating to exclusion of income 

earned abroad. 

(4) Treasury Decision 6042, approved September 16, 1953, which resulted from a petition submitted by certain groups of taxpayers, easing the 

requirements for filing information returns reporting dividends paid by 

savings and loan associations and similar organizations for calendar years 

after 1952. 

(5) Treasury Decision 6072, approved June 3, 1954, setting forth the 

regulations applicable to claims for the credit or refund of tax on floor 

stocks of electric light bulbs and tubes, etc., and indicating the type of 

supporting evidence which is required in respect of such claims. 

TAX RULINGS 

A total of 51,060 requests for tax rulings and technical advice were 

answered during the year. The requests included 45,848 from taxpayers 

and 5,212 from field offices of the Revenue Service. In the last 6 months 

of the preceding fiscal year, the number of requests for rulings was 30,277, 

of which 26,168 were from taxpayers and 4,109 from revenue offices. 

An analysis of the rulings this year, by subject matter, is as follows: 

Requests for tax rulings and technical advice processed, fiscal year 1954 

Subject Taxpayers' 

requests 

Field 

requests 

Total 

Income and excess profits tax 38,195 1, 801 39,995 

Excise taxes 3,871 1,220 5,091 

Employment and self-employment tax_ 1,773 1, 090 2 863 

Estate and gift tax 1,097 225 1, 323 

Engineering items 912 875 1,787 

Total 45, 848 5, 212 51,060 

As a direct result of the announced expansion of the pub ication program 

relative to communications issued by the Internal Revenue Service, the 

number of rulings published in the Internal Revenue Bulletin increased from 

151 for the fiscal year 1953 to 432 for fiscal year 1954. A breakdown of 

the published rulings by type of tax or subject matter follows: 

Tax rulings published, fiscal years 1953 and 1954 

LEGAL SERVICES 

The transfer of functions from the National Office to the Offices of 

Regional Counsel and the delegation of authority to the extent consistent 

REPORT ON OPERATIONS 29 

with efficient and expeditious handling of work were accomplishments of 

major importance in the legal area during fiscal year 1954. 

In the latter part of the fiscal year, all of the duties and functions formerly 

exercised by the appellate, enforcement, and civil advisory counsels, and 

the attorney in charge (alcohol and tobacco tax) were vested in the 

regional counsel with power to redelegate. 

A large segment of the legal work involved in proceedings under the 

Bankruptcy Act, receiverships, and other insolvencies, discharge or release 

of liens, administration of the estates of decedents or incompetents, offers 

in compromise, and legal work in connection with Federal tax liens in suits 

for foreclosure or to quiet title by mortgagees and other secured creditors, 

which was formerly handled in the Claims Division of the Chief Counsel's 

office, was decentralized to the offices of regional counsel. Principally, 

only those matters requiring affirmative action by the Secretary of the 

Treasury, the Commissioner of Internal Revenue, or the National Office, 

were not transferred. 

The review of overassessments of unpaid income, excess profits, estate, and 

gift taxes in cases pending before the Tax Court where the abatement 

thereof exceeds $200,000 ($100,000-1954 Code) and no report to the Joint 

Committee is required by section 3777 of the Code was decentralized to the 

regional counsel. 

A new procedure was adopted which provides that proofs of claim in 

liquidating bankruptcies, receiverships, decedent estates, and other miscellaneous insolvencies are retained in the district directors' offices unless and 

until it appears that legal advice or services are required. This eliminates 

the necessity of handling in the Chief Counsel's office, at either national or 

regional level, cases in which claims for taxes are as a matter of routine 

allowed and paid and which do not require the advice of an attorney. 

A policy was placed in effect in regional counsel offices providing for the 

assignment of a variety of appellate, enforcement, and collection work to 

each attorney handling a docket of cases. This program is designed to 

afford the attorneys a broad experience in the various types of work and 

implements the inservice training program. 

Realignment was made in the organizational structure of the National 

Office with the aim of improving operating efficiency and enabling the more 

expeditious handling of cases. 

TAX CONVENTIONS AFFECTING THE INTERNAL REVENUE 

SERVICE 

The United States income, profits, estate, and gift tax laws apply to 

United States citizens whether residing at home or abroad, and to their 

income from domestic and foreign sources. They also apply to aliens 

residing in the United States and to the income of nonresident aliens 

derived from domestic sources. Since other nations usually tax their residents on income from sources in their territory, serious problems of double 

taxation arise in the international field. 

Accordingly, the Revenue Service has participated for many years in the 

negotiation of treaties with various countries in which the double taxation 

arises. During the fiscal year 1954, ratifications of tax treaties with 

Belgium, Greece, and Australia were exchanged and the treaties became 

effective. 

Negotiations were completed for income and estate tax treaties with 
30 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Japan, an estate tax treaty with Belgium, and a supplemental treaty with 

the United Kingdom. These treaties were signed by the appropriate 

diplomatic representatives and were referred to the Senate for ratification. 

Also, tax treaties with the Federal Republic of Germany were negotiated 

and brought close to the point of formal signature. 

Other countries with whom negotiations were conducted during the 

year included the Netherlands, Honduras, France, Italy, Canada, and 

Austria. 

As a part of the technical assistance programs, the Revenue Service 

regularly provides facilities for foreign tax officials designated by their 

governments to study the statutes, organization, and techniques of tax 

administration in the United States. A total of 82 officials from 28 foreign 

countries visited the National Office for varying periods of study during 

the year. Frequently, after extensive conferences with specialists in the 

National Office, they visited selected district offices in order to observe the 

manner in which general policies are implemented. 

IMPORTANT LEGISLATION AFFECTING THE INTERNAL 

REVENUE SERVICE 

LEGISLATION ENACTED DURING FISCAL 1954 

The principal enactments of the 83d Congress during the fiscal year 

include: 

Public Law 125, approved July 16, 1953, extending until December 31, 

1953, the period during which the excess profits tax shall be effective. 

Otherwise, this tax would have expired as of June 30, 1953. 

Public Law 196, approved August 5, 1953, permitting unemployment 

insurance coverage under State unemployment compensation laws for 

seamen employed on certain vessels operated by the United States. 

Public Law 213, approved August 7, 1953, extending from January 1, 

1954, to January 1, 1955, the exemption from income taxes of certain 

combat pay of members of the Armed Forces of the United States. 

Public Law 219, approved August 7, 1953, providing a retirement 

system for judges of the Tax Court of the United States. 

Public Law 274, approved August 14, 1953, specifically authorizing the 

abatement of income, estate, and gift tax jeopardy assessments upon 

determination that jeopardy does not exist. 

Public Law 283, approved August 15, 1953, providing, under certain 

circumstances, for a monthly, instead of a quarterly, drawback of alcohol 

tax upon certain nonbeverage products. 

Public Law 287 (Technical Changes Act of 1953), approved August 15, 

1953, providing extensions of time for taking various actions and extending 

certain other provisions. These extensions include the provision relating 

to recognition of gain in certain "one-month" complete corporate liquidations, the time for making election with respect to adjustments for excessive 

depreciation allowed for periods before 1952, the time for making election 

with respect to war loss recoveries, the provision relating to abatement of 

income taxes of members of the Armed Forces upon death, the temporary 

provisions relating to life-insurance companies, and the provision exempting 

from additional estate tax the estates of certain members of the Armed 

Forces who die as a result of service in a combat zone. Public Law 287 

REPORT ON OPERATIONS 31 

made several miscellaneous amendments to the Internal Revenue Code, 

including amendments relating to such matters as the deduction of certain 

unpaid expenses and interest, the basis of trust property transmitted at 

death, earned income from sources without the United States, net operating 

loss carryovers for corporations, an amortization deduction for grain 

storage facilities, and mitigation of the effect of the statute of limitations 

in certain cases. 

Public Law 324 (Excise Tax Reduction Act of 1954), approved March 

31, 1954, reducing, effective April 1, 1954, the rates of most of the ad 

valorem excise taxes on commodities and services which had been in excess 

of 10 percent to a rate of 10 percent; extending for an additional year 

certain excise tax rates which were scheduled to be reduced on April 1, 

1954; providing floor stocks refunds on specified electric, gas and oil 

household appliances, and upon electric light bulbs; and containing 

several other amendments relating to excise taxes. 

PREPARATION FOR OTHER LEGISLATION 

In addition to providing technical assistance to other offices of the 

Treasury Department and to the Tax Committees of the Congress in 

connection with the legislative acts which were completed during the year, 

the principal ones of which are listed above, the Revenue Service also 

furnished such assistance in connection with certain other extremely 

important legislative programs, including: 

Internal Revenue Code of 1954.-Throughout the year, a high percentage of 

the technical and operating personnel of the National Office participated 

in the necessary work leading to the enactment of the Internal Revenue 

Code of 1954, which took place shortly after the close of the fiscal year 

(approved August 16, 1954). The new Code provided a complete rearrangement of the tax laws, modernization of many old provisions, clarification of 

certain provisions, plus numerous substantive additions. It constituted the 

first complete revision of the tax laws since the enactment of the income tax. 

Social Security Amendments of 1954.-Similarly, the Service was called on for 

technical advice in the drafting of the Social Security Amendments of 1954 

which were also approved not long after the close of the fiscal year (approved 

September 1, 1954). This act extended the employment and self-employment taxes under the old-age and survivors insurance program to several 

millions of additional taxpayers. 

Other Acts.-Further technical assistance was provided in connection with 

the Railroad Retirement Act amendments of 1954 (approved August 31, 

1954) and the Federal unemployment tax amendments (approved September 1, 1954). 

ADMINISTRATIVE AND INTERNAL CONTROL FUNCTIONS 

PERSONNEL 

The number of employees on the rolls -of the Revenue Service declined 

from 53,463 on June 30, 1953, to 51,411 on June 30, 1954. In the National 

Office, the number declined from 3,834 to 2,707 as the result of extensive 

decentralization of operational activities formerly conducted in Washington. 

In the regional and district offices, the number of permanent personnel 
32 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

remained about the same, 48,641 on June 30, 1954, compared with 48,620 

on June 30, 1953. In accordance with new policies, extensive shifts were 

made from the ranks of collection officers and office auditors to the force of 

revenue agents. As a result of these changes and the diversion of funds from 

various servicewide economies, it was possible to increase the number of 

revenue agents from 7,617 to 10,605. It is the policy of the Service to 

augment this force considerably in order to strengthen enforcement. 

A comparison of the number of employees in various categories at the end 

of the fiscal year with the corresponding date of the preceding year follows: 

Personnel on rolls, June 80, 1955 and 1954 

Branch of service 

National Office 

Regional and district offices: 

Supervisory personnel 

Enforcement personnel: 

Collection officers 

Office auditors 

Returns examiners 

Revenue agents 

Special agents (tax fraud) 

Alcohol tax inspectors 

Alcohol tax investigators 

Storekeeper-gaugers 

Total enforcement personnel 

Other permanent personnel: 

lje l Other technical 

Clerical (excluding temporary), messengers, and laborers 

Total, other permanent personnel 

Total, permanent personnel, regional and district offices 

Temporary employees 

Grand total 

TRAINING 

Advanced Training Center.—Training of graduate college level was added 

during the year to the general training program of the Revenue Service. 

This was accomplished by establishing the Advanced Training Center under 

contract with the School of Business Administration, University of Michigan, Ann Arbor, Michigan. The contract was awarded after soliciting 

proposals from all qualified institutions of higher learning in the United 

States. The first classes were opened in September and consisted of 100 

revenue agents selected, on a merit basis, from all of the regions. The 

Center was founded with the understanding that the number of students 

from the Revenue Service would be increased substantially and that courses 

would be developed for other categories besides revenue agents. 

Other training activities.—The many inservice training courses in income 

tax law, accounting, and other subjects relating to revenue work were 

continued and expanded. Added courses were provided in the management development program, which is designed to prepare individuals for 

administrative and executive responsibilities. 

REPORT ON OPERATIONS r 33 

RECORDS MANAGEMENT 

Because of the paperwork resulting from the volume of tax returns and 

other documents being filed annually and the millions of records created 

in the processing and examination of these returns, a records management 

program was established to cope with the problems. 

Special studies resulted in improvements in the maintenance of tax ruling 

files, the design and use of forms, and the handling and answering of correspondence from taxpayers. A correspondence project, carried out in one 

district office on an experimental basis, was found to reduce the cost of 

preparation and to speed up replies to taxpayers' questions so successfully 

that it was prescribed for the other district offices. 

Records disposition activities under disposition schedules approved by 

the Congress resulted in the disposal or transfer to Federal Records Centers 

of 235,771 cubic feet of records. A comprehensive disposition schedule 

containing records retention and disposal authority for all records of the 

National Office was approved by Congress; similar disposition schedules 

for all alcohol and tobacco tax and audit records in field offices were 

developed and forwarded to Congress for approval. 

COST OF ADMINISTRATION 

General.—During the year, the obligations incurred by the Revenue 

Service from appropriated funds totaled $268,969,107 compared with 

$268,590,806 in the preceding year. 

An analysis of these obligations, by classes of expenditure, follows: 

Obligations incurred by the Internal Revenue Service, fiscal year 1954, by activity 

and by class of expenditure 

[Figures in thousands) 

Activity Salaries Other Total 

Technical 

Collections 

Audit i 

Intelligence 

Alcohol and tobacco tax 

Appellate 

Legal service 

Inspection 

Statistical reporting 

Executive direction 

Supervision and administration (proratablffi 

Total 

$3,961 

55. 784 

122,841 

9,965 

18, 477 

7, 790 

5, 825 

2,970 

1,491 

2,323 

9,787 

353 

10,279 

6,998 

881 

2,008 

320 

449 

555 

100 

116 

6,110 

33,954 

66,063 

129,838 

10,846 

20,482 

8,110 

6, 274 

8.525 

1, 590 

2, 439 

16,847 

241,103 27,866 268, 909 

Includes delinquent accounts and returns work. 

Rewards to informers.—The appropriations for the Revenue Service authorize payment of rewards to informers, qualifying under section 3792 of 

the Internal Revenue Code of 1939. Under this authority, rewards are 

paid to individuals who submit specific information actually leading to the 

detection of violations of the internal revenue laws and resulting in the 

assessment and collection of taxes in such instances. 

A table showing the receipt and disposition of claims for such rewards 

during the fiscal years 1953 and 1954 follows: 

53,463 51,411 
Status Number 

General enrollment—attorneys and agents: 

Applications for enrollment approved 

Applications for enrollment disapproved 

Applications withdrawn on advice of the Director 

Applications abandoned 

Special enrollment to practice before the Internal Revenue Service: 

Applications approved by reason of examination 

Applications approved pursuant to standards ant procedures based upon former service 

with the Treasury Department. (Sec. 12, Department Circular No. 230, Revised)...... 

Applications approved by reason of having passed CPA examination though CPA certificates not issued 

Applications of former employees denied 

Applications withdrawn 

Applications abandoned 

Renewal of enrollment cases: 

Applications for renewal approved 

Applications for renewal disapproved 

Applications for renewal withdrawn 

Applications for renewal abandoned 

Disbarment cases: 

Disbarments 

Resignations accepted 

Resignations accepted with prejudice 

Reprimands issued 

Suspensions 

Formal complaints pending against enrolled persons 

Closed without action 

4,839 

33 

192 

39 

2 

125 

21 

9 

32 

101 

1,506 

32 

59 

2 

10 

2 

9 

9 

34 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Receipt and disposition of claims for informers' rewards, fiscal years 1958 and 1954 

Status 

Number of claims 

Fiscal 

year 

1953 

Fiscal 

year 

1964 

Pending, beginning of period 5,975 f 4,427 Received 2, 691 4, 555 

Dispositions, total 2, 906 2,580 

Rejected 2, 297 2,096 Allowed: 

Number 609 

Amount $649,999 $533,305 

Pending, end of year 1 6,760 6,402 

Discrepancy in dosing 1953 and opening 1954 figures due to eliminating from inventory cases where 

it appeared claim would be, but had not yet been, filed. 

ENROLLMENT OF PRACTITIONERS 

The Office of Director of Practice was established in the Internal Revenue 

Service, on January 9, 1953, by order of the Secretary of the Treasury to 

take over the functions formerly performed by the Treasury Department's 

Committee on Practice. 

The work is under the supervision of the Commissioner of Internal 

Revenue. However, decisions of the Director in individual cases relating 

to enrollment, disbarment, or disciplinary measures are not subject to 

change by the Commissioner, but may be appealed to the Secretary of the 

Treasury. 

The Office of Director of Practice receives and acts upon applications of 

attorneys and agents for admission to practice before the Treasury Department. It makes inquiries, holds hearings and in general acts as the administrative and advisory agency in all matters pertaining to practice; and 

performs other duties prescribed by Department Circular No. 230. 

The results of the work of the office during 1954 as regards enrollment 

applications and cases involving charges against enrollees are set forth 

in the following table: 

Disposition of enrollment and disbarment cases, fiscal year 1954 

REPORT ON OPERATIONS 35 

INTERNAL AUDIT AND SECURITY 

manner; and both internal and external reports are accurate, meaningful, 

and useful. 

custody are adequately safeguarded, controlled, and utilized in an efficient 

laws and regulations; all revenue and receipts arising from Service activities 

are collected and properly accounted for; all assets of the Service or in its 

only in the furtherance of authorized activities, and comply with applicable 

law and Service policy, activities are being conducted efficiently and effectively and continue to serve their intended purpose; expenditures are made 

section 113 of the Budget and Accounting Procedures Act of 1950 (Public 

Law 784, 81st Cong.). Specifically, the basic objectives of internal audit 

are to determine that: All activities are being conducted in accordance with 

audit activities performed are in compliance with the legal requirements of 

independent appraisal of just how efficiently and effectively all service 

activities, at all organizational levels, are being carried out. The internal 

Revenue and other key national, regional, and district officials with an 

Commissioner (Inspection), furnishes the Commissioner of Internal 

Internal audit.—The Internal Audit Division, operating under the Assistant 

Statistics covering the internal audit activity of the nine regional inspection offices for the fiscal year 1954 are as follows: 

Internal audits, started and completed, fiscal year 1954 

Activity 

In 

Process 

Arne 30, 

1953 

pi...,.„A Started Complated 

In 

process 

June 30, 

1954 

Regional counsels' offices 

Regional commissioners' offices: 

Collection 

Audit 

Intelligence 

CO 

I CV 

Alcohol and tobacco tax 

Appellate 

Administrative 

Total 1 34 19 16 

District Directors' divisions: 

. 0 .1-■ I, .0 C. ‘0 1.7 ., 

Collection_ 

Audit 19 56 14 

Intelligence 13 12 61 

Administrative 12 6 68 

Alcohol and tobacco tax 1 15 

 

59 12 

Total 61 234 234 51 

Grand total t 52 274 257 69 

. During ..fiscal year 1954, these activities were transferred o the 9 regional commissioners. 2 This figure represents complete or "int.-nave" audits only. Closing inventory figure of 60 reflected in 

annual report for 1953 fiscal year included interim (or partial) audits and transfers. 

In addition to the intensive internal audits initiated and completed, as reflected above, 295 interim "surprise" audits were made of branch offices of district 

directors' collection divisions. These interim audits covered branch offices 

in which cash payments are received for local deposit or for transmittal to a 

headquarters office. During the fiscal year, regional inspection offices also 

verified the accounts of 13 outgoing district directors and prepared statements of accountability for transfer to incoming district directors. Each 

of the nine regional inspection offices also conducted and reported on two 

special surveys during the fiscal year, covering the regional commissioner's 
36 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

office and three district directors' offices in each region. The first of these 

surveys was made to determine the effectiveness with which regional and 

district offices were discharging their responsibilities relating to the various 

transfer of functions and delegations of authority from the National Office 

under the reorganization of the Internal Revenue Service. The other 

survey was aimed at determining the accuracy of regional and district office 

statistical reports on collection and audit activities, and at determining the 

factors affecting current audit production and collection warrant inventories. In addition to the two surveys just discussed, Internal Audit 

personnel in the National Office of Inspection conducted surveys of the 

National Office's Appellate and Fiscal Management Divisions. 

Throughout the fiscal year the National Office has been placing emphasis 

on the expansion of the areas of coverage by internal audit, that is, developing audit programs covering areas previously unaudited or given comparatively little attention, and improving the audit programs in use. Continued attention was also given to audit reporting with the objective of 

providing reports which are clear, concise, properly documented and also 

of maximum value to management. Emphasis has also been given toward 

accelerating audit frequency with the objective of auditing each regional 

activity of the Revenue Service at least once each year. 

Internal security.—The Internal Security Division, also operating under the 

Assistant Commissioner (Inspection), is responsible for making character 

and security investigations of new employees and investigating any allegations of impropriety against employees already on the rolls. The results 

of these activities for the fiscal years 1953 and 1954 are shown in the followng table: 

Personnel investigations and disciplinary actions, fiscal years 1953 and 1954 

Item 

Number of cases 

Fiscal 

year 

1053 

Fiscal 

year 

1954 

PERSONNEL INVESTIGATIONS 

Number of cases closed: 

Character and security investigations 1,116 1,958 

Conduct investigations 1,089 1,295 

Number of cases pending. end of year: 

Character and security investigations 379 1,472 

Conduct Investigations 571 459 

DISPLINARY ACTIONS AGAINST EMPLOYEES AS A RESULT OF PERSONNEL 

INVESTIGATIONS 

Separation of employee (by type of offense): 

Bribery, extortion or collusion 16 11 

Embezzlement or theft of Government funds or property 6 16 

Failure of employe") to pay proper tax 27 45 

Falsification or distortion of Government reports, records, eta 41 53 

Unauthorized outside activity 12 9 

Failure to properly discharge duties 8 8 

Personal misconduct unrelated to tax cases 89 34 

Divulgence of confidential information 3 2 

Failure to file financial statements 0 2 

Acceptance of fees or gratuities (') 20 

Other misconduct o 12 

Total separations I 152 209 

Suspended from duty and pay 19 23 

Reprimanded, warned, transferred or demoted 190 209 

Total disciplinary actions 381 441 

Includes resignations and retirements while employees were under investigation or before administrative 

4' Thiscategory 

n on disciplinary action to be taken, where the investigation disclosed derogatory informs ion. 

2 Th was included under the caption "Acceptance of gratuities, bribes, et ." In the 1953 Annual 

Report. 

REPORT ON OPERATIONS 37 

GENERAL MANAGEMENT IMPROVEMENTS AND POLICY CHANGES 

The major management problems facing the Service at the beginning of 

the year were those relating to furthering the reorganization effected in 

the 2 previous years. The basic reorganization actions had been taken and 

decisions made. New policies had been established and the role of, and 

the relationships between, the National Office, regional offices, and district 

offices had been defined. There remained the task of following through on 

the reorganization actions and decisions, of carrying out new policies, of 

adapting operations to new management concepts, and of reshaping programs to conform to the new alignment of functions, authorities and organization. The management improvement program was to a large extent 

keyed to the accomplishment of this task. 

Following through on the reorganization actions and decisions of the 

previous year resulted in a number of significant accomplishments. To 

the extent practicable, all operational activities carried on in the National 

Office were decentralized to field offices. Concurrently the organization 

of the National Office was reappraised. Nearly all components were reorganized to gear for the planning and programing role established for the 

National Office. Similarly regional and district offices reorganized to 

provide for activities and authorities decentralized to them and to carry out 

their redefined missions. 

One organizational improvement embraced two major functions and 

extended from National Office to the district offices and then suboffices. 

This improvement was the clarification and realignment of collectionaudit activities. It was one of the most important projects undertaken at 

the National Office, regional offices and district offices. All audit functions 

were consolidated within the audit area under centralized authority, and 

qualified personnel were transferred from the collection area to the audit 

area in a number commensurate with the work transferred. The reorganization of the district audit divisions was closely allied to this project. The 

benefits of these actions already had begun to be realized during the filing 

period early in 1954. Better utilization of manpower was achieved during 

this peak workload period with a resultant decrease in time heretofore 

diverted from productive audit work. 

Management improvement actions associated with the execution of new 

policies, the adaptation of operations to the new management concepts and 

the reshaping of programs to conform to new alignment of functions, authorities, and organization, resulted in the following accomplishments: (1) the 

development and installation of a regional audit management program 

which will promote uniformity in the application of tax laws and administrative operating policies; (2) the revamping of the taxpayer assistance 

program to carry out new policies and objectives of continued service to the 

public with a minimum diversion of technical manpower from normal 

activities; (3) the restoration of the racketeer investigation program to a 

position commensurate with respect to the entire Intelligence effort resulting 

from the new policy of placing emphasis upon the investigation of the top 

racketeers of the country, instead of expending equal effort to the investigation of all racketeers, including the large number of petty gamblers (this 

action resulted in Making a substantial number of revenue agents and 

special agents available for other investigative work); and (4) an increase 

in the publication of rulings in the Internal Revenue Bulletin. The inspection program, which provides for the independent appraisal of Service 

operations by personnel under the jurisdiction of the Assistant Commissioner 
TIP 

38 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

(Inspection), was revamped to conform to the new organizational and 

management concepts and to provide top management with a more effective tool with which it can achieve better supervision and increased efficiency 

in operations and guarantee the integrity of the Service's operating system 

as well as of its employees. 

In the collection area two large-scale improvements were made. A new 

revenue accounting and reporting system was developed and its installation 

was begun. Related thereto was the development of a revised procedure 

for the maintenance of accounts receivable records and the administration 

of delinquent accounts and returns. The installation of these new procedures was also underway at the close of the year. In addition, several 

significant improvements of narrower scope were made of which le most 

important were: (1) the making of a destination sort of all taxpayer labels 

before affixing them to the income tax form packages mailed prior to the 

filing period, and (2) the establishment of production schedules in the 

processing of income tax returns. The destination sort of taxpayer labels 

resulted in substantial savings. The establishment of production schedules 

resulted in a more even distribution of workload, better utilization of personnel and an overall increase in efficiency. 

As part of the functional reorganization in the National Office, additional 

authority was delegated to Directors of Internal Revenue, including approval of assessment lists, scheduling of those overassessments in excess of 

$10,000 which do not require review by the Joint Committee on Internal 

Revenue Taxation, control of transferor-transferee cases, processing of 

receivership cases and informants' claims for rewards, classification and 

selection of gift tax returns for examination, and the housing of returns 

(except those in certain categories) for earlier years. 

Expansion of a prerefund audit program is one of the more important 

improvements made in the audit area in addition to those related to reorganization actions. The 1953 number of prerefund audits and additional revenue resulting therefrom was more than doubled during the 

1954 filing period. 

Alcohol and Tobacco Tax staffs focused their efforts on modernizing the 

systems for collecting liquor and tobacco taxes and on simplification and 

reduction in the supervision of the industry. The full fruits of their efforts 

are still to be realized, although several significant accomplishments have 

already been achieved. 

Appellate activities made management progress by developing ways and 

means to reduce backlogs and to accelerate disposition of cases. 

The reduction in the processing time required in the preparation and 

publication of Statistics of Income to one-half of the time formerly required 

is the significant accomplishment in the statistical area. 

Management improvement in administrative activities was concerned 

mainly with strengthening and building a program to provide the essential 

services necessary to effective management of operating functions. 

Accomplishments in overall administrative areas include: establishment 

of revised qualification standards for tax collectors and tax investigators; 

development of new and revised classification standards and guides; issuance 

of policies, guides and procedures governing adverse personnel actions and 

the delegation of authority for such actions; expansion of public information program; simplification of the allotment system; revision of budget 

processes to provide for closer integration of financial and program planning 

REPORT ON OPERATIONS 39. 

in budget formulation and execution; installation of more effective time and 

attendance reporting and control procedures; establishment of records and 

forms management programs; installation of a system for screening printing requests to assure use of most economical methods of reproduction; 

space consolidation in the field resulting in release of a large amount of 

space and more efficient management of activities; upgrading of furniture; 

and the establishment of a single coordinated internal management document system. 

Further progress was made during the year on plans for improved administration of payroll taxes. Essentially, these plans are based upon 

combined reporting of wages and taxes for income tax withholding and 

old-age and survivors insurance purposes. The Departments of the 

Treasury and of Health, Education, and Welfare have been working together in the development of these plans, looking toward recommendations 

for legislation. 

A policy was instituted to effect final disposition of disputed issues at the 

earliest possible stage through maximum use of the informal conference 

procedure. Another policy adopted involves partial allowances of refunds 

or credits in cases where complete agreement has not been reached. Partial 

allowances are made in such instances to provide the taxpayer with earlier 

use of the funds and reduce the government's interest obligations. 

The procedures relating to extensions of time for filing income tax 

returns of corporations were simplified by combining in one form the application for extension of time and a statement which is accepted in lieu of a 

tentative return, and by providing for the automatic granting of the extension where all requirements have been met. 

A survey was made of the Services' approximately 1,400 posts-of-duty for 

the purpose of appraising the need for the present number and locations 

of these suboffices in terms of the Service's program objectives and utilization of available manpower. As the fiscal year ended, the National Office 

was formulating a broad policy governing realignment of suboffices. 
Appendix 

STATISTICAL 

TABLES 

NOTE.—In tables where figures have been 

rounded to a specified unit, the components 

may not necessarily add to totals. Percentages are calculated on unrounded figures, 

327405-55--4 
Internal Revenue 

Collections 

Tables 1-5 
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Dallasregion Albuquerque Austin 

Dallas LittleRock 

New Orleans 

Oklahoma City San Franciscoregion Boise 

Helena 

Honolulu Los Angeles SanFrancisco Phoenix 

ptt n CO 

 a4 OCR 

RCP-1 2 R' ee 

o 

tl 

ti 

0 

 0 

▪

" 

$ 

•

6 

o 

•

i 

A 

cQ "5 

• E 

g

g 

re 1 

1 

s 

E 5 

14 1, 

3 

05. 

4 

0 

oc m 

It 

.0 4 

5 •

t 

g 

A 

4 

o

4 

d 1 4 9: -tadc1;19:^3lg fdd a as 

PRWIEVPHREgIRREPTig.NRiRIMAIR4IP 44 

4 4 4 "fl t4` E"4 "!.1"X14,2414fl444 

5 - 

ra WeSinARAREPMPAViRNERE"0""P 

a 4 a a 

2

N 

a 

0 a 

F m 

S

a 

l 

u 

4r- AA 

=obtc, g 

.2 

tThi j h!Ocild° 2 .4E12A 1 &Er i52 

..-.. 

jjgol4rENU..152t.4 g 5 11t -1.55 b.AE41111 

A 4 

opu44golmozieggarSgg.Ng44g6caz 

4 

I 

S 
STATISTIC

4—w- o4oN4r94P -gag4 rEa

ff4.14q7 

352RgR REE 

°6 's

lAgg 

tag .1 

Fa 1 EH 5 g

?: a' e 0 W

- 

4aT a a 

WEER ER 

VV 

gi R"E'RgRE -R 'ER 

a 

1 idg 

elc, 

CCCCC CC vvv 

VVV CCCC 

.. 

V: 

NN 

CV 

47, 

3116 

75 37 60 

12 

29 19 

138 

78 

62 

468 

(*) 5 

236 199 

(*) 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Alcohol taxes

—Continued 

Malt liquortaxes 

Special oroccupational 9 

(22) 

Rsmv.Tomma.,RRoRmRpoRm51:ospilgPRRxER 

) (TZ

a li iD eS

:: 

1 

ce 

i 

4 

g EERgRRREiERER5EAOF

wg

EEILIER 

tzti.::: c'dlgc4 Kit: g.40-4 " 

1 e RS 

Wines,cordials,etc.,taxes 

Total wines, 

cordials,etc., 

taxes 

(20) E 2 PE RE2 =-PREEERiE 2 E't="4 

N a a cfee aa.: wins 

14 EREAEORRA EFIE' 

:i a a 

Floorstocks tax 

(19) 

- NN . 

c rrs--. : 

Special oroccupational a 

(Is) 

g g R .-.c. L:IIR -1 " pm - a RA3X PSBR 

3M 10 06

Domestic 

(17) 

a a 

ERE E s 

ERFiRraggREEa RREO ee as a oie a 

R a ERE R2 R 

Imported (col- lected by Cus- toms) 

(16) 

P 

4 4 

e- C - 

Internal revenueregionsand directors' districts 

I 

4;,tv 

g 

1am -i-p 

22A 4;825W 

pi 

A 

NAAMN47741m402S-gok4E.,B 

i Ili 

g 

, 

It 

2%AI 

S og 

6"-10421 2 .4111 illagssi 

. 

R

gig 

500644aarmo0.0,Z 

gar 

3 

1 

4 '2 

0111: 

4 
STATISTIC

22 1MT -

44 4 4 

P 

- f4 

4 4 

.. ... 

•—• ,.• 

4 -g 1-71 

4 

r r 

?-1 P 

C 

"' 

472, 069 

52,788 225, 437 95,638 

98406 

133, 881 134 

202 

9,446 1, 094 71 

7,741 71, 650 9,767 

31, 801 

1,

976 

55, 335 97 

22,850 492 

242 

31,1 10 

545 

221, 923 425 

2,

266 

1, 363 49, 143 

131,491 

52 

c4

g 

F s 

3 

A 

O 

ti 

0 

0 

0 

0 

0 

.1

• 9

4 

•

p

`op 

2 

E2 

•

g 

V 

2 a 

g 

4' 

v 

• g 

I. o 

g 

.- 

i

11 14 

A 

a, 0 

1 pr, 4 

?, 

. 

4 B 

V 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Tobaccotaxes 

Total tobacco 

taxes 

(30) 

1 3 Er2 131"Eq11121RREFiE EEREEEERE 

g .. a ad -;g4 a g aiagg I 

r P 

aa 

EE 

(60) 

710 r ; lo u sun

2 F. 

r 

a ' 

rr rr 

"' 

rPrr r "P 

§ 

Pr Pr ^ 

(so) 

q qc so oa

pg pme po pam

2 2- I q "RI 4 

RR' Era. 

e 

E",3,3521 N40a6 oa- n 

g 

2) (h

10 sm8

i 4 RP135'1-331.1E=I 3R R31"EREERHEE 

a d aaa-, ..,7 a, .4 a 

• 

-6 

UR 

(92) 

y0 man8 so

....--t-t. 

.. 

E a. 4 ER RE adr 

4 " - •• L 

ea

33 - 

..., 

' L 

Z4 

E 

me 

.. 

3 1E 3 i p.4; 

R---a ------, t. •° -t t -- 

Alcohol taxes

—Continued 

Total alcohol 

taxes 

(25) 

g 

1REEMEEM3IEEEM1a111ERREUE.REEIREI 

g g 4g4ggggga54g04 diga4g1 4ga e. 

Malt liquortaxes

—Continued 

Total malt 

liquortaxes 

(24) 

t_77 

1gPIERIERREEERREERFERRERRIREERZREPEPIF 

.1 a trt_ti-.4 r-laaegt. - d44^,'ig4 ate 

.i. 

Floortax 

(23) 

- 

rs-rrrs-rs-s- 

- - - 

r rs- r --Irrirrr :1-pr 

Internal revenueregionsand directors' districts 

1

St2 N E 7J.0 

Pil

0

frigle4 

, 

0 

A 

. .

. 

4 

0 

- 

 ig 

i 

1 

1

0 

- 

! 

N 

2 

Ape:asa 

.10 

i<UOldr0944mi4afairtgalielje0a 

E " w atglgg 

10.401 ° 11potSAit 

d 

0 

84.05 

0 40 40vgag 

1 

-0 -9 ,„! 

ni 
• • 41.‘• • 

■.■ W 

e0 0 

00 MA - A3 

UMW 

STATISTICA

APAAR2^ WAIRAUARAEAUEARRE

ee aae a a 4 a 

• 

ede 

AEUEreAAEARAsAA 2AgiAiRE

brie a 4 a a ea 

5

2d 

A - 

- - 

z A 24 a . 

0 

a. 0 0E; .0 ar. 

E 

MEm. -14 

o f m 

s<mmw414440

11g-4-41flgilA19112ai m=8“.-gbant_MiAsA. 

n 

E5154gem ,2 1 0m g 

o 

A 

gmozesialengleg14""11 "14 MQ041ftZ 

• 

C I

O 

O a 

54 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

0.1 

E i'.' N sEif 

Lai -96 

gg lig 

4.;"j1031i3g. ggs 

ALL 

grad a%Rs .2 

102411 1

211124:aom .1iW44§4g

0 Pim, [074<m1:1AtgUaimig 

N.

o 

•

''Pli:sRARIRERP53ARARAMARHAgfAUSARAFAE 

a g g me 4 a 

SS MI 

2 4 A 3 PAPEAPEA§6 12ARRAAERUPRAP"W 

H "gga 

EnP28 .-1 

a a 

AUFAEARRAAAA a 

EE 

cf, 

5 

0 

p

a 

a. 

a e 
STATISTICA

56 REPORT OF CONIEMBSBBNER OF INTERNAL REVENUE 

IF.ESEP'WHEIWESERS2"41"P

ed ,E:d a .6 a 4 a 4E2 

S 

8 

d 

F41 

at 

'2 k2g..571Ak2222 S PE- EirEn 

d )42-. add 

"Ifri 

VIE APESRM§ 

6 6 5g4 

ii§FREEOME d ro ..ssA a. 44 

.-Zef 

act S aN'2`1

a 

2 

PrineggiSPANIEMLIPIEHMEMEsE141 

4 d, me4 emg a 

i 4 AA I 

il a4110tEgEM 0111411421111111Pu 

=r6giOnv 1"- 

NMA0144041'2ISISV5 A/AAS ti 

R m RUZARal000E. .4114 j<A0OSAX 

• 

Lubricatingoils 

4 

4 

S 

O 

vs a 2 

5 

(-3c 3alo g' a' d 104 

1 '2 "2 a1,114N 04aA 01 ,14

le2411t1WIO24i14W845710144

0 4 

327465-515-5 

mflINE1E3 

gg 

31REBV 44 

irdUEIRM - RIEUERFAEREa ddaead -7,6 44 aega,.5Eaegd 
Internal revenueregionsand directors' districts 

11.4er4-a 

ingn a 

wagargiumtp-ARg-T 

e i aa 

3301 R33aaEREMEWREarn 5 gE- 3aar ral 

4 4 e .:Fitzagg. as 11.rge 

!, 

et 

4 

• 

dN 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

M333115133EE3RagliMI38IVE3"E 3 M3I33 

d g agaaggqvggeg Iggageg .:gar.: aea 

STATISTICAL TA

Ilail3323E 433IEREI395395F2mily3e

ggegge ad.5 eg 0.4?.:444^-Igg es a 

,4 1E3g5a9.500E - 

d aaafp.Tada4a,;a 

"igE9Panai309 -saaaN3ggraEf lini 

a e g.. e 

eg 

EPPla 

e a 

6 33aai 

ggagag 

24" I 

RPM 3E- ;s3 ,es 

8 

Mar' C' 4 

r CCir 

01 

O v 2 

10.4W 

0A1 4.?P 

o

AW140113.1 .

4crIZINW8octiP<474Z8 4a4a.44z7

a 0 M 

s. Cl G 
F 3 

o 

i 

4 

8 

0 

0 

60 

2 

a 

e 

" 

4- 

te4 E 

•

•u 

g 

A 

O 

4 8 

•g 

• 4 

g) m 

74). 

g 

c#: 

I 

0 

•

0 

o 

m 

g 

co 

y

V 

Co

Retailers' excise 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

taxes 

Total retailers' 

excise taxes 

(47) 

4-

REWAHBRIEMMEEPLIMEAMEESEMEEE 

4.- 0,24.rcog.4174 0imeoa geommemcg.ogcaae,:e 

Toilet goods 

(46) 

GaragnitiElitaiMMOWMA311M03 

4.. g g 0 0.,-. = gg .g. 4..4 .. ....:. . ....t 

S) (6

I w g22 o2

PrEHUWOR1ZEIEMPEFingrallIgHig . 

..

g...g cg0 -0. ,... .. g. 

046 

r e float

s

InaglIBEMEIRVEHMEHNIMMMI 

t t, g g.0gz ..„4..004.4 ggc.,40-0 Ligg.g 44 

(XS 

d fun

WR qt1M0-3VEARBEFflnIFARMEREggnfl 

Internal revenueregionsand directors' districts 

Bostonregion Augusta Boston 

Burlington Hartford 

Portsmouth Providence 

New York region Albany 4 Brooklyn Buffalo 

Lower Manhattan 4 -41 Syracuse Upper Manhattan Philadelphiaregion Baltimore Ca

mden 

Newark 

Philadelphia Pittsburgh Scranton 

Wilmington Cincinnati region 

Cincinnati Cleveland Columbus 

Toledo Indianapolis Louisville 

Parkersburg Richmond 

Atlantaregion Atlanta 

Bir

mingham Columbia 

Greensboro 

Jackson 

Jacksonville 

STATISTICA

ggag.eg 

mggERnmlintrmeaniA4gtitgligNMOg

44 esaeag4e7s-e..:g 44m,i4e 

FTPITTY1.:aa5 3449311214 5

REIEn.18EHERIMintaliER4 NRUP

03

- ae a,--t: 

MMinlifIngEMARDILIPM

gt.laasg.„: 4a Ne4:44c.: 44 NNE. N4.4.4 

Chicag Springo field Detroit 

Milwaukee 

Omaharegion Aberdeen 

Cheyenne Denver Des Moines 

Fargo Kansas City St. Louis Omaha 

St.Paul 

Wichita 

Dallasregion Albuquerque Austin 

Dallas LittleRock 

NewOrleans 

OklahomaCity SanFranciscoregion Boise 

Helena Honolulu LosAngeles SanFrancisco Phoenix 

Portland Reno 

Salt LakeCity 
4 

0 

62 

t 

i 

a 

•A 

g 

1 

. 

-a 

t 

tl 

i I 

,• 6 ; 

g 

g 

s 

m 

•

no 

g 

41 

1 

.0 A 

1 

m o 

g 

o 

A a 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Miscellaneousexcise taxes 

Transportationof 

oil bypipeline 

(12) 

- - 

- - 

.: 

A '3 A 

•

Fr 

.6. "ra 

EE 

a 

$ A E E - a 

- 

- 

- - 

Local telephone 

service 

(51) 

EgFinK- Errairia - 14i1 15AAMEEREHE5 455 

g g -, g al ga gg.4- gag,r_raa,ragg _z a 

Leased wires 

(10) 

ran.4172"R"inirirrhIgnn38Er ' P 

Long - distan ce telephone, teleg raph,cable, 

radio,e tc. 

(49) 

EARE5 3- 1E 3 AWAFEEIR"AREAAFRIAREHEgEA 

g d 4 .a .:g .6. t/g-r gaz.4.4R aa;qg a a 

(Se) 

s n jea

A A 

EEE , E 

I 

-r4 

IA A 33 Ri 41 

Internalrevenueregionsand directors' districts 

Bostonregion Augusta Boston 

Burlington Hartford 

Portsmouth Providence 

New York region Albany + Brooklyn Buffalo 

LowerManhattan Syracuse UpperManhattan 4 Philadelphiaregion Baltimore 4 

Camden 

Newark 

Philadelphia Pittsburgh Scranton Wilmington Cincinnati region Cincinnati 

Cleveland Columbus Toledo Indianapolis Louisville Parkeraburg Richmond 

Atlanta region Atlanta 

Birmingham Columbia 

Greensboro 

Jackson 

Jacksonville 

STATISTICA

EA- P3 

a . vc E - clignAgEEN .. .. ... Nnm 

"' Fl 

312REEPEF4 3REEEFFRAR3AAggRA

aa 

Erin" 

a 

tR 'Wciflu="44"' 

a a 

2 g6

a 

4,

IIEREARgE5gAEAREAR AARAPIEEP5

7EaEcsE :37.-7 EE -a ce 1 -it 

- 

6' 3 

 - 

API 

ar a 

R 5 gi 

- a a 

A 

s 

F R 3 

- 

2 

s 

E 

"Inge region Chicago Springfield Detroit 

Milwaukee 

Omaharegion Aberdeen 

Cheyenne Denver 

DesMoines Fargo Kansas City St.Louis Omaha 

St.Paul 

Wichita 

Dallasregion Albuquerque Austin 

Dallas Little Rock 

NewOrleans 

Oklahoma City SanFranciscoregion Boise 

Helena 

Honolulu 

LosAngeles SanFrancisco Phoenix 
STATISTI

64 REPORT OF COMMISSIONER OF INFERNAL REVENUE Miscellaneousexcise taxes

—Continued 

Coln-operated 

amusement and 

gaming devices 

• (58) 

LI,X4gFgelp2861R749ER.7 are52,1FieiaNfpacr,:ggg 

aa a 4 

Bowlingalleys, 

Pool tables,etc. 

(57) 

AgNEW=VR7U4SVASPFerelBSRA23071SBABEMZ. 

Club duesand 

initiation fees 

(56) 

4 

IIRRAnEFOLIEHREQUatWOMAIREPIE 

44 44 4 4 4 a 

Leasesof safe 

depositboxes 

(65) 

pr§A2iMERwangEgAppgrgEMS*WsEM 

..: 

Transportation of property 

(54) 

e 

FEEPACalManlii§MIRMOAR501Mg ;I:.-ae.iraega..r e ea 

Transportation 

of persons 

(53) 

:E

EinF-IMEMNIR641E0ERMEMIEHEPRO 

.7 a e ri rr zw...: cc"; 4. 4 4 aLia a 44 

Internal revenueregionsand directors' districts 

i 

41 0 

:RnmliAEgg 

tlif 

A 

7 

Oum;";-.41 

a 

3-CMMMOMM4MAMOZNP.m40E3OF4AN 

g 

r. 

gi° 

It 

- 

1.. 

0 

T' “4.11.PIAla.a-its, A 

gl=t 

'RI 

g 

i

1 

° 4 12 110 

I. 

aa 

gl 

04 

P..1M00„; 

g c E 

11

clE 

782 

1

a 

1 

MiligIa20225::4 4Wlasnr3g8 I

garlap-tmusszioipcussarligo:1

i5O4PIIIPME4F:W.14tirel

44 4 4 

Mign;"22 , R F4PETOI'P2I i * ''q

4 4 

ggagag 

EAginEA4ERMAIMIEPETME

4a agageg ea aag .6

413§E7 g4;"§§giaTnRaPH

SIB. c'tg 

gaeaag ag a g e

Chicagoregion Chicago 

Springfield Detroit 

Milwaukee 

Omaharegion Aberdeen 

Cheyenne Denver 

Des Moines 

Fargo Kansas City St. Louis Omaha 

St.Paul 

Wichita 

Dallas ration Albuquerque Austin 

Dallas LittleRock New Orleans 

Oklahoma City San Franciscoregion Boise 

Helena Honolulu_ LosAngeles 
• le

ilg s ffoo e ett no s wn o l xe —s oe no n penu

Diesel fuel 

(63) 

inr,grpswayiggInsprwissmmgsg r 

4 - a 4a 

Coconut and other 

vege tableoils 

processed 3 

C ; °' 3 - rifi' 

4 a4 4 

Iv° MEG '" 

trer 

r 

w- " 2 

Narcotics,includ- ingmarihuana 

an d sp ec ia l taxes It 

(61) 

wi4--, c-71g2g--xp-p2--B..) 1--6...-rai. , , -0.-474 

Admissions

—Roof 

gardens,cabarets,etc. 

(60) 

rIn4411 0ESEEIPAEM4 11§MERGEkPmin 

e rfia re a a 

Ad missions

— Theaters,conc erts,a thle tic 

contests,etch 

(59) 

41111:1HIAIIREIREHERMIRMIIMIliital 

.., cc c)r ailreaa-waeaaea tre«a444.04a4«64 

Internal revenueregionsand directors' districts 

Bostonregion Augusta Boston 

Burlington Hartford 

Portsmouth Providence 

NewYork region Albany 1 Brooklyn Buffalo 

LowerManhattan 4 Syracuse UpperManhattan Philadelphiaregion Baltimore 4 

Camden 

Newark Philadelphia Pittsburgh Scranton 

r 

1 

7; 

"3

2 

a 

- 

9 

w 

a Is 

2 

O 

Aq 

4 

ti 

a 

8 A 

ga44gngfig 4n14gEOZCCEPFEEggE

4 ape «4 

31, 665 13,817 3, 093 9,873 4, 882 21, 338 938 

503 

3,

710 

3,691 583 

2,930 2,958 1, 565 4, 910 

550 

24, 893 939 

6, 168 9,822 1, 231 4,131 3,403 38, 998 938 

1, 001 

1,

329 

16, 041 9,458 1, 231 

2,

410 

473 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

• STATISTICA
STATISTIC

iNEREEHEM2WifiggilEVEUM2E AU 

7250 

. Pqig5fiEligUignaWFIllgiga g5 . . . 

.: ow 

tt O 910 

1 '69 011 

ti2 OOt 

8 4 14 '

'96 1 1 9L

COI tit '

L LE' LCSA

969 IOC '

IN 19s 

69i 1390'986 969'

z ta atie

1306 

t s CM FM '

909 OA '

1 990' EIS '

lit G ' BO

'1 Lit 9' LL

tts 500 t° ste0£9 906 '

99 0 PC/ '

g Ign

'IL at 

2 'et ' .5 31

s co its '

9 I '

M IN ''as 348 

t sus ' .c6 ' .- Wggr

Penalgigra4RitilarghSYMM

1os 

^lsagg‘gtitil4*rggace

Aplinp.-- .)§30 x g—^ %minaaa 

C C CE

aa 

EStlelrevg ', 7.714all rragmg2 eU R

a a 

E C C 

Chicagoregion Chicago Springfield Detroit 

Milwaukee 

Omaharegion Aberdeen 

Cheyenne Denver 

DesMoines Fargo KansasCity St. Louis Omaha St.Paul 

Wichita 

Dallasregion Albuquerque Austin 

Dallas LittleRork 

NewOrleans 

Oklahoma City 

gen Franciscoregion Boise 

Helena Honolulu LosAngeles SanFrancisco Phoenix Portland 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

==== 

Grand total,all internal revenue 

taxes w 

(68) 

E

SMEMIREMENWO.iFigiiEREFERWMNE56 

rgggatgl-Matg5105Elltataggnin 

Miscellaneousexcisetaxes

—Continued 

Total miscellaneous 

excisetaxes 

(67) 

1

UUREMEEMF.INFEUNMAIWOOVIRM09 

4sd-rg^-1f$7.74egat6Ip°^pie fEgg":faBzI 

(99) 

i10 Jel

r- A.t; asrt'ancnizlzmpl-')roe-zeA rn! 1- 

r CC 

(99) 

A1 44 102 44 T —21 a 01 4 44

0 2 2°"- IEWar0BEZ,Z217-T,FUNEVZ? EIS 

4 ”: 

(99) 

noco lled Nuo

Ai s lick u —F

Z B '"Ilr'E c"""'Z'-"4 29En cl.742 -"I BEr2W--°mZ 

. .— 

Internal revenueregionsand directors' districts 

Bostonregion AuguSta Boston 

Burlington Hartford Portsmouth Providence 

NewYork region Albany 4 Brooklyn Buffalo 

Lower Manhattan 4 Syracuse 

regio Upper Manhattan 4 Philadelphian Baltimore 4 

Camden Newark Philadelphia Pittsburgh Scranton 

Wilmington Chreinnatl region Cincinnati 

Cleveland Colu

mbus 

Toledo Indianapolis Louisville Parkersburg Richmond_ Atlantaregion Atlanta 

Birmingham Colu

mbia 

Greensboro 

Jackson Jacksonville 

Naga villa 

E-4 

68 
70 REPORT OF COMMUSSIONER OF INTERNAL REVENUE 

STATISTIC

=14 Nil lifigni e 

4r. 3 3 

="- 

0 

g 0 o u_ m 

op 

4961 

(10 

t Min

9 6 ' I V SOO

E HE 

g 5gf 

1 '299' 063 

11 34

t2 cos 

cflaaa 

Aging 

091 949 '

Egr '2 812

(II) 

191 8£

898 . &46

:1- 

gig. 

RR5 

'I 2 28 669'

01 26

. 31 E90'

.Sg 

REt^n E ..Sri 

. 

1 32 034 '

a""= 

9 641'

1) 0(

y toad

49 2 ' 162

REE 

if g" 

294 b 9 ' 20

'2, .063

68 1' 08

-,,, «aa 

Rgiggg 

391 118'

ps 

.; 

9 212'

6) (

PI quI

'2 192 ' 212

M g' 

E ARE 

ar 

N 

E 961 ' 096 '

94 BEE '

2 2 280 ',--ge...r 

-,,ga. n=---- 

991 296 '

rig 

e c 

2 221'

(8) S

o/ aeruc

1 

01 1 9E1 '

E gill, 

a , 

g g rig 

9 ' ,V81

6 389'

IEZ 

:te-r 

EEEIgg 

_ 

1 83 HO '

Agg 4 

'9 208 

t ne /ren

44 13'9 9

E EE1 4n54 

N 

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lz9 tc e

2 888'

62 999'

!fag^ 

ME241.6 

411 622 '

no.... 

4 

2 860 '

2261 

9) (

u qmoca re

I 88 ' 163 t

E gm'i 

R ElE 

999 321'

2911 

9 2 1 23

EEER 2 

162, 330 1 

ilg 

8 890 '

November 

(5) 

16 '8 331

E 

::, 

385 

4 922 ' 9 ' 38

49 298'

gra 

EER3N^ 

916 896'

..e, 

--- 

t., 

2 296'

■ October 

(9) 

I 'LL4 299 

gr 

1 5E2 

gee 

'3 030 269'

BEL 

'26 102 

gRgE/g 

Z 'LI 883 

c'g 

8°1BL 9' 12

2) (

s e go:120 a

992 ' 628

:= gitl 

g Fig 

a 

E0 V 812

CLL 

E9 c 898 

ggaa 

?REAP 

1 62 ' CU

4Etvg 

e 

'2 gm 

.) (F

Y 11 19118

932 104'

g 

3 RMN 

..= 

r- 

.ted. 

9091 1 EU 

E801 

69 11' 8

-.1w-r 

gREMEg .4. -- - 

681 ' 898

Wa 

, 061

I) (

f In S

1 029 122'

g ERR .■ 

3 21 ' 1 219 

'1 349

18 80£'

qtaak

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'121 441

EE" 

9 0' 92

8 JO 8001110 .1 110 :10 1.01

t. 

Td 

t 

A •S/ a 

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72 REPORT OF COMMISSIONER OF INTERNAL REVENUE 1261 (31) 

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STATISTICAL TABLES 73 

TABLE a— Internal revenue collections, fiscal years ending June 30, 1953 and 1934, 

by sources 

[In thousands of dollars] 

Sources of revenue 

Corporation income and profits taxes: 

Regular 1, 

Exempt organization business income tax is 

Total corporation income and profits taxes 

Individual income and employment taxes: 

Income tax not withheld 2 

Withheld taxes: 

Income tax and old-age insurance I , 

Railroad employment compensation tax, 12 percent of taxable portion of payrolls 

Railroad employees' representative tax, 12 percent of taxable portion of 

payrolls 

Total withheld taxes 

Unemployment insurance (3 percent of taxable portion of payrolls) 

Total individual income and employment taxes 

Miscellaneous internal revenue: 

Estate tax 

Gift tax 

Alcohol taxes: 

Distilled spirits: 

Excise taxes: 

Imported (collected by Customs) $10.50 per gallon 

Domestic, $10.50 per gallon 

Seizures, penalties, etc 

Floor tax (tax-paid stocks on hand) 

Rectification tax, per proof gallon, 30 cents 

Export stamps, 10 cents per cask and 5 cents per case 

Container stamps, 1 cent per bottle, or W cent if less than Xi pint: 

Bottled m bond 

Bottled other than in bond 

Stills or worms manufactured, $22 each 

Special or occupational taxes: 

Manufacturers of stills, $55 per year 

Rectifiers: 

Less than 500 barrels, $110 per year 

500 barrels or more, $220 per year 

Wholesale liquor dealers, $200 per year 

Retail dealers in liquor or medicinal spirits, $50 per year 

Nonbeverage manufacturers of spirits, $25, $50, $100 per year..... 

Total distilled spirits 

Wipes, cordials, etc: 

Excise taxes: 

Imported (collected by Customs) 

Domestic 

Floor tax (tax-paid stocks on hand) 

Special or occupational taxes: 

Wholesale dealers in wines or in wines and malt Liquors, $200 

per year 

Retail dealers in wines or in wines and malt liquors, $50 per year. 

Total wines 

Malt liquors: 

Excise tax per barrel of 31 gallons, $9 

Floor tax (tax-paid stocks on hand) 

Special or occupational taxes: 

Brewers, 500 barrels or more, $110 per year; less than 500 bar- rels, $55 per year 

Wholesale dealers in malt liquors, $100 per year 

Retail dealers in malt liquors, $22 per year 

Total malt liquors 

Total alcohol taxes 

Footnotes on p. 77. 

327465-56 6 

6. 

4 

2, 780,925 2, 783, 012 

37,244, 619 

784, 590 

106, 694 

25,377, 496 

273, 1 ea 

24,748, 526 

628,928 

41 

1,930,081 

11,603, 942 

21, 514,251 

264 

21,594, 515 

762,983 

483 

37 

1,192 

3,986 

768,681 

82,163 

3,938 

76,579 

480 

105 

1,043 

1953 

28,690,854 

283,882 

37,921,314 

883,344 

71,778 

26,085, 633 

605,177 

44 

21,546,322 

10,946, 578 

1, 926, 208 

21, 515, 632 

890 

230, 566 

1,642,059 

995 

282 

24,951 

31 

1,088 

13, 013 

5 

9 

10 

24 

1,339 

13, 710 

116 

774,90 

769,774 

13 

35 

1,171 

3,907 

79,904 

4,152 

74,527 

II 

113 

1,101 

1954 
74 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 3.-Internal revenue collections, fiscal years ending June 30, 1953 and 1954 

by sources-Continued 

[In thousands of dollars] 

STATISTICAL TABLES 75 

TABLE 3.-Internal revenue collections, fiscal year's ending June 30, 1953 and 1954, 

by sources-Continued 

[In thousands of dollars] 

Sources of revenue 1953 if 1954 Sources of revenue 1953 if 1954 

Miscellaneous Internal revenue-Continued 

Tobacco taxes' 

Large cigars classified by intended retail prices: 

Class A, tax per thousand, $2.50 

Class B, tax per thousand, $3 

Class C, tax per thousand, $4 

Class D, tax per thousand, $7 

Class E, tax per thousand, $10 

Class F, tax per thousand, $15 

Class G, tax per thousand, $20 

Small cigars, tax per thousand, 75 cents 

Cigar and cigarette floor tax (tax-paid stocks on hand) 

Cigarettes per thousand, class A (small) $4, class B (large) $8.40 

Cigarette papers OS cent) and tubes (1 cent) 

Manufactured tobacco (chewing, smoking, and snuff), 10 cents per nomad_ 

Leaf tobacco sold or removed in violation of sec. 2059 I RC 

Miscellaneous internal revenue-Continued 

Miscellaneous taxes: a 

Bowling alleys, pool tables, etc., $20 per alley or table 79 Coin-operated amusement and gaming devices, $10 and $250 per device_ _ _ 654 admissions: 

8, 972 Admissions, for each 5 cents or fraction of the amount paid, 1 cent 4, 289 Ticket brokers' sales, for amounts in excess of box office price, 20 25,100 percent 

3, 011 Leases of boxes or seats, of the amount for which similar accommoda. 3, 670 Qom are sold, 20 percent 42 Roof gardens, cabarets, etc., 20 percent of total paid for admissions, 2 services, etc 

I, 513, 740 Admissions sold by proprietors in excess of established price, 50per- 695

3 cent of such excess 20, 17 

(9 Total admissions taxes 

84 

598 

8, 919 

4,449 

25, 858 

2, 797 

3, 572 

49 

19 

1, 586, 782 

717 

21, 066 

1 

3,411 3,227 

16,505 14, 616 

310,224 270,520 

1, 259 812 

451 404 

46,691 38,312 

897 216 

359,622 310,264 

1, 654, 911 1, 580, 229 Narcotics (opium, coca leaves, or derivatives thereof): 

Opium, coca leaves, etc., per ounce or fraction thereof, I cent 

Opium order blanks per hundred, $1 

Accepted offers in compromise, eta., on account of narcotics ta x violations 

Special taxes: 

Importers, manufacturers, and compounders, $24 per year 

Wholesale dealers, $12 per year 

Retail dealers, $3 per year 

Practitioners, $1 per year 

Dealers in untaxed narcotic preparations and laboratories, $1 

per year 

Total narcotics taxes 

Marihuana taxes 

Coconut and other vegetable oils processed: 

Coconut oil from the Philippines, per pound, 3 cents_ 

Coconut oil from Trust Territory, per pound, 3 cents 

Coconut of from other United States possessions, per pound, 3 cents. 

Coconut oil and combination containing coconut oil (other than in 

preceding listing) per pound, 5 cents 

Other per pound, 3 cents 

Total coconut and other vegetable oils processed_ 

Firearms transfer and occupational taxes 

Diesel fuel, per gallon, 2 cents 

Wagering: 

Occupational, $50 

Excise, 10 percent 

Other receipts (including repealed taxes) 

Total miscellaneous taxes 

Total miscellaneous internal revenue 

Grand total all internal revenue taxes 

Total tobacco taxes 

Stamp taxes on documents, other instruments, and playing cards: 

Issues and transfers of bonds of indebtedness, or capital stock, foreign 

insurance policies, and deeds of conveyance: 

Sales by postmasters 

Sales by directors 

Silver bullion transfers, 50 percent of profit 

Playing cards, per pack, 13 cents 

Total stamp taxes on documents, etc 

Manufacturers' excise taxes: 20 

Lubricating oils, per gallon, 6 cents 

Gasoline, per gallon, 2 cents 

Floor tax, gasoline, 34 cent per gallon 

Tires (wholly or in part of rubber), per pound 6 cents 

Inner tubes, per pound, 9 cents 

Mechanical pencils, pens, and lighters, 15 percent 

Automobile truck chassis and bodies, 8 percent 

Other automobile chassis and bodies and motorcycles, 10 percent 

Parts and accessories for automobiles and motorcycles, 8 percent 

Electric, gas, and oil appliances, 10 percent 

Electric light bulbs, 20 percent 

Radio sets, television sets, phonographs, components, etc., 10 percent... 

Phonograph records, 10 percent 

Musical instruments, 10 percent 

Mechanical refrigerators, quick-freeze units, air-conditioners, etc., 10 

ercent 

Ma

p

tches, per thousand, 2 cents, and fancy wooden or colored stems, 5$6 

cents 

Business and store machines, 10 percent 

Cameras, lenses, and films, 20 percent 

Sporting goods, 15 percent 

Fishing rods, creels, etc., 10 percent 

Firearms, shells, and cartridges, 11 percent 

Pistols and revolvers, 11 percen t 

Total manufacturers' excise taxes 

Retailers' excise tam " 

Furs, 20 percent 

Jewelry, 20 percent 

Luggage, 20 percent 

Toilet goods, 20 percent 

Total retailers' excise taxes 

Miscellaneous taxes: F 

Sugar, per pound, approximately 34 cent 

Telephone, telegraph, cable, radio 

Leased wires, 25 percent 

Local telephone service, 15 percent 

Transportation of oil by pipeline, 434 percent 

Transportation of persons, 15 percent 

Transportation of property, 3 percent of amount paid, except coal which 

Is 4 cents per ton 

Leases of safe deposit boxes, 20 percent 

Club dues and initiation fees, 20 percent 

Footnotes on p. 77. 

390 360 

17 17 

56 46 

3 7 

1 

166 174 

242 268 

6 5 

904 883 

26 36 

16,386 14,842 

26 76 

486 21 

41 93 

1,044 1,234 

17,983 16,266 

7 

15,091 19,056

8 

974 1,008 

9, 502 8, 550 

653 3,517 

2,061,164 1,937,399 

10,837,401 10, 452,354 

69,686, 535 69,919,991 

20, 824 

61, 816 

97 

21, 427 

61, 608 

24 

7, 582 6,941 

90,319 90, 000 

73,321 

890, 675 

4 

154, 922 

25,126 

11, 938 

210, 032 

785, 716 

177, 924 

113,390 

36, 684 

160,383 

7,617 

11,048 

87, 424 

68, 441 

835, 609 

() 

129, 567 

22, 512 

10, 885 

149,914 

867,482 

135, 248 

97, 415 

35, 390 

135, 535 

8, 445 

9, 191 

76, 059 

8,950 

50, 259 

29, 401 

11,'288 

4, 557 

12, 148 

983 

9, 373 

48, 992 

25, 196 

8,140 

4, 626 

10,266 

975 

2,862, 788 2, 688, 262 

49, 923 

234,659 

95, 750 

115, 676 

39,036 

209, 258 

79, 891 

110, 149 

Footnotes on p. 77. 

496,009 438, 332 

78,130 

391,682 

26,258 

357,933 

28,378 

287,408 

419,604 

10,368 

36,829 

73, 885 

388, 893 

23, 615 

359, 473 

30,106 

246,180 

396,519 

9,318 

31,978 
76 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

1. 

2 2 

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Income,profitsand employment taxes 

Total income, 

profitsand em- nlernmont Etyma 

FIREWIEginin 

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Fiscal yearended June 30 

1,961 1961 

1961 

81IWO( 0061 

61 

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ti61 

111 

a 

F 

Footnoteson p. 77. 

0 

STATISTICAL TABLES 77 

Footnotes for tables 1 through 4, pages 44-76 

'Less than $500. 77 Under revised accounting procedures effective 1 Includes tax on business income of exempt or- July 1, 1954, taxpayments made to banks under the 

depositary receipts system are to be included in ganizations. 

8 Includes old-age insurance tax on self-employ- internal revenue collections for the month in which 

ment Income. Rates of tax are as follows: the depositary receipts are issued instead of the Individual income tax: month in which tax returns supported by the deCalendar year 1953—Graduated rates from 22.2 positary receipts are received in intern el revenue 

percent on first $2,000 net income in excess of offices. This will eliminate differences in concept 

exemption to 92 percent on amount over between internal revenue collections reports and 

CLegelt as measured in the Trees- . year /954—Above rates range from 20 ury Monthly Statement. 

internal revenue receipts 

percent to 91 percent. The amount of depositary receipts issued by 

Sall-employment tax; Federal Reserve banks, and not received by internal 

Calendar year 1953-212 percent of self-employ- revenue offices as evidence of taxpayments, totaled 

ment income. $3,944 million as of June 30, 1954, of which $3,414 

Calendar year 1954-3 percent of self-employ- million related to withheld income and F. I. C. A. 

ment income. taxes, $97 million to railroad retirement taxes, and 2 Includes railroad employment compensation tax and railroad employees' representative tat. 

g33 million to excise pen. I

periods, serinternal r to 

mreavinetnaluen 

1 Bronx, Rockland, and Westchester counties were collections for the fiscal year 1954 are shown herein 

transferred from Albany District to Upper Man- on the basis formerly employed and do not include 

batten District, effective July 1, 1953; Lower Man- these amounts. 

batten District includes Puerto Rico; Baltimore Dis- Met includes /1 Corporation income and profits tax rates: Maryland and the District of Co- First $25,000 of net income, normal tax of 30 percent; 

lumbia; Seattle District includes Washington and set income in excess of $25,000, combined normal 

Alaska. tax and surtax of 52 percent; excess-profits tax of 1 Includes export stamps, bottled-in-bond con- 30 percent, terminated Dee. 31,1953. Normal tax and 

rafter stamps, and bottled other-than-in-bond con_ surtax rates also apply to net income derived by eels twiner stamps. rain exempt organizations from unrelated trade or 8 Includes special or occupational taxes on menu- huffinesslecturers of stills, rectifiers, wholesale liquor dealers, / 1 Rates of income tax withheld and old-age insur- retail dealers in liquor or medicinal spirits, and non- once tome 

beverage manufacturers of spirits. 

7 Income tax withheld: Wages in excess of exemptions Includes floor stocks tax; tax on stills or worms taxed at 20 percent through Dec. 31, 1953; 18 percent 

manufactured; and seizures, penalties, etc. beginning Jan. 1, 1954. 

8 Includes special or occupational taxes on whole. Old-age insurance taxes (including employers' and sale and retail dealers in wines or in wines and malt employees' tams)/ liquors. Taxable portion of payrolls taxed at 3 percent 1 Includes special or occupational taxes on brewers through Dec. 31, 1953; 4 percent beginning and wholesale and retail dealers in malt liquors. Jan. 1, 1954. 

s Includes taxes on large cigars, classes A through 78 Excise tax rates shown in table 3 do not take into G, and on small cigars. account the reductions which were effective Apr. 1 Includes floor stocks taxes, taxes on cigarette 1, 1954, under the Excise Tax Reduction Act of 1954. papers, and taxes bh leaf tobacco sold or removed in Increases or decreases in excise tax collections for violation of sec. 2059, Internal Revenue Code. the fiscal year 1954 as compared with fiscal year 1953 

s Includes taxes on silver bullion transfers and on should be appraised in the light playing cards 

a events: (1) the change from a monthly basis to a 

li includes taxes on mechanical pens, pencils, and quarterly basis for the filing of substantially all 

ghters; electric light bulbs; phonographrecords; excise tax returns, effective for the quarter beginning 

musical instruments; matches; business and store July 1, 1953; and (2) also beginning July 1, 1953, the 

machines; cameras, lenses, and films; sporting goods; extension to certain excise taxes of the depositary 

fishing rods, creels, etc.; firearms, shells, and car- receipt system for the payment of taxes. tridges; and pistols and revolvers, 11 Beginning January 1951, withheld income taxes 

s Includes taxes on ticket brokers' sales, leases of and social security employment taxes on employees 

boxes or seats, and admissions sold by proprietors and employers are paid into the Treasury in coinin excess of established price, as well as general ad- caned amounts without separation as to type of tax, missions tax. The figures for prior periods have been combined Em- s Includes all narcotics and marihuana taxes. cordingly in this table for purposes of comparison, 

it Includes taxes on coconut oil from the Philip- but are shown separately in previous annual reports. 

pines, the Trust Territory, and United States possessions as well as other coconut and vegetable oils processed. 
78 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 50-Internal revenue tax on mr.ln1Jfacl/./Tcd prodllct.~ ,from Puerto Hif;O, jio'cal 

years 1.953 and 1954-, by objects of taxation 

-= Articles taxed I , lr03 . 

I~~ DlstUlcd splrns, exc15e tax ...._ .....•.•••••..•••.•••...•..••, .....•.._..... $15. :?-~1. 541 $14, 2Il6. sa D.istllled spirIts. rcct1llcatlon tax __ _.•..: ••·••••••• 430,607 419,211 Cigars, b~c:

gJJ:~~~;~;;!;~;;;i;;;;;;:;1~;;;;;;;;r;:::~~;~;;~~~ill;;~~~!!: ::::::::;f::: :~! Chewing and smoklng tobacco_ 4-lG 1._ Total..::' _ ,. __ 1 15. 70s, 3.31 14,ll89,4M 

NOT};o-Starnp sales for Puerto RIcan tobacco and J1quor manufacturers 1m, (Iop"slted at Sl1n Juan to the cn.'dlt or tlle lrc:lSUrc, of PuertO Rico and COI",cQuclltl~' aN, nOl SbOWll in olher collccUon statements herein except that liquor and toob:lcCO t:lXCS nmounting to ~12,8S-i In 1054 '''H\ $36; In 1953 were collccloo at lbe ,_ of entry and werc covered into the 1'rcl1!<uIi' or the Unlf.(,d Slatts to the credit of the treasure.' of Pueno Rko, under the Act of M:lr. Z, 1\117 (sec. 3360, Internal RevCllue CoM of I03~ II. amended) 0 

Alcohol and 

Tobacco Taxes 

Tables 6-11 

.. 
1953 1954 

80 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 6.umber -N of establishments qualified to engage in the production, distribution, storage, or use of alcohol and alcoholic liquors as of June 30, 1953 and 1954, 

or to engage in the production or distribution of tobacco products as of December 

31, 1952 and 1953 

June 30 

Class of establishment 

ALCOHOL, DISTILLED SMITS, BEER, WINES, ETC. 

Distilled spirits: 

Fruit distilleries 

Registered distilleries 

Internal revenue bonded warehouses 

Distillery denaturing bonded warehouses 

Tax-paid bottling houses 

Rectifying plants 

Industrial alcohol: 

Industrial alcohol plants 

Industrial alcohol bonded warehouses 

Industrial alcohol denaturing plants 

Dealers in specially denatured- alcohol and nun 

Users of specially denatured alcohol 

Reprocessors, rebottlers, etc., of specially denatured alcohol articles 

Users of tax-free alcohol 

Fomented malt liquor: 

Breweries 

Wine: 

Bonded wineries 

Bonded wine storerooms 

Bonded field warehouses 

V inegar factories using vaporizing process 

Beverage dealers: 

Importers 

Wholesale liquor dealers 

Wholesale malt liquor dealers 

Retail liquor dealers 

Retail malt liquor dealers 

Other: Manufacturers of nonbeverage products (drawback) 

Bottle manufacturers 

Carriers 

Fruit-flavor concentrate plants 

Dec. 31 

1952 

TOBACCO 

Manufacturers of tobacco including snuff 

Manufacturers of cigars and cigarettes 

Sea stores warehouses 

Export warehouses 

114 

110 

244 

2 

61 

157 

47 

59 

50 

33 

4, 218 

1,743 

7,639 

312 

634 

70 

28 

7 

1, 233 

2,806 

12,659 

287, 600 

165, 257 

1, 159 

78 

459 

12 

259 

1,348 

51 

4 

1953 

256 

1,163 

53 

4 

106 

100 

231 

2 

65 

151 

43 

53 

48 

35 

4,166 

1, 604 

7,608 

296 

593 

69 

22 

7 

1, 249 

7,069 

11, 789 

288, 367 

176,450 

1,124 

83 

469 

15 

1963 1954 

Fiscal year Item 

Seizures: 

Stills (number) 

Nontaxpaid distilled spirits Ovine gallons) 

Nonttapaid wines (wine gallons) 

Mash (wine gallons) 

Automobiles (number) 

Trucks (number) 

Property (appraised value) 

Arrests (number) 

10, 699 

172, 951 

8, 611 

8,151,082 

1, 748 

585 

$3,104, 104,525 

9,370 

11, 266 

186,447 

44, 687 

6, 722,850 

1, 783 

626 

c $3,197, 771 

9,344 

STATISTICAL TABLES 

TABLE 7.-Number of permits under the Federal Alcohol Administration Act, 

fiscal year 1954 

Status Distillers 

(1) 

Warehousers 

and 

bottlers 

(2) 

RectiHers 

(8) 

Wine producers 

and 

blenders 

(4) 

anWine ..,_ 

(6) 

era 

Importera 

(6) 

Wholesalers 

(7) 

Total ' 

,,," 

(8) 

In effect July 1, 1953 

Issued 

Terminated 

Revoked 

Annulled 

Voluntarily surrendered 

Automatically terminated 

In effect June 30, 1954 

Amended 

I §N R' SR O 1 

349 

32 

 62 

5 

40 

17 

319 

169 

1 aR R 4 7--.V 

pti -2?§M 

77 

16 

17 

16 

1 

75 

14 

1, 233 

215 

202 

1 

128 

78 

1,246 

185 

18,574 

1,796 

2,118 

 13 

1,123 

1,041 

13,193 

1,146 

16,405 

2,161 

2,647 

16 

5 

1,418 

1,208 

15,919 

1,708 

TABLE S.-Number of permits under secs. 3070 through 3125, Internal Revenue 

Code of 1939 as amended, fiscal year 1954 

Status 

Industrial alcohol plants, 

bonded warehouses and denaturing e

- plants i 

(1) 

Dealers 

in spedaily denatured 

alcohol 

(2) 

Users of 

specially 

done.- 

tured 

alcohol 

(3) 

Users of 

specially 

denstured 

rum 

(4) 

Users 

of taxfree 

alcohol 

(5) 

Carriers of 

tax-free 

and spadaily 

denatured 

alcohol 

(6) 

Total 

(7) 

In 

Issued 

effect July 1, 1953 

Terminated 

Revoked 

Voluntarily surrendered_ 

Involuntarily surren- dered 

Expire 

In effect Ju

d

ne 30, 1954 

Renewals approved 

Amended 

84 

78 

74 

42 

13 

11 

2 

33 

36 

83 

5 

4, 168 

381 

1 

237 

20 

1 

4,105

23 

4,065 

1 ,320 

V.,' '-"22", 

f

©` - M§ 

pR'4 na i.T.M 

12, 436 

753 

2 

475 

31 

245 

12, 349 

11, 914

2,031 

_ 

in combination. 

Permits cover Industrial alcohol plants, bonded warehouses, and denaturing plants, either singly or 

2 Represents permits terminated due to failure to Me renewal app !cations, or to disapproval of renewal applications. 

TABLE 9.-Enforcement, Alcohol and Tobacco Tax Division: Seizures and arrests, 

fiscal years 1953 and 1954 

I Includes $65,532 representing the appraised value of 19 automobiles, 4 trucks, and 2,047 wine gallons of 

taccpaid liquors seized for violations of the Liquor Enforcement Act of 1936, and the value of 5,091 wine 

gallons of texpaid liquors seized for violations of other internal revenue laws. 

Non.-Includes seizures and arrests in cases adopted, as well as originated by the Alcohol and Tobacco Tax Division. 

81 
82 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 10.-Label activity under Federal Alcohol Administration Act, fiscal year 1954 

Number of applications received 

Number of actions 

Certificates issued 

ApplicaItem • tions Total 

For ap- For ex- Total Approv- Exemp- disapproval emption als tions proved 

(1) (2) (3) (4) (5) 

(6) (7) 

DISTILLED SPIRITS 

Domestic 12,515 42 12,557 11,835 36 228 12, 099 

Imported 1,532 1,532 1,490 91 1, 581 

Total 14,047 42 14,089 13,325 36 319 3,680 

WINES 

Domestic 8,548 331 8,879 8,193 311 110 8,614 

Imported 10,391 10,391 9,912 180 10,092 

Total 18,939 331 19,270 18,105 311 290 18,706 

MALT BEVERAGES 

__ 

~~ 

Domestic 1,517 1, 517 1,391 1,420 

Imported 241 241 201 227 

Total 1,758 1,758 1,592 55 1,647 

Grand total 34,744 373 35,117 33,022 347 664 34,033 

TABLE 11.-Number of tobacco, cigar, and cigarette factories in business, calendar 

year 1953 

Status 

Manufactured 

tobacco lactortes 

Cigar factortes 

Cigarette 

factories 

(1) (2) (3) 

In business, Jan. 1, 1953 259 1,303 

I ~ ~ 

Opened 22 71 

Closed 25 265 

In business, Dec. 31, 1953 256 1,119 

Stamp Taxes 

Table 12 
0 a • a 10 ea CS 

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STATISTI

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CI .00,40 N C• S O. 

COS a • 01 

13 a .0 

1.0 

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CO S 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

Distilled spirits 

Manufacturersof nonbeverage 

products 

et 

V» 

ie. 

2:96"2"77WRB”NEW- RBr ENR"W— rw-- R 

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7S 

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dealers,$50 

(6) 

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gg= — 

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Internal Revenueregionsand dire ctors' districts 

A 

3d 

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61 

ItAaY 

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N 

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84 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

STATISTIC
88 

O 

S. vC); 

R 

I 

Q 

Al 

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tl ro 

av

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0, 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

4

2i 

er. 

..,5 

Nil 

Pia 

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a a aea aaa a a a e a 

garp°° Sn74:-.AZR42 c4 nEing:nSec tgg '4w9c.ea 

Manufacturers,impor- ters,and 

compounders 

of opium, 

etc., $24 

(21) 

n e -.. aeeeeene =el A"N".. ..it-N-i. . 

I 

a 

2 

. 

tai

o 

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sf, 

A 

, 

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STATISTIC

A4'" * ""4 ' A ' ' ""A A

8 . 

601 

601 

m.i.... N. . N . . 

.. ... . 

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327465-55-7 

z 
STATISTIC

REPORT OF COMMESSIONER OF INTERNAL REVENUE 

7.1.1 

. E4i s E 04 

tit.g-ar-cestr4gg,lefgagdr.taa.lua 

ERMOMMERgEMMEUREHEIRHEMEFUMPAR 

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a 

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Coin-operated devices, billiard, 

pool,and bowlingalleypremises 

Nis 

0 4 r 

" - IgAmpA41-a''eanAiraA1MR 

,010 

op24 g 

vg 

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53 

A a 

MEIFZOMM2riklEHiPNEMEMERFEBEEMEM 

..r 4 a 4 

National Firearms Act 

At 

lig 

d... 

S 

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Pi

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c0110 

. . .. . co.,. .. .e . 

12s 

frig 

aut 

0 - 

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importers 

EA » s 

4'

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Internal revenueregionsand directors' districts 

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FOR Re" °°" "1"'g6lEg-E

lia2FECURFAERUMMInicliMM§M

e15,t941:4 a.6.-Nwa.,Aeg-.,;re.i.a4.4-a.--
95 

mid 

29 

'5 

Cases Receiving 

Appellate Consideration 

or in Litigation 

Tables 13-28 

2 

327465-55-8 
Stipulations 

fi 

Item 

Cams 

Deficiency number__ in tax thousand dollars.. 

O 

Penalty

verassessment thousand dollars:_ 

Net deficiency and penalty thousand dollars._ 

thousand dollars__ 

5,387 

64,071 

10, 306 

9,428 

64,962 

94 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 13.-Appellate Division receipt and disposal of income, profits, estate, and 

gift tax cases not before the Tax Court (pre-90-day and statutory notice cases), 

fiscal year 1954. 

Status 

Number 

of 

cases 

(1) 

Amount stated in revenue agent's 

report or in statutory notice ' 

Deficiency 

in tax 

(2) 

Penalty 

(3) 

Overassessment 

(4) 

In thousands of dollars 

Pending at beginning of year: 

Awaiting Appellate Division action 17,990 635,145 87,916 123,488 

Awaiting taxpayer's action on statutory notice 

directed or sustained 1, 975 43, 616 4, 376 3, 376 

Received during year 8, 950 143,012 18, 638 37,240 

Disposed of: 

Closed 12, 515 189.997 20, 575 41,194 

Petitioned to the Tax Court 2, 222 79,439 11,504 3,800 

Total disposed of 14, 737 269,438 32,079 44, 795 

Pending at end of year: 

Awaiting Appellate Division action 12, 251 510, 362 51,513 116, 366 

Awaiting taxpayer's action on statutory notice 

directed or sustained 1, 327 41,975 7, 337 2,923 

Total 13, 578 552, 337 58, 851 119, 289 

I For cases originally received in pre-90-day status, amount of director's finding; for cases originally received in 90-day status, amount of statutory notice; for estate tax cases, net amount after deducting addl. 

Wm) State tax credit allowable if substantiated. 

TAPIR 14.-Resulte obtained in Appellate Division closings of income, profits, 

estate, and gift tax cases not before the Tax Court, fiscal year 1954. 

Disposal 

Number 

of 

eases 

closed 

(1) 

Decision of Appellate Division 

Amount of 

deficiency 

In tax 

(2) 

Amount 

of 

penalty 

(3) 

Amount of 

overassessment 

(4) 

Agreements before statutory notice (Including agreed 

In thousands of dollars 

overassessments and agreed claim rejections) 10, 299 74,493 7,166 34,874 

Agreements on directors' statutory notices during 

90-day period 211 344 103 10 

Agreements on reconsideration after Appellate Division's statutory notices 121 1,160 109 237 

Defaults on Appellate Division's statutory notices (no 

petition filed) 897 10,808 1,864 327 

Defaults on directors' statutory notices sustained by 

Appellate Division (no petition filed) 54 335 5 23 

Unagreed overassessments and claims rejections 933 11 79 1,282 

Total 12,515 87,148 9,327 36,758 

STATISTICAL TABLES 95 

TABLE 15 -Appellate Division receipt and disposal of income, profits, estate, and 

gift tax cases docketed in the Tax Court (pending settlement or trial), fiscal year 1954. 

Status 

Number 

of 

cases 

(1) 

Amount stated in statutory notice I 

Deficiency 

in tax 

(2) 

Penalty 

(3) 

Overassessmeat 

(4) 

Pending at beginning of year 

Received during year: 

Cases considered before petition 

Cases not considered before petition 

Cases reopened after trial 

Total receipts 

10, 920 

In thousands of dollars 

674, 031 115, 707 40,7'28 

1,977 

2, 403 

53 

4, 433 232, 003 32, 605 -640 

Disposed of during year: 

Closed by stipulation-agreed settlement Closed by dismissal or default 

Tried before the Tax Court on merits 

Total disposed of 

Pending at end of mr: 

In hands of technical advisers 

In bands of regional counsel 

Total 

5,367 

300 

1,191 

173,671 

3, 993 

54, 823 

28, 341 

I, 388 

8, 513 

6,853 

75 

838 

6,858 232, 486 38, 241 7,766 

3, 562 

4,933 

356, 600 

216, 947 

62, 919 

47,152 

25,121 

7,202 

8, 495 573, fah 110, 071 32,323 

includes amount of overassessments stated in statutory notice, and, in add tion, overassessments in 

certain associated cases in the amount determined by the district director or the Appellate Division. For 

estate tax cases net amounts are used after deducting additional State tax credits allowable If substantiated. 

TABLE 16.-Results obtained in income, profits, estate, and gift tax cases docketed 

in the Tax Court and disposed of by stipulation (agreed settlement), fiscal year 1954. 
(1) (2) 

Status 

Compromise 

CAMS 

Fiesa °lasing agreement cases 

On hand, July 1, 1953 

Received (net) 

Disposals: 

Accepted, granted, or approved 

Rejected 

Withdrawn 

Transferred 

Total disposed of 

On hand, June 30, 1954 

1,904 

807 

29 

154 

987 

813 

224 

611 

129 

34 

2,085 

626 

158 

25 

96 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 17.-Income, profits, estate, and gift tax cases docketed, stipulated, defaulted, and defended on the merits before the Tax Court, fiscal years 1940 to 1954, 

inclusive. 

Fiscal year 

Number 

docketed 

(1) 

Number 

stipulated 

(2) 

Number 

defaulted 

(3) 

Number 

 on 

the merits 

(4) 

1990 3, 383 

OgragEiRlAgil 

1941 3, OM 

1 992 2, 517 

1943 2,7'54 

1954 1,964 

1945 1, 787 

1946 1,787 

1947 1,913 

1998 2,526 

1949 3, 065 

1950 2,732 

1 951 3, 389 

1952 3, 326 

1953 4,139 

1954 5, 465 

Total 67,078 43,836 4,790 15,936 

Source: For columns 1 and 2, data obtained from Tax Court ecords; for columns 3 and 4, data obtained 

from Appellate Division records. 

TABLE 18.-Appeilate Division receipt and disposal of compromise and final closing 

agreement cases, fiscal year 1954 

STATISTICAL TABLES 97 

TABLE lg.-Appellate DiMsion receipt and disposal of nondocketed, docketed, and 

compromise cases (income, profits, estate, and gift taxes), fiscal years 1945-54 

Type of case and status 

Fiscal year 

1945 

(1 ) 

1946 

(2) 

1947 

(3) 

1948 

(4) 

1949 

(5) 

1950 

(6) 

1951 

(7) 

1952 

(8) 

1953 

(9) 

1954 

(1 0) 

NONDOCKETED CASES 

Receipts 

Dispositions 

Inventory 

DOCKETED CASES 

Receipts 

Dispositions 

Inventory 

COMPROMISE CASES 

Receipts 

Dispositions 

Inventory 

TOTAL CASES 

Receipts 

Dispositions 

Inventory 

6,087 

5,764 

4, 718 

3,181 

2,922 

3,997 

960 

815 

564 

10,228 

9,491 

9, 279 

5,661 

4, 579 

5, 800 

2, 745 

2,816 

3,926 

787 

702 

649 

9,193 

8, 097 

10, 375 

5,325 

5,243 

5,882 

3, 332 

2,986 

4, 272 

1,075 

863 

861 

9, 73213, 

9, 092 

1,015 

7, 515 

5,473 

7,924 

4, 598 

3,879 

4, 991 

1,629 

1,293 

1,197 

74215, 

0,695 

4, 11 

8, 036 

6,108 

9, 85210, 

4, 624 

9,489 

5,131 

2,434 

1,942 

1,689 

09416, 

2, 534 

6, 67 

7,384 

6,896 

34010, 

5, 335 

4,097 

6,369 

3,810 

2,827 

3,172 

529 

3,320 

9,831 

7, 014 

7,147 

20710, 

6,115 

4,941 

7, 543 

3,862 

3,348 

3,686 

16,991 

15, 43615, 

21,436 

7, 398 

7, 528 

077 

6,934 

4,971 

9,006 

3,184 

3,445 

3,425 

17,018 

944 

22, 508 

120,962 

11,679 

19,3435 

7, 677 

5,763 

10,920 

1,742 

3,263 

1,904 

1 30,381 

20,700 

32,189 

8,950 

14, 737 

13, 578 

4,433 

6,858 

8, 495 

807 

2,085 

626 

14,190 

23, 680 

22,699 

1Receipts of nondoeketed cues for the fisea year 1953 include 10 069 cases transferred from internal revenue 

agents' conference sections merged into the Appellate Division during 1953 under Reorganization Plan 

No. 1 of 1952. 

TABLE 20.-Receipt and disposal of cases in the Tax Court, fiscal year 1954 

Type of tax 

Pending July i' 1953 Filed or reopened Disposed of Pending June 30, 

1954 

Number 

(1 ) 

Amount in 

dispute 

(2) 

Nunber 

(3) 

Amount in 

dispute 

(4) 

Number 

(5) 

Amount in 

dispute 

(6) 

Number 

(7) 

Amount in 

dispute 

(8) 

Income and proftts... 

Estate and gift 

Total 

11,328 

889 

(Thousand 

dollars) 

1,519,144 

93,357 

(Thousand 

dollars) 

419,384 

27, 778 

6,179 

42S 

(Thousand 

dollars) 

318,595 

31,260 

9,183 

615 

(Thousand 

dollars) 

1,619,939 

89,873 

12,017 1, 612, 501 4,387 447,160 6,607 349,855 9,798 I,709,812 
Pending July 1, 1953: 

Appealed by taxpayers 

Appealed during year: 

By Commissioner 

Disposed of during year: 

Favorable to Commissioner 

Pending June 80, 1954: 

Appealed by Commissioner 

8 

1 

3 

I 

98 REPORT OF COMMISSIONER OF INTERNAL REVENUE STATISTICAL TABLES 

TABLE 21.-Rn/fulls obtained in cases disposed of in the Tax Cour fiscal year 1954 

Basis of dosing 

Number 

(1) 

Amount in dispute Amount approved Saved or recovered 

Deficiency 

(2) 

Overpayment 

(3) 

Deficiency 

(4) 

Overpayment 

(5) 

Amount 

(6) 

Percent 

of amount 

in dispute 

(7) 

(Thousand dollars) 

Income and profits: 

Dismissed 294 5,318 3,822 5,149 8 8,968 

Decision on merits_ 877 340 ,23 20,836 18, 579 7, 373 32,042 63.4' Agreed settlement 5,008 175,394 79, 208 68,010 9,636 187, 582 64.0 

Total 6,179 214,730 103,865 91, 739 17,017 178, 587 56.1 

Estate and gilt: 

Dismissed 6 68 68 68 100.0 

Decision on merits_ 63 3,365 121 977 sa 1,016 29.1 

Agreed settlement__ 359 26,617 1,089 6,369 207 6, 576 23.7 

Total 428 30,049 1,210 7,414 245 7,659 246 

TABLE 22.-Tax Court cases on review in Courts of Appeals or Supreme Court, 

fiscal year 1954 

Type of tax 

Pending July 1, 

1953 

Appealed during ' 

year - 

Disposed of 

during year 

Pending June 30, 

1964 

N,„

- ber -7 

(1) 

Amount 

(2) 

Numbar 

(3) 

Amount 

(4) 

Numbar 

(5) 

Amount 

(6) 

S 

Amount 

(8) 

Income and profits _ 

Estate and gift 

TotaL 

399 

20 

(Thousand 

dollars) 

30,639 

9,515 

318 

15 

(Thousand 

dollars) 

12,581 

59 

323 

16 

(Thousand 

dollars) 

19,756 

8,544 

389 

19 

(Thousand 

dollars) 

23,464 

1,030 

419 40,154 328 12,641 339 28,300 408 24,494 

TABLE 23.-Receipt and dispoeition bf Tax Court cases reviewed in Courts of Appeal's 

or in Supreme Court, faecal year 1964 

Number of 

eases 

Pending July 1, 1953: 

Ap ealed by 

pealed by taxp 

both ayers 

Appealed by Commissioner 

IN COURTS OF APPEALS 

314 

85 

17 

Total 

Appealed during year: 

By Commissioner 

By taxpayers 

By both 

Total 

Disposed of during year: 

Favorable to Commissioner 

Favorable to taxpayers 

Modified 

Settled 

Dismissed 

Total 

Pending June 30, 1954: 

Appealed by Commissioner 

Appealed by taxpayers 

Appealed by both 

Total 

IN SUPREME COURT 

TABLE a-Receipt and disposal of suits filed by taxpayers in Federa courts, fiscal 

year 1964 

Courts 

Pending July 1, 

1953 1 

Rem ved during year 

Closed during 

yearn 

Amount

re 

funded 

(7) 

putt 

Pere e,,,,,,,, 

....6 -sforded 

(8) 

PendingJuly 1, 

1954 5 

Number 

(I) 

ill dispate 

(2) 

e I 

Amount Amount 

in clls- 

(4) 

N 

il'"ea 

(5) 

Amount 

In dispure 

(6) 

lc . 

be, 

' 

(9) 

Amount u

In ribpate 

(10) 

Court of Claims_ 

District courts 

Total... _ .. 

2,533 

(Thousand 

ollars) 

d7070, 489489 

76,101 

167 

822 

(Thousand 

dollars) 

478,630 

67,264 

95 

779 

(Thousand 

dollars) 

80, 647 

28,311 

(Thousand 

dollars) 

1,317 

8,207 

4.3 

28.9 

477 

2,576 

(Thousand 

dollars) 

11R, 471 

115,054 

2,988 146,590 989 145,894 874 58,958 9,526 16.2 3,053 233,526 

nc u es 8 processing tax cases; 1 pending in Com of Claims, $6,207 Marts, $266,003 in d spate. in dispute; 7 pending in district 

2 Includes I processing tax case in Court of Claims $46,207 in dispute, $40,689 refund. 

Includes 7 processing tax cases pending In district courts, $266,003 in dispute. 

Nont: Suits filed by taxpayers are primarily suite or refund of taxes or to enjoin the collection of taxes (other than those relating to alcohol, tobacco, and firearms taxes). 

Status 

407 

58 

324 

25 

168 

105 

20 

4 

64 

888 

827 

ea 

246 

19 

416 
100 REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 25.-Receipt and disposal of claims pending and suits filed by the United States 

in Federal au d State Courts, fiscal year 1954 

Status 

In suit 

(1) 

Not in 

suit 

(2) 

Total 

(3) 

Amount 

in dispate 

(4) 

Amount 

recovered 

(5) 

Percent 

recovered 

(6) 

Pending July 1, 1953 

Received during year in suit and for 

institution of suit 

Total 

Suits instituted during year 

Total to be accounted for 

Closed during year 

Pending July 1, 1954 

Number In thousands of 

dollars 

439 

121 

489 

291 

928 

412 

45,070 

257 

560 

189 

780 

189 

1,340 45,327 

749 

177 

591 

132 

1,340 

309 1, 761 

95,327 

259 19.7 

572 959 1, 031 43,566 

Nom-Claims and suits by the United States are primarily uits to collect taxes or to recover erroneous 

refunds (other than those relating to alcohol tobacco and firearms taxes). 

TABLE 26.-Receipt and disposal of lien cases, fiscal year 1954 

Status 

Cases in court 1 Cases not in court 2 

Number 

(1) 

Amount 

collected 

(2) 

Number 

(3) 

Amount 

collected 

(4) 

(T

doll

housand 

ars) 

(Thousand 

dollars) 

Pending July 1, 1953 1, 312 284 

Instituted or received during year 1,376 897 

Total to be disposed of 2,688 1,131 

Disposed of during year: 

Closed 1,071 829 1, 033 3,039 Transferred to Regional Counse l 10 

Total disposed of during year 1,071 829 1, 093 3, 034 

Pending June 30, 1954 1, 617 88 

1 Primarily suits for foreclosure or to quiet title by mortgagees and other secured creditors, to which the 

United States is made a party. 

3 Primarily applications for discharge of property from tax liens. 

STATISTICAL TABLES 101 

TABLE 27.-Receipt and disposal of insolvency and debtor proceedings, fiscal 

year 1954 

Status 

Reorganizetion proceedtags 1 

(1) 

Bankrur and recei er291119(weed" ings 2 

(2) 

Miscellaneous 

insolvency 

 proceedings 3 

(3) 

Total 

(4) 

r. _____ - 

Cases pending July 1, 1953 

New cases received 

Cases received by transfer 4 

Total 

 1,301 

1,094 

18 

7,029 

5, 494 

312 

9, 769 

2, 406 

2 

13,099 

8, 995 

331 

cases received 

Cases disposed of during year 

Closed 

Transferred 

Decentralized 

Transferred to Regional Counsel 

Total disposed of 

Cases pending June 30, 1954 

1,112 5, 806 2, 408 9,326 

1, 010 

296 

495 

191 

4622 

19 

6,900 

12 

2, 493 

17 

3,907 

7 

9,026 

331 

11,302 

210 

1, 992 12,453 5 424 20, 869 

421 382 753 1, 556 

under the following sections or chapters of the Bankruptcy Act: sees. 75 (agricultural compositions and extensions) and 77 (railroad reorganizat oils) and chs. X (corporate reorganizations), XI (arrangements of unsecured indebtedness), XII (real property arrangements), and XIII (wage 

earners' plans) which involve tax claims and other rights and interests of the United States. 

the United States. 

2 Strict bankruptcy proceedings and Federal or State receivership proceedings which involve tax claims of 

1 Proceedings relating to corporate dissolutions, insolvent banks, assignments for the benefit of creditors or administration of estates of decedents which involve tax claims of the United States. 4 Proceedings transferred from reorganization to bankruptcy and receivership( 205), to miscellaneous insolvency proceedings (1), from bankruptcy and receivership to reorganization (1 organ)zation

8), from bankruptcy and receivership to miscellaneous insolvency (1), and from miscellaneous insolvency to bank- ruptcy and receivership (17). 

TABLE 28.-Results obtained in insolvency and debtor proceedings closed, fiscal 

year 1964 

Type of proceeding and character of closing 

Number 

of cases 

(1) 

Amount 

claimed 

(2) 

Amount 

collected 

(3) 

Percent 

collected 

(4) 

Reorganization proceedings: I 

Payment 

Uncollectible 

Abatement 

No amount due 

Other 

Total 

Bankruptcy and receivership proceedings 2 

laseellaneous insolvency proceedings: I Payment 

Compromise 

Uncollectible 

Abatement 

Barred by limitations 

Other 

Total 

655 

66 

2 

98 

In thousands of dollars 

68.5 

182 

7,094 

270 

139 

333 

4.932 

1, 010 7, 836 4, 932 62.9 

5, 522 17,929 3, 928 21.9 

1, 875 

149 

365 

95 

se 

24,980 

4,657 

2,043 

344 

738 

20,732 

1,621 

83.0 

34.8 

2, 993 32, 760 22,359 68.2 

Grand total 

• 5._ . . - 

9,025 58, 520 31, 214 53.3 

aarlmm r, table's. 

See footnote 2, table 27. 

3 See footnote 3, table 27. 
Cost of 

Administration 

Tables 29-30 
O 

REPORT OF COMMISSIONER OF INTERNAL REVENUE 

TABLE 29.-Obligations incurred by the Internal Revenue Service, fiscal year 

ended June 30, 1954 

104 

TABLE 30.-Cost of p ing and binding for Internal Revenue Service, fiscal year 1953 and 1954 

Internal Revenue office, district, 

or region 

Salaries 

( 1) 

Travel 

(2) 

A. NATIONAL OFFICE AND REGIONAL 

TOTALS (INCLUDING DIRECTORS' 

OFFICES) 

Total, Internal Revenue Service. 241,103 5,754 

National office 18,858 176 

Boston region 15,481 332 

New York City region 32, 297 282 

Philadelphia region 31,920 530 

Cincinnati region 26, 550 731 

Atlanta region 20,474 842 

Chicago region 28,242 507 

Omaha region 22, 266 839 

Dallas region 17, 342 719 

San Francisco region 27, h74 796 

B. REGIONAL OFFICES (EXCLUDING DIRECTORS' OFFICES) 

Boston region 1,975 58 

New York City region 5, 142 109 

Philadelphia region 5,564 179 

Cincinnati region 5, 551 206 

Atlanta region 3,699 219 

Chicago region 3,779 102 

Omaha region 2, 869 184 

Dallas region 2,765 144 

San Francisco region 4, 334 242 

C. DISTRICT DIRECTORS' OFFICES 

Boston region: 

Augusta 1,078 53 

Boston 6,710 98 

Burlington 484 25 

Hartford 3,263 58 

Portsmouth 740 25 

Providence 1, 231 14 

New York City region: 

Albany 2, 554 49 

Brooklyn 6,214 20 

Buffalo 3,011 37 

Lower Manhattan 5,877 20 

Syracuse 1, 757 37 

Upper Manhattan 7, 723 10 

Philadelphia region: 

Baltimore 5, 733 68 

Camden 1, 719 39 

Newark 5, 251 43 

Philadelphia 7,018 97 

Pittsburgh 4, 234 58 

Scranton 1, 727 40 

Wilmington 674 16 

Cincinnati region: 

Cincinnati 2, 322 29 

Cleveland 4,757 71 

Columbus 1, 380 34 

Toledo 1,390 30 

Indianapolis 4,019 91 

Louisville 2,448 83 

Parkersburg 1, 625 64 

Richmond 3,056 123 

Atlanta region: 

Atlanta 2,836 114 

Birmingham 2,241 76 

Columbia 1,308 50 

Greensboro 2,919 125 

Jackson 1,290 72 

Jacksonville 3,483 108 

Nashville 2,697 78 

Others 

(6) 

10,511 

8, 084 

103 

475 

273 

289 

311 

227 

216 

220 

313 

31 

64 

128 

153 

152 

so 

103 

87 

125 

8 

30 

5 

17 

5 

7 

15 

26 

14 

18 

10 

328 

30 

13 

25 

47 

19 

8 

3 

10 

35 

8 

8 

23 

14 

15 

23 

19 

21 

16 

36 

19 

32 

16 

Total 

(7) 

268,969 

31, 513 

16, 252 

34,400 

33, 496 

28, 455 

22,150 

30, 095 

24,134 

18, 795 

29,680 

2,139 

5, 457 

6,207 

6,344 

4,279 

4,146 

3,507 

3,100 

4,925 

1,164 

6,945 

525 

3,389 

811 

1,280 

2,667 

6, 463 

3, 314 

6,030 

1,845 

8,624 

5,901 

1,793 

5, 527 

7, 238 

4,340 

1,791 

699 

2,388 

5,059 

1,443 

1,447 

4, 188 

2, 594 

1,723 

3,268 

3,041 

2,387 

1, 399 

3, 122 

1, 410 

3, 685 

2,826 

Rent 

and 

utility 

services 

(3) 

Communications 

services 

Supplies 

and 

equipment 

(5) 

2,686 

In thousands of dollars 

170 

41 

713 

178 

349 

64 

569 

320 

96 

186 

(4) 

5,364 

3, 586 

145 

269 

203 

206 

149 

253 

157 

137 

259 

3,550 

639 

149 

363 

392 

331 

310 

297 

336 

281 

452 

STATISTICAL TABLES 105 

TABLE 29. Obligations incurred by the Internal Revenue Service, fiscal year 

ended June 30, 1954-Continued 

Internal Revenue office, district, 

or region 

salaries 

 (1) 

Travel 

 (2) 

Rent 

and 

utility 

services 

(3) 

meat 

CommimicsGone 

services 

(4) 

Supplies 

and 

equip- 

(5) 

Other I 

(6) 

Total 

(7) 

In thousands of dollars 

C. DISTRICT DIRECTORS' OFFICES-COIL 

Chicago region: 

Chicago 

Springfield 

Detroit 

Milwaukee 

Omaha region: 

Aberdeen 

Cheyenne 

Denver 

Des Moines 

Fargo 

Kansas City 

St. Louis 

Omaha 

St. Paul 

Wichita 

Dallas region: 

Albuquerque 

Austin 

Dallas 

Little Rock 

New Orleans 

Oklahoma City 

San Francisco region: 

Boise 

Helena 

Honolulu 

Los Angeles 

San Francisco 

Phoenix 

Portland 

Reno 

Salt Lake City 

Seattle 

9,826 

3,282 

7, 325 

4,029 

707 

404 

I, 941 

2, 746 

650 

2,012 

949 

1 2,, 810 

3,722 

2, 455 

666 

3, 950 

4, 044 

1,308 

2, 439 

2,171 

731 

755 

1,054 

7, 916 

6,005 

812 

1, 767 

 500 

871 

2,928 

55 

109 

128 

114 

44 

44 

85 

39 

56 

71 

110 

123 

33 

167 

164 

73 

75 

63 

31 

43 

27 

116 

112 

27 

56 

29 1 

1 

100 

20 

23 

61 

255 

159 

95 

1 

3 

1 

16 

34 

(0 

(0 

3 

53 

0 

54 

6 

2 

28 

1 

(5) 

1 

1 

99 

1 

1 

2 

3 

() 

2 

103 

23 

47 

29 

4 

4 

19 

14 

5 

12 

10 

9 

28 

19 

5 

30 

35 

11 

14 

16 

8 

7 

11 

75 

49 

8 

16 

3 

5 

31 

85 

40 

46 

33 

8 

17 

19 

32 

6 

17 

22 

26 

21 

63 

17 

47 

46 

25 

49 

24 

25 

17 

17 

134 

50 

13 

35 

17 

19 

27 

64 

24 

59 

21 

5 

5 

12 

12 

6 

8 

10 

18 

18 

8 

48 

28 

9 

19 

21 

4 

5 

16 

52 

46 

5 

18 

8 

4 

29 

'AM 

FaUsg0 0 FN

KI A RIR4 R il§

P. Sc.inr er as 

ac6-r e: 4.; .-r aa --cee 

.

In

cludes obligations or printing and reproduction, de all of which is shown in Table 30. Less than $500. 

24 

49 

36 

36 

38 

50 

33 

27 

46 

11 

61 

7 

26 

6 

12 

14 

41 

19 

42 

13 

90 

49 

9 

44 

40 

14 

8 

3 

14 

42 

10 

11 

31 

19 

11 

33 

17 

17 

7 

19 

10 

23 

19 

40 

88 

268 

226 

146 

94 

107 

73 

99 

11 

47 

5 

24 

8 

13 

35 

57 

46 

51 

15 

70 

20 

12 

61 

12 

12 

5 

3 

6 

12 

6 

7 

23 

28 

9 

15 

45 

28 

10 

22 

14 

29 

17 

9 

5 

31 

172 

26 

60 

209 

4 

79 

1 

(1) 

1 

27 

2 

(0 84 

186 

22 

12 

403 

10 

103 

25 

3 

4 

1 

8 

141 

4 

2 

3 

20 

9 

4 

7 

1 

5 

11 

Class of work 1953 1954 

Quantity 

(1) 

Cost 

(2) 

Quantity 

(3) 

Cost 

(4) 

Fiscal year 

Tax return forms 

Instructions, for tax returns 

Administrative forms 

Reports, regulations, etc 

Letterheads, miscellaneous binding, etc 

Reproductions 

Total 

(Thousands) 

871, 349 

29,863 

258,537 

1,065 

14, 392 

32,820 

1,208, 026 

(Thousand 

dollars) 

2, 801 

143 

939 

184 

61 

130 

4,258 

(Thousand 

dollars) 

2,462 

151 

766 

252 

119 

48 

1,101, 608 3, 798 

(Thousands) 

776,835 

25, 337 

243, 381 

779 

42,024 

13,253