,
 COMMISSIONER OF
 

INTERNAL REVENUE
 

dfnnuarJ(e;ort
 

for the Fiscal Ye,tr ended June 30, 1955 

UNITED STATES GOVERNMENT PRINTING OFFICE 

WASHINGTON 1955 

PUBLICATION NO. 5S 
Hon. GEORGE M. HUMPHREY, 

Secretary of the Treasury. 

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

Washington 25, D. C. - Plea 50 cents 

Letter of Transmittal 

TREASURY DEPARTMENT, 

OFFICE OF COMMISSIONER OF INTERNAL REVENUE, 

Washington, D. C., October 31, 1955, 

DEAR MR. SECRETARY: 

Submitted herewith is the "Annual Report of the Commissioner of 

Internal Revenue for the fiscal year 1955." 

It covers a year in which the fruits of recent years' improvements in 

policies and procedures have begun to appear. A long campaign to 

economize on other operations and "plow back" the savings into enforcement paid off with increases in the numbers of revenue agents and in the 

amounts of additional tax obtained by audit. Similarly, there were 

evidences that a reversal was in sight to the several-years trend of rising 

totals of delinquent accounts. 

Investigations and prosecutions of fraud cases also were stepped up. 

Further reductions were made in the backlogs of appellate cases. 

The complete revision of the tax laws, embodied in the Internal Revenue 

Code of 1954, posed enormous challenges of revising procedures, forms, 

regulations, etc. In general, the transition to the new law was smooth 

and effective. 

A long overdue readjustment of posts of duty was accomplished, but no 

major organizational changes were made. Rather, efforts were pointed 

toward making more effective use of the organization as it had evolved 

through the many modifications of recent years. 

"...TratO 

Commissioner of Internal Revenue. 

III 
Contents 

Contents 

REPORT ON OPERATIONS 

Page 

Internal revenue collections 5 

General 5 

Individual income taxes 6 

Corporation income taxes 6 

Employment taxes 6 

Other internal revenue 6 

Receipt and recording of returns 7 

General 7 

Mechanization 9 

Mathematical verification 10 

Information reports 10 

Supervision and control of the alcohol and tobacco industries 11 

General 11 

Authorization of operations 11 

On-premises supervision 12 

Inspection of establishments 12 

Chemical analyses and research 13 

Enforcement work 14 

Audit of returns 14 

Fraud investigations 15 

Alcohol and tobacco tax program 17 

Firearms program 19 

Rewards to informers 19 

Cases involving criminal prosecution 20 

"Net worth" decisions by the Supreme Court 21 

Collection of delinquent accounts 22 

Delinquent returns 23 

Appeals and civil litigation 25 

General 25 

Income, profits, estates, and gift taxes 27 

Excise and employment taxes 27 

Claims for relief from excess profits tax 28 

Closing agreement cases 28 

Other courts 28 

Statements on adverse Tax Court decisions 

iv 

30 

Page 

Changes in tax liability 31 

Additional taxes 31 

Overassessments and overpayments 33 

Refunds and repayments 33 

Excessive prepayment of individual income tax 34 

Carrybacks and carryovers 35 

Claims for refund 36 

Review of overassessments exceeding $100,000 36 

Offers in compromise 37 

Rulings, regulations, and special technical services 39 

Regulations program 39 

General 39 

Alcohol and tobacco tax 40 

Tax return forms program 41 

Tax rulings 41 

Publication program 42 

Legal services 43 

International tax conventions 44 

Legislation relating to internal revenue matters 45 

Legislative services performed 45 

Important legislation enacted during fiscal 1955 45 

Internal controls 47 

Internal audit 47 

Internal security 48 

Administrative functions 51 

Personnel 51 

Training 52 

Advanced Training Center 52 

Executive development program 52 

Other training activities 53 

Operating facilities 53 

Space 53 

Equipment 53 

Records, correspondence, etc 56 

Cost of administration 56 

General .56 

Enrollment of practitioners 56 

General management improvements and policy changes 57 
VI Commissioner of Internal Revenue Annual Report 

STATISTICAL TABLES 

Internal Revenue Collections 

Table 

I. Internal revenue collections by sources and by internal revenue 

regions, districts, States, and Territories, fiscal year 1955 . . . 

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

year 1955 

3. Internal revenue collections by sources, fiscal years 1954 and 

1955 

4. Internal revenue collections by principal sources, fiscal years 

1940 through 1955 

5. Internal revenue tax on manufactured products from Puerto 

Rico by objects of taxation, fiscal years 1954 and 1955 

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, 1954 and 1955, or to engage in the production or 

distribution of tobacco products as of December 31, 1953 and 

1954 

7. Permits for operations relating to alcoholic beverages, under 

the Federal Alcohol Administration Act, fiscal year 1955 

8. Permits relating to industrial alcohol, under Chapter 51, Internal Revenue Code, fiscal year 1955 

9. Label activity under the Federal Alcohol Administration Act, 

fiscal year 1955 

Stamp Taxes 

10. Occupations subject to special taxes. Number of each class of 

special-taxpayers purchasing special-tax stamps covering the 

fiscal year 1955, or portion thereof, under the various annual 

rates, by internal revenue districts and States 

Cases Receiving Appellate Consideration or in Litigation 

11. 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 1955 

12. Results obtained in Appellate Division disposals of income, 

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

fiscal year 1955 

13. Appellate Division receipt and disposal of income, profits, 

estate, and gift tax cases docketed in the Tax Court (pending 

settlement or trial), fiscal year 1955 

Contents 

Table 

14. Results obtained in income, profits, estate, and gift tax cases 

docketed in the Tax Court and disposed of by stipulation 

(agreed settlement), fiscal year 1955 

15. Income, profits, estate, and gift tax cases docketed, stipulated, 

defaulted, and defended on the merits before the Tax Court, 

fiscal years 1940 to 1955 

16. Appellate Division receipt and disposal of compromise and final 

closing agreement cases, fiscal year 1955 

17. Appellate Division receipt and disposal of nondocketed, docketed, and compromise cases (income, profits, estate, and gift 

taxes), fiscal years 1940 to 1955 

18. Receipt and disposal of income, profits, estate, and gift tax 

cases in the Tax Court, fiscal year 1955 

19. Results obtained in income, profits, estate, and gift tax cases 

disposed of in Tax Court, fiscal year 1955 

20. Receipt and disposal of Tax Court cases in Courts of Appeals 

or in Supreme Court, fiscal year 1955 

21. Receipt and disposal of suits filed by taxpayers in Federal courts, 

fiscal year 1955 

22. Receipt and disposal of claims pending and suits filed by the 

United States in Federal and State courts, fiscal year 1955 

23. Receipt and disposal by the office of the Chief Counsel of lien 

cases, and insolvency and debtor proceedings, fiscal year 

1955 

Cost of Administration 

24. Obligations incurred by the Internal Revenue Service, fiscal 

year 1955 

25. Cost of printing and binding for Internal Revenue Service, fiscal 

years 1954 and 1955 

Page 

66 

86 

89 

92 

94 

96 

96 

97 

97 

100 

111 

112 

112 

112 

113 

113 

114 

114 

115 

118 

119 
Commissioner of Internal Revenue Annual Report 

COMMISSIONERS OF INTERNAL REVENUE FROM JULY 1862 TO 

DECEMBER 1955 

Name I State 

Service 

From- ToGeorge S. Boutwell Massachusetts July 17.1862 Mar. 4,1863 

Joseph 1. Lewis Pennsylvania Mar. 18, 1863 lune 30,1865 

William Orton New York July I, 1865 Oct. 31,1865 

Edward A. Rollins New Hampshire Nov. 1,1865 Mar. 10, 1869 

Columbus Delano Ohio Mar. 11,1869 Jan. 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 31,1876 

Green B. Roam Illinois Aug. 2, 1876 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. 18,1893 

Joseph S. Miller do Apr. 19, 1893 Nov. 26,1896 

W. St. John Forman Illinois Nov. 27, 18% Dec. 31, 1897 

Nathan B. Scott West Virginia 

J an. 

1 , 1898 Feb. 28,1899 

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

John W. Yerkes Kentucky Dec. 20,1900 Apr. 30, 1907 

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

Royal E. CabeIl Virginia Sept. I, 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 M. Williams Alabama Apr. 1,1920 Apr. 11,1921 

David H. Blair _________________________________ North Carolina May 27,1921 May 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 Nonagon. Missouri Oct. 9,1943 Jan. 22,1944 

Joseph D. Nunan, Jr__._________ New York Mar. I, 1944 June 30,1947 

George J. Schoeneman Rhode Island July 1,1947 July 31, 1951 John B. Dunlap Texas Aug. I, 1951 Nov. 18, 1952 

T. Coleman Andrews Virginia Feb. 4, 1953 Oct. 31, 1955 

Note.-Office of Commissioner of Internal Rowan a created by act of Congress, July 1, 1862. 

In addition, the following were Acting Commissioners during periods of time when there was no Commissioner holding 

the office: John W. Douglass, of Pennsylvania, from Nov. 1, 1870 to Jan. 2, 1871; Henry C. Rogers, of Pennsylvania, from 

May I to May 10, 1883; John 1. Knox, of Minnesota, rom May II to May 20, 1883; Robert Williams, Jr., of Ohio, from Nov. 

28 to Dec. 19, 1900; Millard F. West, of Kentucky, from Apr. 12 to May 26, 1921; H. F. Mires, of Washington, from Aug. 

15 to Aug. 20, 1930; Pressly R. Baldridge, of Iowa, rom May 15 to lune 5, 1933; Harold N. Graves, of Illinois, from Jan. 

23 to Feb. 29, 1944; John S. Graham, of North Caroh a, from Nov. 19, 1952 to Jan. 19, 1953; Justin F. Winkle, of New York, 

from Jan. 20 to Feb. 3, 1953; and 0. Gordon Delk, o Virginia, from Nov. 1 to Dec. 5, 1955. 

kReport 

on 

Operations 
hi 

hi 

W g 

CV 

z 

z 

 z 

Note.—In tables and charts where figures have been 

rounded to a specified unit, the components may not 

necessarily add to totals. Percentages are calculated on =rounded figures. 

3 
Internal Revenue Collections 

fiscal years 1954 and 1955 

CORPORATION 

INCOME AND 

PROFITS TAXES 

INDIVIDUAL 

INCOME TAXES 

EMPLOYMENT TAXES 

ALL OTHER (estate, 

gift, and excise) 

Internal Revenue Collections 

General 

Internal revenue collections during the 1955 fiscal year totaled 

$66,288,692,000. This compared with $69,919,991,000 collected during 

the preceding year. 

The decline, amounting to 5.2 percent, reflected primarily lower tax 

rates upon individual incomes and for many excises, and the lapsing of the 

excess profits tax. On the other hand, an advance in rates brought about 

an increase in old-age insurance taxes. 

A comparison of collections by major categories follows: 

Internal revenue collections, fiscal years 1954 and 1955 

[In thousands of dollars. For detail, see appendix table 3, pp. 89-91.1 

Source 

Fisca year 

1954 1955 

Income and profits taxes: 

Corporation 

Individual: 

Withheld by employers 

Other I 

21, 546, 322 18, 264. 720 

• 22, 077. 113 

10.736. 578 

21, 253, 625 

10, 396, 480 

Total individual income taxes • 32, 813.691 31, 650.106 

Total income and profits taxes • 54, 360, 014 49.914, 826 

Employment taxes: 

Old-age insurance • 4, 218, 520 5.339, 573 

Unemployment insurance 283,882 279,986 

Carriers taxes-old-age benefits 605,221 600,106 

Total employment taxes • 5, 107. 623 6, 219, 665 

Estate and gift taxes 935,121 936. 267 

Alcohol taxes 2, 783, 012 2 2. 742, 840 

Tobacco taxes I, 580, 229 2 1, 571, 213 

Other excise taxes 5, 153, 992 4, 903. 881 

Grand total 69, 919. 991 66, 288, 692 

• Estimated. Collections of individual income tax withheld are not reported separately from old-age insurance taxes 

on wages and salaries. Similarly, collections of individual income tax not withheld are not reported separately from 

old-age insurance tax on self-employment income. The amount of old-age insurance tax collections shown is based on 

estimates made by the Secretary of the Treasury pursuant to the provisions of sec. 109 (a) (2) of the Social Security Act 

Amendments of 1950 and includes both classes of old-age insurance taxes mentioned above. The estimates shown for 

the two classes of individual income taxes were derived by subtracting the old-age insurance tax estimates from the 

combined totals reported. 

7 Included in the 1955 collection results are amounts of taxes collected in Puerto Rico upon tobacco and liquor manufactures coming into the United States; results for earlier periods are exclusive of such amounts. 

• Revised. 

Note.-Under revised accounting procedures effective July I, 1954, tax payments made to banks, under the depositary 

receipt system, are included in internal revenue collections for the month in which the depositary receipts are issued 

instead of the month in which tax returns supported by the depositary receipts are received in internal revenue offices. 

The revised procedure conforms to the practice followed in other Treasury Department reports dealing with Internal 

Revenue receipts. The classes of taxes affected by this change and its effect upon comparability of the data for 1954 

and 1955 are shown in table 3, pp. 89-91. 

5 
6 Commissioner of Internal Revenue Annual Report 

Individual Income Taxes 

Collections of individual income taxes, totaling $31,650,106,000, were 

3.5 percent less than in the prior year. Although there was some increase 

in personal income, this was more than offset by the reduction of rates, by 

approximately 10 percent, effective beginning January 1, 1954. The 

enactment of the 1954 Internal Revenue Code made numerous technical 

changes but did not affect rates. Individual income taxes collected through 

withholding fell off by 3.7 percent and other collections (payments of 

estimated tax, payments with returns, payments on bills, etc.) came down 

3.2 percent. 

Corporation Income Taxes 

Corporation income taxes yielded $18,264,720,000 during the year, a 

decline of 15.2 percent resulting from the decrease in corporate profits 

during 1954 and from the lapse of the excess profits tax. 

The excess profits tax was enacted during the Korean conflict, and 

expired on December 31, 1953, but the normal lag in collection of corporation taxes under the 1939 Internal Revenue Code was such that the 

major impact of the lapse showed up in 1955 collections rather than in 1954 

collections. 

The new Code provides for some advance in the time for paying corporation taxes through payments of estimated tax. Therefore, the interval 

between income and tax payment will be reduced in the future. 

Employment Taxes 

The only major category of taxes to show a significant increase during 

the year was the tax under the Federal Insurance Contributions Act for 

old-age and survivors insurance (Social Security). This tax brought in 

$5,339,573,000, an increase of 26.6 percent. This was due in part to rising 

payrolls, but largely because of an increase in rates from 1.5 percent each 

on employees and employers to 2 percent each, effective January 1, 1954. 

The rate change affected collections only for the last few months of fiscal 

1954 but for all of 1955. 

Collections ofthe tax for unemployment insurance, totaling $279,986,000, 

and for railroad retirement, totaling $600,106,000, were off slightly. 

Other Internal Revenue 

Excise tax collections (other than on alcohol and tobacco), amounting 

to $4,903,881,000, declined 4.9 percent, reflecting rate changes effective 

April 1, 1954. 

No significant changes occurred in collections of alcohol taxes, totaling 

$2,742,840,000; tobacco taxes, totaling $1,571,213,000; or estate and gift 

taxes, totaling $936,267,000. 

Receipt and Recording of Returns 

General 

There were several changes in requirements for filing returns this year. 

Perhaps the most significant was the new individual income tax filing 

date of April 15, instead of the historic date of March 15 which was retained for corporation and all income tax returns other than individual 

returns. Another was the use of a tabulating machine card for the Form 

1040A, Individual Income Tax Return. 

The net effect of these and other changes on the receiving and recording 

of returns cannot, however, be fully mirrored in a single fiscal year report. 

Total receipts of tax returns were virtually the same as last fiscal year. 

There was a decline from 88,900,000 to 88,700,000, less than 1 percent. 

Among the principal types of tax returns, changes in the number filed 

from last year were few and small. Declarations of estimated tax continued 

to move upward. Employment tax returns, also steadily gaining over a 

number of years, rose 2.5 percent to 17,500,000, reflecting increases in 

both the number of employers and the coverage of the old-age insurance 

program. 

The table below compares the number of returns filed in the two fiscal 

years, by principal type of return: 

Number of returns filed, by principal type of return, fiscal years 1954 and 1955 

[Figures in thousands) 

Type of return 

Fisca year 

1954 1955 

Income taxes: 

Individual—citizens and resident aliens 

All other individual and fiduciary 

Total individual and fiduciary 

58, 493 

597 

57, 610 

678 

59,090 58,289 

Declarations of estimated tax 6, 162 6, 303 

Partnerships 983 1,036 

Withholding agents 9 10 

Corporation 745 836 

Other s 138 221 

Total income tax returns 67, 127 66,695 

Employment taxes: 

Withheld income tax and old-age Insurance 16, 472 16, 864 

Railroad retirement and unemployment insurance 620 649 

Total employment tax returns 17,092 17,513 

Estate tax 39 40 

Gift tax 48 58 

Excise taxes 3, 197 2, 788 

Special taxes 1,303 1,441 

All other 46 112 

Grand total 88,852 88, 650 

Includes personal holding company income tax returns previously r eported separately. 

r Includes exempt organization income tax returns previously reported separately. 

Includes all types of returns formerly reported as miscellaneous. 

Revised to exclude offers in compromise. 

7 
Number of Returns Filed 

fiscal years 1954 and 1955 

INDIVIDUAL AND 

FIDUCIARY 

DECLARATIONS OF 

ESTIMATED TAX 

(individuals) 

PARTNERSHIPS 

CORPORATIONS 

EMPLOYMENT 

EXCISE AND ALL 

OTHER TAXES 

Report on Operations 9 

From the standpoint of economical and expeditious processing, the most 

serious problem in this area is the concentration of individual income tax 

returns which are filed immediately ahead of the final filing date. Since 

all of the other types of returns are in much smaller quantities, the result 

is an extremely uneven workload in the different months of the year. 

The change from March 15 to April 15 in the deadline for individual 

income tax returns has spread out the peak workload to a slight extent 

but the general problem remains. A number of other steps have been 

taken to smooth out and to plan more carefully this work. 

A chart showing the monthly receipts of returns in the last 2 years follows: 

36 

34 

 32 

30 

28 

26 

24 

22 

20 

18— 

16

4 

2 

0 

Millions 

MONTHLY RECEIPTS OF TAX RETURNS 

1 on 

30 

3, 

30 

2d 

26 

20 

16 

14 

I2 

8 

6 

2 

0 

— 3N 

_22 

—16 

—10 

Fiscal Year 1954 

I 

Fiscal Year 1955 

— — 

— 

i 

/ 

— 

— I 

/ 

4 

— 

TOTAL 

\ 

/ 

INCOME 

TAX 

"... 

EMPLOYMENT 

AND EXCISE 

— 

—V 

0 

/ ‘iliiiite /1 

/ 

e--""‘ ,‘ $1 „.... - 

I I I I I I I I I I I I I I I I I I I I 

A 3 0 N 0 J F 11 A M J J A 3 0 0 CI 3 F 14 A 1.1 

Mechanization 

A new experiment in mechanization of the processing activity was the 

establishment at the processing branch in Kansas City, Mo., of a tabulating 

machine setup to mechanically process all the Form 1040A returns received 

throughout the 10 districts of the Omaha region. This was the first time 

that any major processing operation had been attempted on a regionwide 

basis. The successful results of this method of processing have prompted 

its extension to additional locations in the United States, as well as expansion'of the types of returns covered. 

366952 0-56 2 
10 Commissioner of Internal Revenue Annual Report 

Mathematical Verification 

The number of returns checked for mathematical errors decreased during 

1955 due to the shift of some taxpayers from Form 1040 (on which the taxpayer computes his own tax) to Form 1040A (on which the Government 

computes the tax), the change in filing dates, and other factors. Likewise, 

there was a decrease in the amount of tax change resulting from the 

mathematical verification process. This indicated a higher degree of 

accuracy on the part of the taxpayers, and was believed to be a product of 

the more effective assistance and instructions provided to taxpayers. 

The results of the mathematical verification of income tax returns during 

the last two years are shown in the following table: 

Income tax returns mathematically verified, fiscal years 1954 and 1955 

[Figures in thousands] 

Type of return 

Individual and 

Item fiduciary 

Fiscal re Fisclealan 

Number of returns verified 

Number of returns on which changes were made_ 

Amount of tax increase 

Amount of tax decrease 

Information Reports 

Over 200,000,000 information documents were received and processed 

during the year. This was about the same number as last year. 

These documents included Form W-2 (employers' statements of wages 

paid and tax withheld), Form 1099 (information returns on payments of 

dividends, interest, and various other items), and lesser numbers of other 

types of information documents. Further consideration was given to 

methods for processing these documents at minimum cost and to proposals 

for minimizing the cost of preparation by taxpayers. 

Supervision and Control of the Alcohol and 

Tobacco Industries 

General 

Substantial progress was made during the year toward the goal of 

making supervision of the legal alcohol industry simpler and more economical. (For activities relating to illicit alcohol, see pages 17 and 19 in 

the section on "Enforcement Work.") 

The longer-range aspects of this problem were examined intensively by 

a survey committee composed of representatives of the industry and of the 

Revenue Service. This committee has been developing recommendations 

for both administrative and legislative improvements. 

Immediate economies in use of storekeeper-gaugers were accomplished 

by amending regulations so as to curtail nighttime storekeeper-gauger 

supervision of operations in the industrial alcohol field and reducing duties 

of Government officers at such premises. This was part of a program to 

reduce costs of supervision and to transfer manpower to more urgent duties. 

Accordingly, in several instances where it was found that storekeepergaugers were performing duties which could be performed more appropriately by proprietors, the responsibilities were shifted to the proprietors. 

The program was extended into the distilled spirits field and will be continued during the ensuing year with a similar shifting of responsibilities 

from storekeeper gaugers to proprietors of distilleries and internal revenue 

bonded warehouses. In support of the program Internal Revenue Service 

personnel developed recording sampling devices to permit the taking of 

samples without storekeeper-gauger supervision, and methods of chemical 

analysis of whisky to provide means of determining whether bottled 

whiskies are properly identified. 

Detailed tabulations relating to the production of alcohol, distilled 

spirits, beer, wine, and tobacco manufactures during the fiscal year 1955 

(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 Superinendent of Documents, Washington 25, D. C. 

Authorization of Operations 

The totals of permits issued, terminated, suspended, and in effect at the 

beginning and end of the fiscal year, under the provisions of chapter 51 

11 

Corporation Total 
12 Commissioner of Internal Revenue Annual Report 

of the Internal Revenue Code and sections 3 and 4 of the Federal Alcohol 

Administration Act, are shown in appendix tables 7 and 8 on pages 96-97, 

and the totals of all establishments qualified under the Internal Revenue 

Code at the end of the fiscal year are shown in appendix table 6 on page 96. 

Nineteen applications for approval of interlocking directorates under 

section 7 of the Federal Alcohol Administration Act were acted upon. 

Table 9, showing the number of certificates of label approval and exemption 

from label approval issued under the provisions of section 27 U. S. C. 205, 

appears in the appendix on page 97. 

On-Premises Supervision 

During the fiscal year 1955, storekeeper-gauger supervision was provided 

at registered distilleries, fruit distilleries, internal revenue bonded warehouses (including bottling-in-bond departments), industrial alcohol 

plants and bonded warehouses, denaturing plants, distillery denaturing 

bonded warehouses, rectifying plants, and taxpaid bottling houses (and 

bonded wineries when brandy or other wine spirits are added to wine). 

These facilities accounted for the production of 411,840,037 proof gallons 

of ethyl alcohol, the denaturation of 395,334,023 proof gallons of ethyl 

alcohol, the warehousing of 49,984,207 proof gallons of ethyl alchohol, 

the production of 182,142,103 tax gallons of distilled spirits of various kinds, 

the warehousing of 841,496,003 tax gallons of distilled spirits, the taxpayment on 153,122,315 tax gallons of distilled spirits, including alcohol, 

the rectification of 81,924,622 proof gallons of distilled spirits and wines, 

and the bottling of 172,956,410 wine gallons of distilled spirits. Although 

the production and movement of distilled spirits in 1955 represented only 

a 2 percent decrease from 1954, the number of storekeeper-gaugers assigned 

was reduced by about 17 percent. 

Inspections of Establishments 

Inspections of establishments for the fiscal year aggregated 52,558, of 

which 38,199 related to plants and permittees other than dealers. During 

the previous fiscal year total inspections numbered 61,460 of which 38,618 

related to plants and permittees other than dealers. The plants and 

permittees (other than dealers) which were involved in these inspections 

at which no on-premises supervision is provided (fiscal year 1955 for alcoholic products and calendar year 1954 for tobacco products), produced 

alcoholic beverages and tobacco products as follows: 89,791,154 barrels 

(of 31 gallons each) of beer, 130,691,316 wine gallons of still wine, 1,716,432 

wine gallons of effervescent wines, 3,374,502 wine gallons of vermouth, 

415,001 wine gallons of special natural wines other than vermouth, 

5,881,704,392 cigars, 401,848,775,081 cigarettes, and 203,649,715 pounds 

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

The total reported inspections include periodic inspections of all plant 

Report on Operations 13 

operations, special inspections such as those covering plant changes, claims, 

surveys or instructional activities, investigations incidental to the qualification or requalification of establishments, and investigations of alleged 

infractions of law and regulations. 

Chemical Analyses and Research 

The number of samples received for examination by the National Office 

laboratory during the year (6,108) was substantially the same as last year; 

however, the number of samples received in the 12 field laboratories during 

the year (42,806) represented an increase of 5,980 samples over the preceding year. About 26 percent of the samples received in the National Office 

laboratory were of liquors and narcotics taken in the District of Columbia 

while approximately 28 percent of the samples received in the field were 

of narcotics. In connection with its program of collaboration with the 

Association of Agricultural Chemists, in developing and selecting methods 

of analyses for official adoption, three articles on certain determinations 

were published in that Association's journal. Two additional articles were 

released in Service publications. 
Enforcement Work 

Audit of Returns 

The enforcement program, particularly the examination of returns—

both by office and field audit methods—received the highest priorities 

during the year. The steps taken to strengthen this program are expected 

to have major long-range effects. 

These steps included: 

1. The number of revenue agents was increased from 7,617 to 11,255 

in 2 years. The increase in 1955 was from 10,605 to 11,255. 

2. New primary and advanced training programs for revenue agents 

were instituted. 

3. Better statistical controls were installed. 

4. Improved methods of selecting returns for audit were employed. 

Most of the additional agents were recruited from among those collection 

officers who had demonstrated that they were qualified for agent positions. 

These employees had done a limited type of audit work under the system 

which existed before the reorganization of the Revenue Service. With 

the additional training, facilities, and scope of duties available to them in 

their new positions, they are expected to make an even greater contribution 

to the enforcement program than they have made in the past. 

In addition, a vigorous recruitment program brought in many younger 

men qualified to begin training as agents. 

Together, these efforts reversed the trend toward declining audit manpower which was evident in fiscal years 1951-53. The emphasis and 

recognition given to the strengthening of audit activities also increased the 

incentives for agents to remain in the Revenue Service on a career basis. 

Indications of this were found in a somewhat lower rate of turnover among 

agent personnel during 1955. 

The substantial increase in the number of agents carried with it a pressing 

need for an expanded training program. This was met by the development 

of a special 6-month course for beginning agents. Employees enter this 

course at the civil service grade of GS-5 and, if they satisfactorily complete 

the course, are promoted to GS-7—which is the customary grade at which 

agents undertake full duties. The new course, which will be required of 

all new agents, is designed to give them a comprehensive understanding 

of the tax laws and auditing techniques. Both classroom and on-the-job 

instructions are employed. 

The more advanced training of enforcement personnel is being achieved 

through the facilities of the newly established Advanced Training Center at 

14 

Report on Operations 15 

the University of Michigan. In the audit area the courses consist of an 

agents' course and a group supervisory development course. Two groups 

completed the agents' course with 100 students in each class. In commenting upon the first graduating class of agents, the university officials 

noted that over 50 percent of the class obtained a "B" average or above, 

which was above the level of other graduate students at the university. 

During the year, the statistical reporting was completely revised to 

provide a better basis for analysis of the various audit operations. Particular attention was given to securing separate progress and inventory 

data for field and office audit activities. This was considered essential in 

view of the completely different characteristics of these two operations. 

These data should facilitate the taking of forceful action when problem 

areas are disclosed. 

Important to the evaluation of audit work and to the planning of audit 

programs at the National and Regional Offices is the system of management 

information reports. This new system for obtaining detailed information 

on a scientific sample of audited cases began to produce results during the 

year. 

In the taxpayer assistance program, a total of 14,662,099 taxpayers were 

helped with their returns, an increase of more than 700,000 over 1954. 

This increase is attributed to the numerous changes in tax laws made by 

the 1954 Code. Emphasis was placed on "self-help" methods in an effort 

to concentrate on answering taxpayer questions and encouraging taxpayers 

to do as much of the filling-out of forms as possible. As a result of this 

policy, the number of man-hours required to render such assistance 

increased only 0.64 percent over 1954 compared with a corresponding 

increase of 5.2 percent in the number of taxpayers assisted. 

Among other significant management improvements were (a) the streamlining of the system of recording and controlling the movement of tax 

cases in the field offices of the Revenue Service, and (b) the institution of a 

program designed to improve supervision through visits by field group 

supervisors to revenue agents while they are on the job at the taxpayer's 

place of business and to provide periodic rotation of revenue agents and 

group supervisors within their field district offices. 

Fraud Investigations 

The fraud investigation program received vigorous impetus from a 

number of developments during the year, including: 

1. Increase in the number of special agents from 1,277 to 1,559. 

2. Conduct of specialized training programs for special agents. 

3. Installation of extensive statistical controls of cases through all 

stages of development, showing results obtained. 

4. Restatement and revision of fraud case procedure. 
16 Commissioner of Internal Revenue Annual Report 

5. Adoption of a streamlined organization for the Intelligence field 

force. 

6. Broad approval by the Supreme Court of the "net worth theory" of 

proof of criminal tax evasion. 

The number of all types of investigations completed by the special agents 

increased from 24,781 in fiscal 1954 to 28,430 in fiscal 1955. These included 

unnumbered (preliminary) investigations, numbered (full-scale extensive) 

investigations, investigations of applications for admission to practice 

before the Treasury Department, and charges against enrolled practitioners. 

The most significant increase is that of completed full-scale tax fraud 

investigations, from 2,017 to 2,464. 

The additional 282 special agents were added to the rolls in the latter 

part of the fiscal year and their impact will not be felt fully until next year, 

after completion of their primary on-the-job training. To develop these 

new agents and better the effectiveness of the more experienced agents, 

intensive training courses in intelligence techniques and procedures were 

developed and used in regional training classes during the year. These 

specialized classes were in addition to the attendance of special agents at 

at the regular Treasury Enforcement Officers Training School. 

The statistical reporting system for the Intelligence Division has provided 

operational information of intelligence case production based on more 

uniform concepts than heretofore were available. The resulting data aid 

management at the district, regional, and national levels by furnishing 

sound bases for analysis of field operations. 

The restatement of tax fraud procedures provides procedural instructions 

for processing intelligence cases in the light of present Revenue Service 

organizational structure and includes instructions covering many situations 

and areas for which established procedure was lacking. A greater degree 

of uniformity will be obtained in the handling of intelligence cases as a 

result. An increase in uniformity will also result from the extensive intelligence visitation program commenced this year. Teams from the National 

Office visited each of the 9 regional offices and a number of the district 

offices where they observed the methods and application of national 

procedures in actual operation. Field officials, during these visits, suggested 

ways of improving programs, policies, and procedures. 

The revision of Intelligence field organization at the district level, by 

abolishing the former branch structure in favor of a straight-line organization, permits adaptation of the available force to meet changing investigative needs. 

The Supreme Court's approval of the "net worth theory" of proof of 

criminal tax evasion, described on pages 21-22, endorsed a technique used 

by the special agents for a number of years. Several court decisions had 

questioned its validity. With proper safeguards outlined by the Supreme 

Report on Operations 17 

Court, this technique will be an even more effective tool in the program 

to reduce tax evasion. 

A summary of investigations by the special agents in the fiscal years 1954 

and 1955 follows: 

Number of tax fraud and other investigations completed by Intelligence 

Division, fiscal years 1954 and 1955 

Fiscal year 

Type 

Suspected fraud and miscellaneous type cases: 

Unnumbered cases: 

Fraud 

Wagering 

Miscellaneous 

Total unnumbered cases Investigated 

Numbered cases: 

Prosecution recommended: 

Fraud 

Wagering 

Miscellaneous 

Prosecution not recommended: 5 

Fraud 

Wagering 

Miscellaneous 

Investigations discontinued: 

Fraud 

Wagering 

Miscellaneous 

Total numbered cases Investigated 

Other Investigations: 

Applications for admission to practice before the Treasury Departmen t 

Charges against enrollees to practice 

Total other investigations 

Grand total of all investigations 

I Specific information pertaining to "miscellaneous" cases is not available for fiscal year 1954. 

Includes fraud penalty (no prosecution), deficiency (no fraud penalty), and no change cases. 

Alcohol and Tobacco Tax Program 

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

during the fiscal years 1954 and 1955 were as follows: 

Seizures and arrests for liquor law violations, fiscal years 1954 and 1955 

Item 

Fisca year 

1954 1955 

Seizures: 

Stills (number) 

Nontaxpaid distilled spirits (wine gallons) 

Nontaxpaid wines (wine gallons) 

Mash (wine gallons) 

Automobiles (number) 

Trucks (number) 

Property (appraised value) 

Arrests (number) I 

$3, 

6, 

11,266 

186, 447 

44,687 

722, 850 

1, 783 

626 

197, 771 

9, 344 

7, 

$3, 

12,509 

212, 285 

5, 738 

375,304 

2, 092 

647 

405, 314 

10,545 

I Includes 39 arrests for tobacco tax violations and 363 arrests for firearms violations. 

Note.—Includes seizures and arrests in cases adopted, as well as originated by the Alcohol and Tobacco Tax Division. 

1954 

9,358 16,150 

( 

141 

4,303 2,097 

13, 661 18,388 

721 1, 272 

1,235 957 

c) 24 

1,296 1,192 

217 123 

(I) 24 

565 595 

23 3.9 

(I) s 

4, 057 4, 231 

6,946 5,726 

117 85 

7,063 5,811 

24,781 28,430 

1955 
Seizures and Arrests 

for Liquor Law Violations 

fiscal years 1954 and 1955 

rak 

<-•J 

5411:4 11: 

12,509 23 

11,266 

STILLS SEIZED 

(number) 

7,375,304 

6,722,850 

Report on Operations 19 

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

regular enforcement work, made 119,264 inspections of retail liquor dealers 

and 555 inspections of nonpermittee wholesale liquor dealers. 

During the year 22 arrests were made and 1,404 wine gallons of taxpaid 

liquor and 17 vehicles (the liquor and property being valued at $39,286) 

were seized in connection with the importation, or attempts at importation, 

of liquors into the State of Oklahoma in violation of the Liquor Enforcement Act of 1936. In the tobacco enforcement program, 143 investigations were made which resulted in 39 arrests. 

Firearms Program 

During the year 4,055 investigations were conducted under the National 

and Federal Firearms Acts and the act of August 9, 1939 (49 U. S. C. 781). 

A total of 301 cases of violations of the National and Federal Firearms Acts 

was referred to the Department of Justice for prosecution, and 60 vehicles 

were seized. Registrations of firearms, during the year, totaled 37,076. 

Rewards to Informers 

Over 3,000 claims were filed during the fiscal year by individuals as 

informers seeking rewards under section 7623 of the Internal Revenue Code 

of 1954 and section 3792 of the 1939 Code. Out of these claims and others 

pending from prior years, 576 were allowed, resulting in rewards totaling 

$602,817 paid to informers who had submitted specific information actually 

leading to detection of violations of the internal revenue laws and consequent assessment and collection of taxes and penalties. This represented 

about 20 percent of the claims disposed of during the year. The remainder 

were disallowed either because they could not be substantiated, or because 

they could not fulfill the eligibility requirements of the regulations. 

The following table shows the receipt and disposition of claims for reward 

during the fiscal years 1954 and 1955: 

Receipt and disposal of claims for informers' rewards, fiscal years 1954 and 1955 

Number of claims 

Status 

Pending July 1 

Received during year 

Disposed of during year 

Rejected 

Allowed: 

Number 

Amount 

log June 30 

Revised. 

Fisciagear 

4,427 6,414 

t 4, 567 3, 049 

2,580 2,839 

2, 096 2, 263 

4 576 

5533,30 $602,817 

• 6, 414 6, 624 

" • •-•11::111t" ''' 

MASH SO 

(wise gal 
Status 

Pending July 1 I 

Received during year: 

With recommendation for prosecution 

With requests for opinion 

Totel 

Disposed of during year: 

Prosecution not warranted 

Department of Justice declined to prosecute 

Prosecutions 

Opinions delivered 

All other closings 

Total 

Pending June 30 1 

Fisca year 

1954 1955 

2,965 3,802 

2, 343 2,112 

123 74 

2,466 2,186 

169 I 613 

76 182 

1,191 1,635 

96 94 

97 87 

1,629 2,611 

3,802 3,377 

20 Commissioner of Internal Revenue Annual Report 

Cases Involving Criminal Prosecution 

A vigorous program of criminal prosecutions against flagrant violators 

of the tax laws was continued during the year. 

In the income tax field, the Supreme Court decided several cases, 

clarifying issues and conflicts arising from use of the "net worth" method 

in establishing understatements of net income in criminal cases (see discussion below). 

Altogether, 1,774 cases, with 1,733 defendants, were forwarded to the 

Department of Justice, including 963 cases with 889 defendants in wagering 

tax cases. 

An analysis of cases flowing from the special agents through the Enforcement Division of the Chief Counsel's office and the Department of Justice 

follows: 

Receipt and disposal of cases in Enforcement Division, fiscal years 1954 and 

1955 

l Includes cases awaiting action in Department of Justice. 

Includes 392 coin.machine cases and 5 cases in which taxpayer died prior to referral to Department of Justice. 

Grand juries indicted 890 individuals for violations of the wagering tax 

and 532 for violations of income tax and other tax laws. 

In the cases reaching the courtroom, 1,210 defendants pleaded guilty or 

nolo contendere, 129 were convicted after trial, 73 were acquitted, and 

129 were dismissed. 

Report on Operations 21 

A comparison of indictments and courtroom actions for the last 2 years 

follows: 

Results of criminal action, fiscal years 1954 and 1955 

Number of defendants 

Wagering tax 

Fiscal year 

1955 

Indictments returned 

Disposals: 

Plea—guilty or nob contendere 

Convicted after trial 

Acquitted 

Nol-prossed or dismissed 

664 767 800 774 

I Includes 43 related to cases in which there were pleas or convictions, 11 in which the defendant died. 6 related to 

acquittals, and 47 in which entire use was dismissed. 

"Net Worth" Decisions by the Supreme Court.—During recent years a major 

portion of the criminal income tax cases prosecuted has been based on the 

so-called net worth and expenditure theory. This method involves determining a taxpayer's net assets at the beginning and end of a particular 

year, computing the increase therein during the year, and adding to that 

figure the expenditures made during the year which are not deductible for 

income tax purposes. The propriety of using this method in criminal cases 

was sanctioned by the Supreme Court in United States v. Johnson (1943), 

319 U. S. 503. More recently, however, the Supreme Court turned its 

attention to the manner in which this method was being employed by the 

Government. The Court's conclusions are set forth in four decisions 

handed down on December 6, 1954. These cases are: Holland v. United 

States, 348 U. S. 121; Friedberg v. United States, 348 U. S. 142; Smith v. 

United States, 348 U. S. 147; and United States v. Calderon, 348 U. S. 160. 

These clarifying decisions, all of which were decided favorably to the 

United States, will be of considerable assistance in the enforcement of the 

revenue laws and collection of taxes. 

The Court observed that there are pitfalls inherent in the net worth 

method which, while not foreclosing its use, do require the exercise of great 

care and restraint, and that the courts must closely scrutinize its use. 

A major point decided by the Court, however, was that, contrary to 

defense contentions, the Government is free to use all legal evidence available to it in determining the veracity of a taxpayer's books. In other words, 

the Supreme Court held that section 41 of the Internal Revenue Code of 

1939 did not prevent the Government from looking beyond the self-serving 

declarations in a taxpayer's books, notwithstanding the apparent accuracy 

of those books. 

Total 

Action 

Fill jeer 

711 890 850 532 

570 687 531 523 

56 37 134 92 

16 21 61 52 

22 22 74 107 

Fiscal year 

1955 

Fiscal year 

1954 

Income tax and other 

miscellaneous cases 
22 Commissioner of Internal Revenue Annual Report Report on Operations 23 

A second important point by the Court in the above cases relates to the 

instances where a taxpayer sets up a defense calculated to destroy the 

Government's starting point. The Court observed that the Government 

is obligated to run down such leads furnished by the taxpayer as appear 

plausible and relevant, although it need not trace every lead. 

Another point of the cases involves proof that a net worth increase results 

from receipt of taxable income, and not such nontaxable receipts as loans, 

gifts, and inheritances. The Court held that, while increases in net worth, 

standing alone, cannot be assumed to be attributable to currently taxable 

income, nevertheless proof of a likely source, from which the jury could 

reasonably find that the net worth increases sprang, is sufficient. 

Respecting the crucial element of willfulness, the Court agreed that the 

requirement of the statute cannot be met by an inference based merely on 

an unexplained deficiency, but that "willfulness" involves a specific intent. 

The Court observed, nevertheless, that a consistent pattern of underreporting large amounts of income and failure of the taxpayer to include all his income in his books or records, could form the basis for a finding of willfulness. 

Also, the decisions enunciated certain generalizations relating to jury 

charges in tax evasion prosecutions based on the net worth method. The 

Court said that, where the jury is properly instructed on the standard for 

reasonable doubt, an additional instruction on circumstantial evidence 

that it must "exclude every reasonable hypothesis other than that of guilt" 

is "confusing and incorrect." The opinion in the Holland case observed, 

however, that: "Charges should be especially clear, including, in addition 

to the formal instructions, a summary of the nature of the net worth method, 

the assumptions on which it rests, and the inferences available both for and 

against the accused." 

Collection of Delinquent Accounts 

Vigorous action was taken during the year to counteract a longtime trend 

toward increasing inventories of delinquent accounts. Results of the new 

policies were not readily apparent in the statistics for the year, but there 

were many indications that the trend was reversed. 

This year for the first time statistical information on taxpayer delinquency 

is presented in terms of delinquent accounts instead of warrants for distraint, although data are comparable in most respects. Further, the 

accounts are presented for the current as well as for the past year where 

records permit. 

Under the new program, collection officers are required to spend more 

of their time on collecting delinquent accounts and less on other duties. 

Also, more prompt use of powers to seize assets was ordered in appropriate 

cases, sterner measures were prescribed for the collection of trust funds 

(employee taxes withheld by employers), additional training and higher 

performance standards were provided, and more effective supervision was 

arranged. 

Although the number of collection officers decreased an average of 20 

percent from the previous fiscal year, they closed 1,860,000 accounts, or 

only 10 percent fewer than they had closed last year. 

Moreover, closures by collection were over 82 percent of total disposals, 

up from 74 percent last year; and these closures represented $100,600,000 

more in revenue from this source than last year's. Further, although new 

cases exceeded closures in numbers during the year, this trend had been 

reversed by the end of the year. 

However, the inventory of taxpayer delinquent accounts is up 18 percent 

over last year's close in terms of numbers of cases Dollar amounts in 

these accounts are up 57 percent from $1,050,000,000 at the end of fiscal 

year 1954 to $1,650,000,000 at the close of fiscal year 1955. 

A large part of this increase resulted from recognizing as delinquent 

accounts certain cases, either not made such as a matter of record before 

revision of the accounting system in all offices of the Revenue Service, or 

made of record but not available for disposition because of litigation. 

The following table presents the data on collection of delinquent accounts: 

Taxpayer delinquent accounts, fiscal years 1954 and 1955 

[Figures in thousands] 

status 

Number Amount 

Fiscal 

year 1954 

Fiscal 

year 1955 

Fiscal 

year 1954 

Fiscal 

year 1955 

Assemblies issued 

Closed: 

Collected 

Returned as uncollechble 

Abatements and other 

2, 310 

I, 529 

123 

423 

2,064 

I, 526 

123 

211 

(2) 

$536,331 

66, 474 

(') 

'$599,919 

636, 941 

110,483 

s 118, 533 

Total 2, 075 1,860 t 602, 805 t 865, 956 

Pending lune 30: 

Collection officers (5) 1,132 (0) 948, 795 

Cashier (accounts in part payment status) 47 (2) 26, 977 

Field clerical force 

OARS pending accounts 

132 

238 

48,84

36

3 

624, 9 

Total 1, 309 1, 549 I, 051, 201 1,649, 551 

l The assembly comprises several parts, all for office use, except one which is a notice to the taxpayer i dicating legal 

action unless immediate payment is made. 

Not reported prior to December 1954. 

Amount shown covers only the period January—lune 1955. 

I Amounts of abatements and other closings for periods prior to Jan. I, 1955 are excluded. 

Consists of accounts on which collection has been deferred such as cases involving military personnel, offers in compromise, etc. Substantial portions of these accounts are excluded from inventories prior to December 1954. 

Delinquent Returns 

The number of returns secured from taxpayers who had failed to file 

voluntarily was 767,125, and the amount of tax assessed on these returns 

was $77,770,751. This was an overall decrease from the year before of 

about 10 percent in the number of returns and about 40 percent in tax. 
Number 

Type of tax 

Fiscal Fiscal 

year 1954 year 1955 

24 Commissioner of Internal Revenue Annual Report 

The decrease in the number of delinquent returns was believed to be due 

partly to better voluntary compliance by taxpayers, and partly to a shift of 

Revenue Service personnel to other duties. As explained in the sections 

relating to the audit of returns (page 14) and the collection of delinquent 

accounts (page 22), there was a substantial shift during the year of collection officers to revenue agent assignments, and the remaining collection 

officers were assigned to concentrate more of their efforts on the collection 

of delinquent accounts. These shifts represent a balancing of enforcement 

efforts according to the most urgent needs. 

Additional factors in the decreased amount of taxes collected from delinquent returns were various changes in rates and other statutory provisions. 

The following table summarizes the enforcement work on delinquent 

returns for the last 2 years: 

Delinquent returns secured, fiscal years 1954 and 1955 

Amount of tax, interest, and 

penalty 

Fiscal 

year 1955 

55, 016 

480, 621 48,696 $16, 304, 634 57, 786,443 3 5 7,491 90, 498, 315 319,111 59, 327, 908 180, 938 20, 920, 502 10, 656, 400 

767, 125 I 127, 633, 451 77, 770, 751 

1 

the Because the breakdown was not available in several districts for the months of December and Januar y, fiscal year 1955 are estimated. 

the figures for 

Appeals and Civil Litigation 

General 

One of the principal accomplishments of the Revenue Service during 

the year was a substantial reduction in pending appeals. At the beginning 

of the calendar year 1954, backlogs of cases, especially those not before 

the Tax Court (nondocketed), had reached a point where their disposition 

and the collection of the taxes involved in them were seriously impeded. 

Early in the calendar year 1954 a case disposal program was undertaken 

to reduce these backlogs and put appellate operations on a current basis. 

The eventual objective of the program was to have the inventory of pending 

nondocketed cases (cases not before the Tax Court) reduced to the point 

where the regional appellate division could grant the taxpayer a conference promptly following receipt of the case and thereafter move the 

case to a conclusion just as rapidly as the taxpayer's cooperation and the 

complexity of the issues would permit. A further objective was to maintain the current inventory position thereafter regardless of the number of 

cases received. 

The current nondocketed case inventory objective was reached by 

December 31, 1954, in all regional appellate divisions. Also, it was maintained through the balance of the fiscal year. 

Since time limits for disposition of docketed cases (cases before the Tax 

Court) vary materially because of factors which do not enter into the disposition of nondocketed cases, objectives in the docketed case area were 

more flexible. However, a further reduction in docketed case inventory 

was realized during fiscal year 1955. 

Fiscal 

year 1954 

Income 

Payroll 

Miscellaneous 

Total 

854, 748 

366952 0-56-3 25 
:*4#001- '!.71174 r,*ch- .an 

Appeals 

fiscal years 1954 and 1955 

NONDOCIMEIS 

DISPOSED OF 

DURING YEAR 

PENDING JUNE 30 

mockEtny-C44091 

• 

DISPOSED OF 

DURING YEAR 

1954 0495 

PENDING JUNE 30 

Report on Operations 27 

Income, Profits, Estate, and Gift Taxes 

The following tables reflect the results as to case dispositions for all the 

regional appellate divisions for the fiscal years 1954 and 1955: 

Appellate Division receipt and disposal of protested income, profits, estate, 

and gift tax cases not before the Tax Court, fiscal years 1954 and 1955 

Status 

Number of cases 

Fiscal year 

1954 

Fiscal year 

1955 

Pending July 1 19,365 13, 578 

Received during year 8,950 10,608 

Disposed of during year: 

Closed 12, 515 11, 897 

Petitioned 2, 222 3,178 

Total 14,737 15,075 

Pending June 30 13,578 9,111 

Appellate Division receipt and disposal of petitioned income, profits, estate, 

and gift tax cases, fiscal years 1954 and 1955 

Status 

Number of cases 

Fiscal year 

1954 

Fiscal year 

1955 

Pending July 1 10, 920 8,495 

Received during year 4,433 4,781 

Disposed of during year: 

Settled by stipulation 5,367 4,087 

Closed by dismissal or default 300 201 

Tried before Tax Court on merits 1,191 1,027 

Total 6,858 5,315 

Pending settlement or trial, June 30 8,495 7,961 

Excise and Employment Taxes 

The following table reflects the results in excise and employment taxes: 

Appellate Division receipt and disposal of protested excise and employment 

tax cases, fiscal years 1954 and 1958 

Status 

Number of cases 

Refund claims Abatement claims 

Fiscal year 

1954 

Fiscal year 

1 

Fiscal year 

1954 

Fiscal year 

1 

Pending July 45 101 102 175 

Received during year 137 175 197 259 

Disposed of during year: 

Settled by agreement 16 59 48 114 

Partial allowance—no agreement 1 38 42 

Claim rejected—no agreement 57 75 54 133 

Aber 7 2 16 7 

Total 81 174 124 296 

Pending June 30 101 102 175 138 
28 Commissioner of Internal Revenue Annual Report 

Claims for Relief From Excess Profits Tax 

During the year the Excess Profits Tax Council concentrated its efforts 

on the remaining nondocketed section 722 cases and the settlement or 

trial of docketed section 722 cases. 

The inventory of nondocketed cases was reduced from 37 corporations 

claiming refunds of $242,000,000 to 9 corporations claiming $35,000,000. 

The inventory of docketed cases was reduced from 606 to 501 corporations, despite the filing of new petitions by 29 additional corporations. The 

501 cases in inventory at the close of June 30, 1955, involved claimed refunds 

of $906,000,000. Of the 134 docketed cases disposed of, 37 were tried 

before the Tax Court and 97 were settled administratively and stipulated 

before the court. 

Closing Agreement Cases 

Work was kept substantially current on the review of closing agreements 

under section 7121, Internal Revenue Code of 1954. 

The following table reflects the action of the National Office as to cases 

of this type: 

Appellate Division receipt and disposal of closing agreement cases, fiscal 

year 1955 

Status Number 

of cases 

Pending July I, 1954 25 

Received during year 126 

Disposed of during year 124 

Pending June 30, 1955 27 

Other Courts 

The results of appeals from decisions of the Tax Court to other courts 

during the year follow: 

Cases in appellate courts on appeals horn decisions of the Tax Court, fiscal 

year 1955 

Status 

Number of cases 

In courts 

of appeals 

In Supreme 

Court 

Pending July I, 1954 407 

Appealed 302 6 

Total to be accounted for 709 7 

Disposed or during year: 

Favorable to Commissioner 150 

Favorable to taxpayers 87 

Modified 21 

Settled 15 

Dismissed 53 

Total 326 

Pending June 30, 1955 383 9 

Report on Operations 29 

During the year, in addition to the appeals from Tax Court decisions 

noted above, there were 526 cases involving tax issues decided by the 

Federal civil courts (exclusive of bankruptcy, receivership, insolvency, 

compromise, and liquor cases). These cases involve principally suits for 

refund filed by taxpayers in Federal courts (see table 21) and suits filed by 

the United States in Federal and State courts for collection of taxes (see 

table 22). 

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 1955 

For the 

Government 

Against the 

Government 

Partly for and 

partly against 

the 

Government 

Total 

District courts 

Courts of appeals 

Court of Claims . 

Supreme Court_ 

Total 

164 

71 

13 

5 

150 

64 

17 

1 

38 

I 

2 

352 

136 

32 

6 

253 232 41 526 

As of June 30, 1955, there were 2,882 evil cases (principally suits for 

refund and for collection of taxes) involving tax questions pending in 

district and State courts, 81 pending in courts of appeal, and 493 pending 

in the Court of Claims. 

Five civil cases (see "Enforcement" section for criminal cases) were 

decided by the Supreme Court in favor of the Government. 

The cases of Koppers Co., Inc. v. United States and Premier Oil Refining Co. 

of Texas v. United States, 348 U. S. 254, were decided on January 31, 1955. 

These decisions were decisive of a substantial number of pending cases 

and were of particular interest for the reason that the Court decided that 

the Government could collect interest under section 292 (a) of the Internal 

Revenue Code (1939) on deficiencies which, though real, were never 

assessed because they were eliminated by reason of the relief provisions of 

section 722 of the Internal Revenue Code. 

The Supreme Court decided the case of Olympic Radio and Television, Inc. v. 

United States on May 23, 1955, in favor of the Government reversing the 

Court of Claims. The decision dealt with the construction of the words 

"paid or accrued" in section 122 (d) (6) of the 1939 Code with relation to 

the accounting method employed and held that a corporation on the 

accrual basis could not for carryback purposes increase a net operating 

loss by the amount of excess profits taxes paid in the loss year. The decision 

eliminates this issue from a number of cases pending in the courts and in 

the various field offices in which very large refunds were sought. 

The cases of United States v. Acri, et al. and United States v. Liverpool and 

London and Globe Insurance Co., Ltd., et al. (collection cases) were decided by 
30 Commissioner of Internal Revenue Annual Report 

the Supreme Court on January 10, 1955, in favor of the Government. 

These cases were decisive of a number of cases pending before the lower 

courts and before the Revenue Service involving the question of priority of 

Federal liens over attachment and garnishment liens. The Court held 

that the attachment lien in the Acri case and the garnishment lien in the 

Liverpool and London and Globe case were inchoate liens until perfected by 

judgments entered and were indistinguishable from the case of United 

States v. Security Trust Co. (1950) 340 U. S. 47. The liens of the United 

States arising subsequent to the issuance of the writ of attachment and 

garnishment, but before the dates of entry of judgments, were given priority. 

Section 3672, I. R. C. 1939, which provides Federal liens are not valid 

against judgment creditors until filed as provided by law, was not applicable. Section 3672 is carried into the 1954 Code as section 6323. The 

Liverpool and London and Globe case also decided that attorney's fees did not 

have priority over the lien of the United States against monies held by the 

garnishee. This issue was of importance in numerous cases in which 

stakeholders have claimed attorney's fees out of the monies which they 

hold in preference to the liens of the United States. 

The case of Estate of Raymond Lupia v. Marcelle was decided by the 

Supreme Court on March 7, 1955, in favor of the taxpayer. Former section 421 of the 1939 Code forgave the income taxes of any individual who 

died on or after December 7, 1941, and prior to January 1, 1948, while 

serving in the armed forces of the United States, "with respect to the taxable year in which falls the date of his death." Denying the Government's 

contention that such "taxable year" meant the fractional year ending with 

decedent's death, the Court of Appeals for the Second Circuit construed 

section 421 to forgive the income tax payable by the estate of a partner, 

who was killed in action on January 7, 1945, on his share of the partnership 

income for the period from the date of his death to the end of the partnership's fiscal year, June 30, 1945, 214 F. (2d) 942. The Supreme Court 

granted certiorari on the basis of a direct conflict with the decision of the 

fifth circuit in Allen v. Bickerste, 200 F. (2d) 181. 

Statements on Adverse Tax Court Decisions.—There were published in the 

Internal Revenue Bulletin acquiescences of the Commissioner in 182 

adverse decisions of the Tax Court and nonacquiescences in 29 adverse 

decisions. 

• 

Changes in Tax Liability 

Additional Taxes 

First dividends of the augmented enforcement program were increases in 

the amounts of additional tax, interest, and penalties resulting from audit 

and other enforcement activities. 

These increases reversed the downward trend of recent years, which had 

been a matter of concern. As explained elsewhere in this report, the enforcement program was bolstered by increasing the number of revenue 

agents, improving training and other facilities, better selection of returns 

to be audited, etc. Some of the results of these programs are not apparent 

in the 1955 statistics, since the measures are of a long-range nature. 

The principal increase was one of more than $100,000,000, or 20 percent, in the additional tax resulting from the audit of individual and fiduciary income tax returns. A smaller increase was made in the area of corporation income and excess profits tax returns, making an overall increase 

of $134,000,000, or more than 10 percent, for all income and profits tax 

returns. 

A small increase also was noted for estate and gift taxes and for excise 

taxes, but there were small decreases in the amounts resulting from the 

audit of employment tax returns, from mathematical verification of all 

types of income tax returns and from all types of delinquent returns. 

31 
Tax, Interest, and Penalty resulting 

from Enforcement Efforts 

fiscal years 1954 and 1955 

ADDITIONAL TAX, 

INTEREST, AND 

PENALTY RESULTING 

FROM AUDIT 

INCREASE IN TAX 

RESULTING FROM 

MATHEMATICAL 

VERIFICATION 

AMOUNTS OF TAX, 

INTEREST, AND 

PENALTY ASSESSED ON 

DELINQUENT RETURNS 7S 

TOTALS 

1954— S14442 

1955-1141011 

12S 

Ij 

1954 1955 

fiscal year 

Item 

Additional tax, interest, and penalty resulting from audit 

Income and profits taxes: 

Corporation income and profits 

Individuals and fiduciaries: 

Prerefund audit 

Regular audit 

Total, income and profits taxes 

Employment taxes 2 

Estate and gift taxes 

All other taxes 

Total, resulting from audit 

Increase in income tax resulting from mathematical verification 

Individuals and fiduciaries 

Corporations 

Total 

579,279 611,176 

33, 714 33, 877 

1 485, 564 587,623 

1, 098, 557 1, 232, 676 

23, 580 8, 826 

105, 904 112,199 

7, 471 11, 932 

I, 235, 512 I, 365, 632 

77, 207 62, 838 

I, 281 1, 711 

78, 488 64,549 

Tax, interest, and penalty on delinquent returns 

Income taxes 

Employment taxes 1 

Miscellaneous taxes 

Tota l 

Grand total 

16, 305 1 7, 786 

90, 408 s 59,327 

20, 921 s 10, 656 

127, 633 77, 771 

'1,441,634 1,507,951 

Report on Operations 33 

A comparison of the results for the fiscal years 1954 and 1955 follows: 

Tax, interest, and penalty resulting from enforcement efforts, fiscal years 1954 

and 1955 

[In thousands of dollars) 

1 Revised on the basis of reports received from district offices. 

1 Includes withheld Income tax. 

8 Because the breakdown was not available for the months of December and January, the figures for the fiscal year 1955 

are estimated. 

Overassessments and Overpayments 

Refunds and Repayments.—Refunds and repayments during fiscal year 

1955, including interest, drawbacks, and stamp redemptions, totaled 

$3,513,093,000, representing a slight increase over last year. 

Refunds of individual income and employment taxes increased by 

$69,000,000. Interest payments were down 25 percent from the year 

before. 
10,457 

9, 151 

Fiscal 

year 1954 Refunds Credits 

Taxable year 

Number Principal Interest Number Amount 

1950 

1951 

1952 

1953 

1954 

29, 836 $1, 606, 691 $1, 753 

29, 043 1, 903, 827 3, 523 

30, 152 2, 373, 989 1, 626 

31, 591 2, 739,932 3, 879 

+ 31,990 2, 728, 800 485 

662 

590 

1,020 

1,130 

1 860 

$151,566 

179, 999 

396, 081 

462, 818 

287, 937 

2,784 

362 

18,664 

132 

I, 233 

34 Commissioner of Internal Revenue Annual Report 

Following is a table summarizing refunds paid, the number and amounts 

and interest included in such amounts, with respect to each general class 

of tax during fiscal years 1954 and 1955: 

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

fiscal years 1954 and 1955 

Amount refunded or paid 

Class of tax 

(In thousands of dollars) 

Corporation income and profits taxes 

Individual income and employment 

taxes: 

Excessive prepayment income tax, 

Other income tax and old-age insurance I 

Railroad retirement 

Unemployment insurance 

Total individual income and 

employment tax 

Estate tax 

Gift tax 

Alcohol taxes 2 

Tobacco taxes a 

Manufacturers' and retailers' excise 

taxes 

Redemption of stamps: 

Alcohol 

Tobacco 

Other 4 

Total stamp redemptions 

Other 

Total refunds of internal revenue 32, 521, 542 32, 315, 454 3, 468, 625 

Figures have not been reduced by amounts of 1,000,000 in 1955 and $40,500,000 in 1954, reimbursed from the 

Federal old-age and survivors' insurance trust fund. 

a Includes drawbacks. 

Less than 500 dollars. 

Includes narcotics, silver and wagenng stamps previously reported separately. 

Includes capital stock tax and wagering tax (excise) previously reported separately. 

Excessive Prepayment of Individual Income Tax.-As in previous years, the 

largest part of refunds continued this year to be those resulting from 

excessive prepayments of the individual income tax through withholding 

by employers and from overpayment of estimated tax. This year there 

was almost no change from last year in the principal amount refunded 

under this program. 

The significant reduction in interest amounts paid out in connection with 

refunds can be attributed partly to closer scheduling of these cases, and 

partly to a change in law extending the time for handling such cases 

interest-free from 30 days to 45 days. 

Report on Operations 35 

The later filing date for individual income tax returns was a factor in 

holding down the amount of refunds and the amount of interest on refunds 

paid prior to June 30, 1955. 

The following table covers tax years 1950 through 1954 (usually received 

and processed in following fiscal years) with respect to the number and 

amount of refunds and credits, and interest paid out, as a result of excessive 

prepayments: 

Excessive prepayments of individual income tax, taxable years 1950-54 

[Figures in thousands] 

Figures are preliminary and reflect refunds or credits to June 30, 1955. Revised figures to Dec. 31, 1955 will appear 

in next year's report. 

Includes 123,000D returns requiring split between credit to ensuing tax year and current year refund. 

Carrybacks and Carryovers.-The new Code provides in section 172 (b) 

for a net operating loss carryback for any taxable year ending after December 31, 1953, to each of the two taxable years immediately preceding, and 

for a net operating loss carryover to each of the five taxable years following 

such taxable year. Under section 6411 (a) a taxpayer may file application 

for adjustment of income and profits taxes for the years affected by losses. 

The new law may reasonably account for a slight decrease in amounts 

allowed, as set forth in the accompanying table, between 1954 and 1955 

fiscal years, from $329,400,000 to $312,900,000. The number of applications increased by about 23 percent, and rejections by approximately 25 

percent, between the 2 years. Total applications adjusted increased by 

about 2 percent. 

Receipt and disposal of tentative carryback adjustments, fiscal years 1954 

and 1955 

Amount claimed Amount allowed 

Status 

(In thousands of dollars) 

329,454 

320, 

 706

748 

8, 

43,364 

5,103 

10, 839 

16 

105 

2, 903, 498 2, 972, 330 

Number 

Interest allowed (included in amounts 

refunded) 

Fiscal 

year 1955 

52, 513 49, 188 

31,289, 393 

1, 128, 156 

16 

17,433 

32,434, 998 32, 227, 045 

2, 535 2, 757 

1, 701 

1, 535 

2, 228 

21, 957 10,639 

3, 513, 093 82, 631 62,102 

Pending July 1 

Applications received 

Applications adjusted, total 

Allowed in whole 

Allowed in part 

Rejected 

Pending June 30 

6, 528 7, 038 67,067 54 840 

37,298 45,889 329,504 377,685 

36, 788 37, 640 345, 731 325, 660 

32,173 32, 440 320,425 297,993 

1,732 1,595 10,270 17,225 

Z 883 3,605 15,036 10,442 

7,038 15,287 50,840 102,865 

Fiscal year 

1955 

312,995 

298,491 

14, 505 
36 Commissioner of Internal Revenue Annual Report 

Claims for Refund.—Beginning January 1, 1955, the Revenue Service 

made provision for obtaining from its field offices important management 

data with respect to audit results on claims for refund, Form 843, (including 

amended returns reflecting a decrease in tax which are treated as Form 

843 claims) which were disposed of by the district audit divisions. Information of this type is not available for periods prior to January 1, 1955. 

Disposition of these claims for the period January 1, 1955, to June 30, 

1955, is shown by major class of tax in the following table: 

Claims for refund disposed of by district audit division January-June 1956 

Amount 

Class of tax 

Allowed 

(In thousands of dollars) 

Individual income taxes 

Corporation income and profits taxes 

Estate tax 

Gift tax 

Excise taxes 

Employment taxes 

Tota l 127, 532 235,667 85, 550 

Review of Overassessments Exceeding $wo,00a—A total of 178 cases involving 

overassessments of $522,634,410 was reported to the Joint Committee on 

Internal Revenue Taxation in accordance with the law which requires 

review by the committee of all refunds and credits exceeding $100,000 

($200,000 prior to enactment of the Internal Revenue Code of 1954). 

These figures compared with 200 cases involving $409,047,000 reported 

in the preceding year. 

Offers in Compromise 

The year saw a marked reduction of backlogs in cases in which taxpayers had submitted offers in compromise for settlement of tax liabilities. 

The law permits consideration of such offers when based upon inability 

to pay or doubt as to liability. No compromise is provided for so-called 

hardship or equity cases. 

As of June 30, 1955, there were 10,570 compromise cases on hand at 

all Revenue Service levels as compared with 16,270 cases pending at the 

end of the previous fiscal year. Approximately'21,000 cases were on hand 

as of June 30, 1953. This reduction in inventories reflects the success of a 

campaign to expedite the processing of offers in compromise, and is attributed to: 

1. Adoption of a new policy of rejecting a compromise offer based on 

inability to pay without requiring a field investigation when the 

taxpayer's statement of financial condition clearly discloses that the 

liability is collectible. 

2. Application of the policy of taking immediate steps to collect the 

unpaid liability when an offer is submitted merely to delay collection 

of the tax or if the delay in collection will jeopardize the interests 

of the Government. 

3. Decentralization of jurisdiction over offers in compromise to the 

audit divisions of the district offices. 

To assist taxpayers in compiling more accurate and complete information 

with respect to their financial condition, Forms 433, 433A, and 433B, 

Statements of Financial Condition, which accompany offers in compromise 

based on inability to pay, have been revised recently and consolidated into 

two forms known as 433 (revised) and 433-AB. These two new forms will 

be of material assistance in expediting the handling of offers in compromise. 

The district directors now process substantially all tax and penalty 

offers in compromise. District directors, together with the assistant 

regional commissioners (appellate) and the compromise branch of the 

National Office, received 6,370 tax offers and disposed of 7,412 offers, 

leaving a total of 6,301 tax offers on hand as of June 30, 1955. In addition, 

these offices received 12,817 specific and delinquency penalty offers and 

disposed of 16,644 offers, leaving a total of 3,805 specific and delinquency 

penalty offers on hand as of June 30, 1955. 

The Chief Counsel and the regional counsel consider tax offers in cases 

in which court proceedings, except The Tax Court of the United States, 

are involved, or criminal prosecution is pending. During the year these 

Number 

99,407 42,187 25,605 16,582 

11,276 140,673 51,751 88,922 

332 4, 897 1,423 3, 474 

78 231 150 

3,320 45,946 5, 217

81 

40, 729 

13,119 I, 733 1, 473 260 

150,117 

37 
38 Commissioner of Internal Revenue Annual Report 

offices received 716 tax offers and disposed of 590 offers, leaving a total of 

339 offers on hand as of June 30, 1955. 

The Alcohol and Tobacco Tax Division considers all offers relating to 

alcohol, tobacco, and firearms taxes and penalties. It received 881 tax 

and penalty offers and disposed of 885 offers, leaving a total of 125 offers 

on hand as of June 30, 1955. 

A comparison of the compromise cases closed in the various categories 

for the fiscal years 1954 and 1955 follows: 

Offers in compromise disposed of, fiscal years 1954 and 1955 

Type of tax or penalty 

Number Liabilities Offers 

Fiscal 

year 1954 

Fiscal 

year 1955 

Fiscal 

year 1954 

Fiscal 

year 1955 

Fiscal 

year 1954 

Fiscal 

year 1955 

In thousands of dollars 

Offers accepted 

Income, profits, estate, and gift taxes I, 690 1, 640 23, 990 48, 128 8, 194 13,609 

Extra taxes 546 305 2, 858 1, 328 763 389 

Employment and withholding taxes 2, 185 1, 323 4, 623 2, 904 I, 433 I, 324 

glcohol taxes 161 134 196 238 32 38 

Delinquency penalties on all taxes 18,356 11, 280 10,048 5,451 1,499 865 

Specific penalties 5,180 4, 513 169 154 

Total 28, 118 19, 195 41, 714 58, 048 12, 089 16, 379 

Offers rejected or withdrawn 

~~~~~~ 

Income, profits, estate, and gift taxes 2, 793 73, 062 84,148 13, 330 14,636 

Excise taxes 448 3, 575 3, 369 456 568 

Employment and withholding taxes 1, 628 6, 983 4, 347 I, 127 I, 210 

klcohol taxes 190 791 715 39 41 

Delinquency penalties on all taxes 2, 104 2,157 1, 220 324 239 

Specific penalties 94 26 10 

Total 7,257 6,336 86,568 93, 799 15, 301 16,704 

Rulings, Regulations, and Special 

Technical Services 

In the fiscal year 1955, this function was primarily concerned with the 

drafting of new regulations and revision of tax return forms required by 

the complete overhaul of the Federal tax system, resulting from enactment 

of the Internal Revenue Code of 1954, which was approved by the President on August 16, 1954. 

Regulations Program 

General.-The program for issuing regulations under the Internal 

Revenue Code of 1954 dwarfs any previous regulatory project undertaken 

by the Revenue Service. A total of 112 separate regulations and Treasury 

Decisions were scheduled for preparation and issuance under the new 

Internal Revenue Code (not including those covering alcohol and tobacco 

tax provisions). 

The first step was to issue regulations continuing in effect the procedures, 

organization, and existing regulations under the Internal Revenue Code 

of 1939 to the extent applicable under the new Code. 

It was also necessary to issue immediately regulations required to inform 

taxpayers how, when, or where they were to perform acts required or 

permitted by new provisions contained in the 1954 Code. 

Of the 15 notices of proposed rule making and 5 final Treasury Decisions published during the fiscal year to implement the 1954 Code, the 

following were of especial significance: 

(1) Regulations relating to assessment, collection, abatements, credits, 

and refunds of taxes under the 1954 Code (T. D. 6119). 

(2) Regulations under section 167 of the 1954 Code relating to depreciation (published in proposed form September 28, 1954). 

(3) Regulations under subchapter C of the 1954 Code relating to 

corporation distributions and adjustments (published in proposed 

form on December 11, 1954). 

During the year, initial drafting was completed on most of the other 

separate regulations and Treasury Decisions to be issued. 

A new tide in the Code of Federal Regulations was established and designated "Title 26-Internal Revenue, 1954" under which all of the 

regulations and Treasury Decisions pertaining to the Internal Revenue 

Code of 1954 will appear in final form. 

39 
40 Commissioner of Internal Revenue Annual Report 

Alcohol and Tobacco Tax. —Of the 29 regulations required to implement 

the alcohol and tobacco tax provisions of the new Code, complete regulations were published as follows: 

CODE OF FEDERAL REGULATIONS 

Part No. 

170 Miscellaneous Regulations Relating to Liquor. 

173 Returns of Substances or Articles. 

175 Traffic in Containers of Distilled Spirits. 

182 Industrial Alcohol. 

186 Gauging Manual. 

194 Liquor Dealers. 

195 Production of Vinegar by the Vaporizing Process. 

197 Drawback on Distilled Spirits Used in Manufacturing Nonbeverage Products. 

198 Production of Volatile Fruit-Flavor Concentrates. 

216 Denaturation of Rum. 

220 Production of Distilled Spirits. 

221 Production of Brandy. 

225 Warehousing of Distilled Spirits. 

230 Bottling of Taxpaid Spirits. 

231 Taxpaid Wine Bottling Houses. 

235 Rectification of Spirits and Wines. 

240 Wine. 

245 Beer. 

251 Importation of Distilled Spirits, Wines, and Beer. 

252 Drawback on Liquors Exported. 

270 Cigars and Cigarettes; Manufacturers, Importers, and Dealers. 

275 Manufactured Tobacco; Manufacturers, Importers, and Dealers. 

295 Removal of Nontaxpaid Tobacco Products and Cigarette Papers and Tubes for 

the Use of the United States. 

Six regulations remain to lie issued under this program. 

The new tobacco regulations represent the first major changes since 1935. 

The new law on which they are based is the first complete statutory revision 

as regards tobacco requirements since 1862. 

New "Rules of Practice in Permit Proceedings" (26 C. F. R. (1939) part 

200) were issued to provide, for the first time in one document, rules applicable to all adversary proceedings involving adjudication required by 

statute to be determined on the record, after opportunity for hearing, under 

the alcohol and tobacco tax provisions of the Internal Revenue Code. 

Previously, these rules were contained in four different parts of Titles 26 

and 27 of the Code of Federal Regulations. 

Regulations No. 1 "Basic Permit Requirement under the Federal Alcohol 

Administration Act (27 C. F. R., part 1)" were revised and reissued to 

conform to the new "Rules of Practice in Permit Proceedings" (26 C. F. R., 

part 200). 

Report on Operations 41 

Treasury Decisions of major imports issued during the year included: 

T. D. 6090 issued, effective August 14, 1954, to change the 

emphasis of supervision of industrial alcohol producing, warehousing, 

and denaturing operations. 

T. D. 6092 issued, effective August 17, 1954, to implement section 

5411 of the Internal Revenue Code of 1954 to permit the use of 

brewery premises for the purpose of producing and bottling soft 

drinks. 

Tax Return Forms Program 

The enactment of major tax legislation during the year made necessary 

the review of all tax return forms and instructions. The task of revising 

such forms in advance of the issuance of new regulations presented problems 

of unusual volume and complexity, but was accomplished substantially 

on schedule. 

Because of changes in the law, Form 1040, U. S. Individual Income Tax 

Return, was increased to 4 pages of items and schedules instead of 3 pages 

as in prior years, and the instructions, containing the tax rate table, were 

increased from 12 to 16 pages. 

Form 1040A, the Optional Individual Income Tax Return, was developed 

in "punch card" style to permit the mechanical processing of the increasing 

number of taxpayer returns to be made on this form. 

To effectuate a new provision of the 1954 Internal Revenue Code it was 

necessary to develop Form 1120–ES, Declaration of Estimated Tax by 

Corporation. 

Approximately 200 other public-use forms and many internal forms also 

were revised. 

Tax Rulings 

Enactment of the new Code also necessitated a temporary modification 

of the Revenue Service's policy of issuing rulings to taxpayers. During the 

year, no rulings were issued under the new Code where there had been a 

change in the prior law and new regulations were yet to be published, 

unless there was a showing that extreme hardship would result from the 

failure to issue a ruling. 

Although this policy was still in effect at the end of the year, 42,474 

replies to requests for rulings and technical advice were issued during the 

360052 
42 Commissioner of Internal Revenue Annual Report 

year. In the previous year, when no such restriction was necessary, the 

replies totaled 51,060. An analysis of the year's rulings follows: 

Requests for tax rulings and technical advice processed, fiscal year 1955 

Subject Taxpayers' Field 

requests requests 

Income and excess profit taxes 

Excise taxes 

Employment and self-employment taxes 

Estate and gift taxes 

Engineering questions (depreciation, etc.) 

Total 

Publication Program 

During the year there were 801 rulings published in the Internal Revenue 

Bulletin compared with 432 in the previous fiscal year and 151 in fiscal 

year 1953. This reflects progress in the program for eliminating so-called 

"secret" rulings. The present policy is to publish all rulings and procedures 

directly affecting taxpayers' basic rights or duties, which may serve as 

precedents or guides to the public and the Revenue Service personnel. 

A comparison of the rulings published in the last 3 years follows: 

Tax rulings published, fiscal years 1953, 1954, and 1955 

Fiscal year 

Subject 

Income tax 

Excise tax 

Estate and gift taxes 

Employment taxes 

Excess profits tax 

Firearms 

Alcohol and tobacco taxes 

Miscellaneous 

Total 

A new cumulative list of organizations (approximately 38,000) to which 

contributions are held to be deductible by donors for Federal income tax 

purposes, under section 170 of the 1954 Code, was published as a source 

of reference material for both taxpayers and Revenue Service personnel. 

An explanation of the income tax responsibilities of United States 

citizens residing abroad was published in the form of a booklet and given 

worldwide distribution. 

Various other publications for the information of taxpayers, such as 

"Your Federal Income Tax," were revised and plans were made for some 

new ones, including a tax guide for farmers. 

Report on Operations 43 

Legal Services 

This was the first year under the system which decentralized to the 

regional counsel a large segment of legal work on civil advisory matters. 

The decentralized tasks relate to proceedings under the Bankruptcy Act, 

receiverships and other insolvencies, the discharge and release of liens, 

the administration of estates of decedents or incompetents, the handling 

of offers in compromise, and Federal tax liens in actions to quiet tide and 

suits for foreclosure by mortgagees and other secured creditors (see appendix table 23). It was likewise the first year for testing and extending 

the procedures adopted during the prior fiscal year under which proofs 

of claim in liquidating bankruptcies, receiverships, decedents' estates, 

and other miscellaneous insolvencies are retained in the district directors' 

offices unless and until it appears that legal advice or services are required. 

The same procedures now have been applied to wage earner plan proceedings under chapter XIII of the Bankruptcy Act. These procedures 

are designed to eliminate 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. 

During the fiscal year, the legal work involved in connection with 

collection cases was decentralized to the offices of the regional counsel. 

Concurrently, a new procedure was adopted whereby recommendations 

by district directors with respect to the initiation of collection cases, whether 

by institution of a suit or of intervention in an already pending proceeding, are forwarded to the regional counsel for handling rather than to the 

National Office of the Chief Counsel. 

The performance of the civil advisory function of rendering "on the 

spot" legal advice to district directors in connection with matters involving 

problems of civil law (as distinguished from criminal law) was expanded 

and emphasized. Visitation programs were established in each region so 

that legal personnel competent to handle civil advisory matters visit each 

district director's office at regular intervals. In this way district directors 

are able to secure immediate answers to many of their questions without 

being required to reduce their inquiries to writing. 

38, 547 3, 927 42,474 

96 212 363 

33 88 111 

4 40 51 

2 20 71 

4 13 9 

6 15 

4 40 168 

8 13 13 

151 432 801 
International Tax Conventions 

Income tax conventions with Japan and Germany became effective 

during the year by virtue of exchange of ratifications; a supplemental 

income tax convention with the United Kingdom likewise became 

effective. 

An estate and gift tax convention with Japan became effective during 

the year. 

Income tax conventions with Italy and the Netherlands were signed 

but not ratified during the year. 

Estate tax conventions with Italy and Belgium were awaiting ratification 

at the close of the year. 

Tax conventions and treaties were in various stages of negotiation or 

exploration with various nations, including several Latin American 

countries, where interest was stimulated by the Secretary of the Treasury 

during conferences in Rio de Janeiro in November 1954. 

Fifty-four officials from 23 foreign countries visited the National Office 

during the year to study the administration and operation of the United 

States tax laws. 

44 

Legislation Relating to Internal Revenue 

Matters 

Legislative Services Performed 

The Revenue Service provided technical assistance to the other offices of 

the Treasury Department and to the tax committees of the Congress in 

connection with the legislative enactments during the fiscal year relating 

to internal revenue matters. This technical assistance included participation in the drafting of the legislation and the related committee reports. 

During the year 33 reports on public bills and 14 reports on private bills 

giving information and the views of the Revenue Service with respect to 

such bills were forwarded to the Under Secretary's office for use in preparing 

the Department's reports to the appropriate congressional committees. 

The Revenue Service developed and presented to the Under Secretary 

for consideration in connection with the Department's legislative program 

a number of legislative proposals, relating primarily to administrative 

matters, of importance toward improved administration of the tax laws. 

Important Legislation Enacted During Fiscal 1955 

The principal enactments of the 83d Congress and the 84th Congress 

during the fiscal year include: 

83d Congress.—Public Law 591, approved August 16, 1954, providing a 

complete rearrangement of the tax laws, modernization of many old provisions, clarification of certain provisions, and numerous substantive 

changes and additions. This public law, the provisions of which are 

cited as the Internal Revenue Code of 1954, accomplished the first comprehensive revision of the tax laws since the enactment of the income tax. 

Public Law 746, approved August 31, 1954, increasing the payroll tax 

base under the Railroad Retirement Tax Act and improving the benefits payable under the Railroad Retirement Act. 

Public Law 761, approved September 1, 1954, extending coverage under 

the old-age and survivors insurance program and increasing the benefits 

payable thereunder. 

Public Law 767, approved September 1, 1954, extending coverage under 

the unemployment compensation program. 

84th Congress.— Public Law 18, approved March 30, 1955, extending the 

corporate normal tax rate of 30 percent for an additional year to April 1, 

1956, and also postponing until April 1, 1956, the excise tax rate reductions 

which were to become effective on April 1, 1955, on the following taxable 

45 
46 Commissioner of Internal Revnue Annual Report 

articles: Automobiles, trucks, motorcycles, etc., and parts and accessories 

therefor; gasoline; diesel fuel; cigarettes, distilled spirits generally; imported perfumes containing distilled spirits; still wines; sparkling wines; 

liqueurs and cordials; and beer. 

Public Law 74, approved June 15, 1955, repealing retroactively sections 452 and 462 of the 1954 Code which permitted taxpayers to adopt 

certain methods of accounting for prepaid income and estimated expenses. 

Internal Controls 

Internal Audit 

The Internal Audit Division placed particular emphasis during the year 

upon the further improvement of internal audit quality and coverage. 

Statistics covering the internal audit activity of the nine regional inspection offices for the fiscal year 1955 follow: 

Internal audits, started and completed, fiscal year 1955 

Activity le Proems July I, 954 

1ocess Started Completed In 

June 3 

pr

0, 1955 

Regional counsels' offices 

Regional commissioners' offices: 

Collection 

Audit 

04 , 

CO 

Intelligence 

Alcohol and tobacco tax 

Appellate 

Administrative 

Total 18 32 43 7 

District directors' divisions: 

1 2:1 92 1

Collection 39 37 

Audit 44 - CI 

43 

Intelligence 43 45 

Administrative 41 43 

Total 51 166 169 48 

Grand total 69 198 212 55 

In addition to the regular audits shown above, the regional internal audit 

divisions made 35 interim audits of branch offices of district collection 

divisions and verified the accounts of 12 outgoing district directors. Considerable internal audit time was also devoted to observation and partial 

audit of the installation of a new revenue accounting system in the collection 

divisions of all district directors' offices. At the request of the General 

Accounting Office in connection with its audit of reporting requirements 

under section 1311 of the Supplemental Appropriation Act, 1955, special 

reports were issued by three regional internal audit divisions on the administrative expense appropriation obligations as of June 30, 1954. 

The Internal Audit Division in the National Office completed and submitted a report on the audit of the Collection Division of the Baltimore 

district director's office, submitted a report on a survey made of the Appellate Division in the National Office, reviewed and reported on the 

operation of the Kansas City Regional Service Center, and submitted 

47 
48 Commissioner of Internal Revenue Annual Report 

reports on the audit of the Fiscal Management Division and on the survey 

of the Office of the Director of Practice. 

In addition to the above the National Office internal audit personnel 

prepared or revised audit programs and other instructional material, 

reviewed and processed audit reports, discussed audit findings with National 

Office operating officials, visited regional inspection offices to evaluate 

operations and to discuss audits and administrative problems, and performed other work essential to functional supervision. 

Internal Security 

Authority was decentralized to regional inspectors for making final security determination on character and other types of background investigations in all field authority cases. This has resulted in more expeditious 

closing of cases and has eliminated considerable administrative work 

in the National Office. 

Public Law 725 of the 83d Congress provides for investigation by the 

Federal Bureau of Investigation of certain criminal cases. Close liaison 

was maintained during the year by Revenue Service with officials of the 

Treasury Department and the Department of Justice in working out an 

agreement as to the types of cases to be referred to the Department of 

Justice. This culminated in the issuance of instructions, effective July 1, 

1955, which prescribe a prompt and uniform method of referral of appropriate criminal cases to the Federal Bureau of Investigation. 

During fiscal year 1955 final disposition was made of 4,463 personnel 

investigative cases, as compared with 3,858 cases closed during fiscal year 

1954. This represents an increase of slightly over 15 percent. 

Increased emphasis was made throughout the year on the necessity for 

thorough investigative coverage, improvement in techniques and report 

writing, and prompt investigation of the more important cases. 

Report on Operations 49 

Statistics on personnel investigations and disciplinary actions follow: 

Personnel investigations and disciplinary actions, fiscal years 1954 and 1953 

Fisca year 

1954 1955 

Personnel investigations 

Number of cases closed: 

Character and security investigations 

Conduct investigations 

Other investigations 

1, 958 

I, 295 

605 

2,985 

829 

649 

Total 3, 858 4,463 

Disciplinary actions against employees as a result of personnel investigations 

Separation of employee (by type of offense) I : 

Bribery, extortion or collusion 11 12 

Embezzlement or theft of Government funds or property 15 5 Failure of employee to pay proper tax 45 20 

Falsification or distortion of Government reports, records, etc 53 115 

Unauthorized outside activity 9 5 

Failure to properly discharge duties 6 4 

Personal misconduct unrelated to tax cases 34 38 Refusal to cooperate 2 

Divulgence of confidential information 2 1 

Failure to file financial statements 2 

Acceptance of fees or gratuities 20 6 Other misconduct 12 28 

Total separations 209 236 

Suspended from duty and pay 23 32 

Reprimanded, warned, transferred or demoted 209 214 

Total disciplinary actions 441 462 

I Includes resignations, retirements or other separations while employees were under investigations, or before administrative decision made on disciplinary action where investigation disclosed derogatory inf ;nation. 
tT 

Personnel on Rolls 

fiscal years 1954 and 1955 

NATIONAL 

OFFICE 

REGIONAL AND 

DISTRICT 

OFFICES: 

Collection 

Officers 

OfficeAuditors 

Returns 

Examiners 

Revenue Agents 

Special Agents 

Alcohol Tax 

Personnel 

Clerical, all 

other Field 

Personnel 

Administrative Functions 

Personnel 

A major increase in revenue agents was accomplished during the year 

and, at the same time, a small decrease was effected in the total number of 

all categories of employees. The revenue agent increase was accompanied 

by decreases in collection officers, storekeeper -gaugers, and clerical 

employees. 

These shifts were designed to strengthen the enforcement program and 

to balance the various forces in the Revenue Service. Also they reflect 

cost-reducing techniques. 

The total number of employees was 50,890 at the end of the year, a 

reduction of 521 from the year before. Although most of the decentralization of work from the National Office to the field offices occurred in the 

preceding year, it was nevertheless possible to further reduce the number 

of National Office employees from 2,707 to 2,675. 

The revenue agent force was increased from 10,605 to 11,255, the highest 

number in the history of the Revenue Service. Some of the new agents 

were selected from among collection officers who possessed the qualifications 

for these new assignments; others were recruited by other civil service 

procedures. 

In the alcohol enforcement field, there was a similar shift of qualified 

employees from storekeeper-gauger to investigator positions. 

Plans were made to increase the recruitment of the best qualified college 

graduates from current college classes, and to improve other recruitment 

activities. 

In order to balance the numbers of collection officers in accordance with 

local workloads, about 250 of these employees were shifted from overstaffed to understaffed offices. This program, together with steps to remove employees who failed to meet minimum performance standards, 

enabled the Revenue Service to make necessary shifts of forces without 

using the more drastic reduction in force procedures prescribed by the 

Civil Service Commission. 

Another major personnel project involved the preparation of more 

precise job descriptions for virtually all regional and district positions. 

This was intended to clarify duties, and to eliminate inequalities in grades 

and workloads that often had resulted from the former stereotyped descriptions (general descriptions intended to cover a wide variety of circumstances). Procedures were installed to review the job descriptions from 

time to time and to keep them up to date. 

51 
2,707 2,675 

470 477 

6,877 5,585 

2, 430 2,135 

1, 141 I, 274 

10,605 11,255 

I, 277 1, 559 

473 465 

824 891 

1,208 11, 038 

52 Commissioner of Internal Revenue Annual Report 

A comparison, by categories, of the number of employees at the end of 

the year with the number at the end of the prior year, follows: 

Personnel on rolls, June 30, 1954 and 1955 

Number on payroll 

as of lune 30— 

1954 

National Office 

Regional and district offices: 

Supervisory personnel 

Enforcement personnel: 

Collection officers 

Office auditors 

Returns examiner s 

Revenue agents 

Special agents 

Alcohol tax inspectors 

Alcohol tax investigators 

Storekeeper-gaugers 

Total enforcement personnel 

Other permanent personnel: 

Clerical (excluding temporary), messengers and laborers 

Legal 

Other technical 

20, 679 20, 402 

2, 387 2, 657 

270 268 

Total, other permanent personnel 

Total, permanent personnel, regional and district offices 

Temporary employees 

Grand total 

Includes 43 storekeeper-gaugers detailed full time as alcohol tax investigators pending raining and transfer to such positions. 

Training 

Advanced Training Center.—The Advanced Training Center, established by 

contract at the School of Business Administration, University of Michigan, 

Ann Arbor, Mich., graduated its first two classes of revenue agents. Each 

class consisted of 100 revenue agents who had been selected on a merit 

basis from all regions of the Revenue Service. A curriculum of tax accounting, law, administration, and related subjects was set up with the approval 

of an academic advisory committee of distinguished citizens from the 

accounting, legal, and educational professions. After each semester, 

changes were made in the light of experience. Before the year-end the 

success of the advanced training principle was sufficiently established to 

enable the creation of two short courses for audit and collection group 

supervisors during the summer, and to plan for increasing the fall enrollment to 150 revenue agents and 50 collection officers per semester. A 

special curriculum was designed for collection officers. 

Executive Development Program.—Since one of our principal problems in 

developing an effective organization is that of identifying and preparing 

individuals with outstanding qualifications and experience for promotion 

to executive positions, a special program was initiated to select and train a 

limited number of the most promising career employees in the Revenue 

Service. The plans for the first year provided for the selection of 12 men 

Report on Operations 53 

to be..given a 6 months' course, including both lectures and on-the-job 

experience in various field and National Office positions. By virtue of 

previous accomplishments and of this training, graduates of this course 

are expected to be particularly suited for important offices. Initially, 

many of them will be assigned as assistant district directors. 

Other Training Activities.—By special agreement with the Civil Service 

Commission, new training programs were installed under which beginning 

revenue agents and collection officers may be recruited at grade GS-5, 

given 6 months of intensive training (both classroom and on-the-job 

instruction), and upon satisfactory completion of the training promoted 

to the customary GS-7 starting grade for these positions. These programs 

are expected to provide incentives for young recruits to enter the Revenue 

Service, and to prepare them for productive work in the shortest feasible 

time. (See page 14.) 

Operating Facilities 

Space.—Substantial results were obtained in consolidating various field 

offices in order to improve efficiency of operations and convenience of the 

taxpaying public. This marks a reversal of the situation brought on during 

the last war when the scarcity of space in existing Federal buildings necessitated the rental of scattered offices. 

Exemplifying the new program, the district director at Greensboro, 

N. C., occupied a new 5-story structure, containing 65,000 square feet of 

floor space, which had been built by commercial interests to fit the layout 

and space needs of the Greensboro office, which formerly was dispersed in 

six different buildings. This is believed to be the first building ever constructed outside of Washington, D. C., especially for Revenue Service needs 

and large enough to consolidate all offices in the same locality. 

Another achievement was the leasing of a building in Atlanta to bring 

together offices of the district director in that city from four other buildings. 

Arrangements were made to further consolidate both the district director's 

and the regional commissioner's offices in Atlanta in a new building which 

is under construction now. 

Equipment.—The most comprehensive inventory of property and equipment in the history of the Revenue Service was made. This provided a 

basis for a systematic replacement program. 

Among major new equipment items added during the year, special 

mention is due for the installation at Suitland, Md., of one of the most 

modern of the giant electronic computers which are being adopted by 

large businesses and governmental agencies for the speeding up of massvolume computations and for reducing costs of statistical operations. The 

Suitland computer was purchased and is operated jointly with the Bureau 

of the Census. Initially, the Revenue Service will use it to compile the 

annual volumes of "Statistics of Income" and to tabulate current operating 

data. 

Branch of service 

23, 336 23, 327 

48, 641 48, 006 

63 209 

51, 411 50, 890 

24,835 24,202 

1955 
54 Commissioner of Internal Revenue Annual Report 

Report on Ope
56 Commissioner of Internal Revenue Annual Report 

In order to put much of the mimeographing and other duplicating work 

of the district directors' offices on a more efficient basis, each of the regional 

commissioner's offices was provided with printing facilities to pool such 

work. 

Records, Correspondence, etc.-A streamlined correspondence program, previously installed in a few district offices on a trial basis, was extended to 

20 additional districts during the year. Instructions were issued to increase 

the program of disposing of unneeded records by more than 5,000,000 

pieces of paper a year. Over-age index cards, formerly microfilmed and 

maintained in district offices, will be retired to Federal records centers at 

an annual saving to the Revenue Service of about $240,000. 

Detailed consideration was given to many suggestions from the Task 

Force on Paperwork Management of the Commission on Organization of 

the Executive Branch of the Government (frequently called the Hoover 

Commission), and as many of the suggestions as were found to be applicable 

were put into effect. 

Cost of Administration 

General.-Obligations incurred by the Revenue Service from appropriated 

funds totaled $278,834,000 in fiscal 1955, compared with $268,969,000 in the 

preceding year. 

An analysis of these obligations, by classes of expenditures, follows: 

Obligations incurred by the Internal Revenue Service, fiscal years 1954 and 

1955, by activity and by class of expenditure 

[In thousands of dollars] 

Activity 

Salaries Other Total 

Fiscal 

year 1954 

Fiscal 

year 1955 

Fiscal 

year 1954 

Fiscal 

year 1955 

Fiscal 

year 1954 

Fiscal 

year 1955 

Technical - - - - - - - - - - - - - - - - - - - - - - - - 

Collection - - - - - - - - - - - - - - - - - - - - - - - - 

Audit - - - - - - - - - - - - - - - - - - - - - - - - - - -

Intelligence - - - - - - - - - - - - - - - - - - - - - - -

Alcohol and tobacco tax - - - - - - - - - - - - - - - 

Appellate - - - - - - - - - - - - - - - - - - - - - - - - 

Legal service - - - - - - - - - - - - - - - - - - - - - -

Inspection - - - - - - - - - - - - - - - - - - - - - - - -

Statistical reporting - - - - - - - - - - - - - - - - - -

Executive direction - - - - - - - - - - - - - - - - - - 

Supervision and administration (proratable)__ _. 

Total - - - - - - - - - - - - - - - - - - - - - - -

3, 901 

55, 784 

1 122, 841 

9, 965 

18, 477 

7,790 

5, 825 

2, 970 

1, 491 

2, 323 

9, 737 

3, 865 

I 95, 914 

87, 337 

10, 999 

18, 237 

8,419 

5, 821 

2, 996 

1, 522 

2, 395 

10, 406 

10, 

1 6, 

2, 

6, 

53 

279 

998 

881 

006 

320 

449 

555 

100 

116 

110 

1 13, 

5, 

1,

2,

6, 

171 

406 

272 

131 

440 

329 

450 

547 

462 

695 

021 

3, 954 

66, 063 

1 129, 838 

10, 846 

20, 482 

8,110 

6, 274 

3, 525 

1, 590 

2, 439 

15, 847 

4, 036 

1 109, 320 

92, 609 

12, 129 

20, 677 

8,748 

6, 270 

3, 543 

1, 984 

3, 090 

16, 428 

241,103 247, 911 27, 866 30, 923 268, 969 278, 834 

1 The cost of delinquent accounts and returns work was charged to "audit" in fiscal 1954 and to "collection" in fiscal 

1955. The actual transfer of functions occurred July 20, 1953, in the case of delinquent accounts work, and Sept. 21, 

1953, in the case of delinquent returns work. 

Enrollment of Practitioners 

The "Conference and Practice Requirements," rules governing the 

enrollment, recognition, and conduct of practitioners, were revised. This 

Report on Operations 57 

• 

was the most extensive revision since 1942 and contained many clarifying amendments. 

The processing of applications for enrollment and of disbarment cases 

was kept current. 'Listed below are comparative statistics showing the 

disposition of cases for the fiscal years 1954 and 1955: 

Disposition of enrollment and disbarment cases, fiscal years 1954 and 1955 

Type of case 

Fisca year 

1954 1955 

General enrollment-attorneys and agents: 

Applications for enrollment approved - - - - 4,839 4,397 

Applications for enrollment disapproved - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 33 52 

Applications withdrawn on advice of the Director 192 150 

Applications abandoned - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 39 24 

Special enrollment to practice before the Internal Revenue Service: 

Applications approved by reason of examination - - - - - - - - - - - - - - - - - - - - - - - - - 2 - - - - - - - - 

Applications approved pursuant to standards and procedures based upon former service 

with the Treasury Department. (Sec. 12, Department Circular No. 230, revised)__ _ 125 136 

Applications approved by reason of having passed C. P. A. examination though C. P. A. 

certificates not issued - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 21 13 

Applications of former employees denied - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9 12 

Applications withdrawn - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 32 11 

Applications abandoned - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 101 52 

Renewal of enrollment cases: 

Applications for renewal approved - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I, 506 751 

Applications for renewal disapproved - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 32 19 

Applications for renewal withdrawn - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 59 40 

Applications for renewal abandoned - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 2 

Disbarment cases: 

Disbarments - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3 3 

Resignations accepted - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 10 6 

Resignations accepted with prejudice - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 3 

Reprimands issued - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9 12 

Suspensions - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 14 

Formal complaints pending against enrolled persons - - - - - - - - - - - - - - - - - - - - - - 52 50 

Closed without action - - - - - - - - - - - - - - - - - - - - - - - - 9 17 

General Management Improvements and Policy 

Changes 

The management improvement program during the year was concentrated on making the most effective use of the existing organization, 

following a series of far-ranging reorganizations which were installed in 

the last few years. 

One of the important projects was the realignment of posts of duty. 

Many of these locations had been established under population, transportation, and communication conditions of three or four generations ago, 

and frequently were manned by only one or two individuals. There was 

also a considerable disparity in the number and location of posts in different 

parts of the country. A rational formula was established for locating 

offices, based on population, travel distances, etc., and designed to group 

employees in offices large enough for efficient management. After giving 

each region an opportunity to adjust the plan according to local needs, 

the program was put into effect. The result was a reduction in the number 

of posts of duty from 1,462 to 926. 

366952 0-56-----5 
58 Commissioner of Internal Revenue Annual Report 

Mapshowingdistributionof local officesasof Decem ber1,19 

Report on O

beforerealign 
60 Commissioner of Internal Revenue Annual Report 

Another significant change was the beginning of a return system to 

replace the traditional stamp system for collecting excise taxes on wine 

and beer. The new Code gave the Secretary authority to change to the 

return system throughout the alcohol and tobacco tax area, but it was 

believed advisable to test the changeover on wine and beer before proceeding further. However, a survey committee of both Revenue Service and 

industry representatives made considerable headway in designing simpler 

and more economical systems of supervision, recordkeeping, etc. Insofar 

as some of the suggestions could be adopted without legislation, they were 

installed—some of them on an experimental pilot plant basis. Legislative 

suggestions incorporating other modernizations of the alcohol and tobacco 

tax systems were also prepared. 

The Treasury and the Department of Health, Education and Welfare 

jointly sponsored the introduction in Congress of a plan which they had 

developed for simplifying wage reports by employers under income tax 

withholding and social security laws. Under the plan, employers would 

be excused from filing the quarterly wage reports presently required for 

social security purposes. Instead, the Revenue Service would make available to the Social Security Administration the annual wage reports made 

by employers on Form W-2 for income tax purposes. The plan also contemplates joint processing of these reports by modern electronic business 

machines, which may provide substantial savings to both agencies. The 

savings to employers contemplated by the plan were cited with approval 

by the Commission on Organization of the Executive Branch of the Government. 

A concentrated effort was made to simplify and systematize operational 

reports from the various field offices to the National Office. A special 

reports committee spearheaded this drive to evaluate and improve the 

periodic and special reports which enable the management of the Revenue 

Service to know what work is being accomplished in each of the significant 

areas, including audits, collections, intelligence investigations, appellate 

considerations, etc. 

Installation of the revised revenue accounting system was completed 

throughout all field offices. The new system (replacing one in effect since 

1919) will provide more complete, informative, and useful financial and 

management reports, and its internal check and control features will 

facilitate both internal and external audits. Further improvements are 

being made in the system on the basis of practical operating experience in 

the field offices. These changes are designed to increase efficiency without 

incurring additional costs. 

One of the more promising experiments in processing returns was the 

conversion of Form 1040A (optional income tax return for wage earners 

with incomes of less than $5,000) to a punch card, which was processed by 

electronic means in several districts having tabulating machine equipment 

Report on Operations 61 

and also on a combined regional basis in Kansas City for the entire Omaha 

region. A cost analysis of the Kansas City operation showed a margin of 

savings over the methods used in other offices. The results of this experiment led to the conclusion to develop a full-scale regional processing 

center, and to plan for similar processing centers in other geographical 

areas. 

Special study was given to the problem of minimizing the cost of the 

taxpayer assistance program. Traditionally, during the annual period 

for filing individual income tax returns, a substantial number of revenue 

agents, collection officers, auditors, and other qualified personnel are 

taken off their regular duties to assist taxpayers. In an effort to keep as 

many of these employees on regular work as possible, emphasis was placed 

in the last filing season on group instruction and self-help techniques 

rather than on individual assistance. Also, an intensive survey was made 

of a sample of taxpayers to determine what their needs and problems were, 

and how best to serve them with the least diversion of audit and other 

specialist manpower. 

Among the unusual operating problems peculiar to the past year were 

the unprecedented tasks of reconverting all technical and procedural 

operations to the provisions of the Internal Revenue Code of 1954—which 

was the most extensive revision of the tax laws since 1913—and the expanded coverage under the new social security laws. Advance preparation 

of detailed manuals enabled a smooth changeover. A large number of 

forms, instruction pamphlets, and other taxpayer materials also were 

revised under the new laws. 

A study of compliance problems among United States citizens living 

abroad also was initiated. This showed that there were approximately 

a million Americans abroad who needed assistance and who had obligations to file returns and pay tax to the United States. In order to coordinate and intensify work among these taxpayers, it was decided to 

establish an International Operations Division which will gather up the 

scattered responsibilities in the various domestic offices of the Revenue 

Service with regard to taxpayers in foreign countries. Among other steps, 

the new Division expects to establish a few more permanent foreign offices, 

similar to the one maintained in Paris for many years. 

Progress in fiscal management was highlighted by improved budget 

practices involving preparation, execution, and control. To a greater 

extent than ever before, "grass-roots" needs and conditions were being 

reflected in the formulation of the budget by having the basic preparation 

done in the regions and districts, with operating officials participating. 

Studies to determine appropriate measurable workload units were completed in the collection and audit areas. A budget execution reports system 

was developed which will give management a more current picture of the 

budget condition and readily identify areas which need adjustments and 
62 Commissioner of Internal Revenue Annual Report 

corrective action. Fiscal accounting practices and reporting also underwent improvements, including the publication of a document containing 

all administrative accounting codes and the preparation of a printed chart 

of general ledger accounts. 

The lag in issuing "Statistics of Income" on the annual individual and 

corporation income tax returns was reduced, on the average, about 5 

months during fiscal 1955. This was a continuation of a drive begun 

2 years ago, when the statistics on 1946 individual returns came out 75 

months after the filing date. When the comparable statistics on 1951 

returns were issued recently, the time lag had been cut to 36 months. 

Because of collection and audit priorities in the handling of returns, a 

considerable time lag is inevitable, but some further gains are anticipated. 

Appeni 

Statisticai 

gale; 
Note.—In tables where figures 

have been rounded to a specified unit, the components 

may not necessarily add to 

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Internal Revenue 

Collections 

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76 Commissioner of Internal Revenue Annual Report 

Internal Revenu
Commissioner of Internal Revenue Annual Report Reta ilers' excisetaxes Tota l retailers' exciseta xes 

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40 Commissioner of Internal Revenue Annual Report 

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Internal Revenue Collections 89 

Table 3.-Internal revenue collections by sources, fiscal year 1954 and 1955 

[In thousands of dollars] 

Sources of revenue Fisca year 

1954 ] 1955 

Corporation income and profits taxes: 

Regular s, 

Exempt organization business income tax it ___ - 

Total corporation income and profits taxes 

Individual income and employment taxes: 

Income tax not withheld 2 

Withheld taxes: 

Income tax and old'age insurance: " 

Received with returns 

Undistributed depositary receipts r 

Total income tax and old-age insurance 

Railroad retirement: 

Railroad employment compensation tax received with returns. 12 percent 

of taxable portion of payrolls to 12/31/54, 121/2 percent thereafter 

Railroad employees' representative tax ieceived with returns, 12 percent 

of taxable portion of payrolls to 12/31/54, 121/2 percent thereafter.... . 

Undistributed depositary receipts 3 

Total railroad retirement 

... _____ ________ 

Total withheld taxes. 

Unemployment insurance. 3 percent of taxable portion of payrolls... _ .. ___ 

Total individual income and employment taxes 

Estate tax " 

Gift tax 

Alcohol taxes: 

Distilled spirits: 3 

Excise taxes: 

Imported (collected by Customs) $10.50 per gallon 

Domestic, past, per gallon 

Seizures, penalties, etc _ 

Floor stocks tax (tax-paid stocks on hand) 

Rectification tax, per proof gallon, 30 cents 

Export stamps, 10 cents per cask and 5 cents per case A -1 Container stamps, 1 cent per bottle, or "A cent if less than 1/2 pent: A 

Bottled in 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 - -, 

1 Retail dealers in liquor or medicinal spirits, $50 per year 

. .. .... Nonbeverage manufacturers of spirits, $25, $50, $100 per year 

Total distilled spirits 

Wines, cordials. etc.: 

Excise taxes: 

Imported (collected by Customs) 

. Domestic _____ ____ 

Floor stocks tax (tax-paid stocks on hand) 

Special or occupational taxes: 

Wholesale dealers in wines or in wines and beer, $200 per year 

Retail dealers in wines or in wines and beer, $50 per year. 

... 

Total wines .. ______ 

Beer: ] Excise tax per barrel of 31 gallons, $9 _ , ____ _ - Floor stocks tax (tax-paid stocks on hand) 

Special or occupational taxes: 

Brewers, 500 barrels or more, $110 per year; less than 500 barrels, $55 

per year 

Wholesale dealers in beer, $100 per year 

Retails dealers in beer, $22 per year 

1 21 545 , 632 18, 262, 571 

' . ' 690 2,150 

: 21,546,322 I 18. 264, 720 

- -- 

 10, 946, 578 

1 26, 085. 633 

10, 724,120 

25, 673, 490 

592, 068 

26 085,633 26, 265. 558 

605. 177 

44 

597, 218 

44 

2. 844 

605,221 600,106 

26, 690, 854 26, 865. 663 

283, 882 279, 986 

37, 921, 314 37, 869, 770 

863,344 848, 492 

71, 778 i 87.775 

• 

230, 566 

1, 642, 069 

995 

282 

24,951 

31 

1 1,088 

13,013: 

5 

9, 

4 

11150 

1,339 

3329 

13,710 

242,848 

1. 626, 255 

1,497 

45 

I 23. 867 

8 

, 519 

6.213 

6 

6 

8 

21 

1, 272 

 14.367 

105 

1, 928, 208 1, 917, 038 

4,152 

74, 527 

II 

1,101 

1 

, 

1 

7 47,, 6738299 

106 

 1,085 

_ 

79.904 

• 

769,774 

13 

35 

1, 171 

3,907 , 

83.017 

737, 233 

7 

34 

I, 225 

4,285 

Total beer. . _______ _ . 

Total alcohol taxes... 

Footnotes on page 93. 

774,900 742,784 

2, 783, 012 2, 742, 840 

F

-taco afla El at c45-,--arm- fr 

3130002 
Flue year Sources of revenue 

1954 1955 

Tobacco taxes: I 

Large cigars classified by intended retail prices: 

Class A, fax 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 stocks tax (lax-paid stocks on hand) 

Cigarettes per thousand, class A (small) $4, class B (large) $8.40 

Cigarette papers Ws cent) and tubes (1 cent) 

Manufactured tobacco (chewing, smoking, and snuff), 10 cents per pound 

Court fines, penalties, and taxes on leaf tobacco sold or removed in violation of sac 

5731, Internal Revenue Code of 1954 

79 

554 

8.972 

4,289 

25, 100 

3, 011 

3, 570 

42 

2 

I, 513, 740 

695 

20,173 

(4 ) 

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: m 

Lubricating oils, per gallon, 6 cents. 

Gasoline, per gallon, 2 cents 

Floor stocks tax, gasoline, 1/2 cent per gallon 

Tires (wholly or in part of rubber), per pound, 5 cents 

Inner tubes, per pound, 9 cents 

Mechanical pencils, pens, and lighters, 15 percent to 3/31/54, 10 percent thereafter_ 

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 to 3/31/54, 5 percent thereafter 

Electric light bulbs. 20 percent to 3/31/54, 10 percent thereafter 

Radio sets, television sets, phonographs, components, etc., 10 percent 

Phonograph records, 10 percent 

Musical instruments, 10 percent 

Refrigerators, freezers, air-conditioners, etc., 10 percent to 3/31/54, 5 percent 

thereafter except for self-contained air-conditioning units which remains at 

10 percent 

Matches, per thousand, 2 cents, and fancy wooden or colored stems, 51/2 cents 

Business and store machines, 10 percent 

Cameras, lenses, and film, 20 percent to 3/31/54, 10 percent thereafter. 

Sporting goods, 15 percent to 3/31/54, 10 percent thereafter 

Fishing rods, creels, etc., 10 percent 

Firearms, shells, and cartridges. 11 percent 

Pistols and revolvers, II percent to 3/31/54, 10 percent thereafter 

Total manufacturers' excise taxes 

Retailers' excise taxes: aa 

Furs, 20 percent to 3/31/54, 10 percent thereafter 

Jewelry, 20 percent to 3/31/54, 10 percent thereafter 

Luggage, 20 percent to 3/31/54, 10 percent thereafter 

Toilet goods, 20 percent to 3/31/54, 10 percent thereafter 

Total retailers' excise taxes ' 

I, 571, 213 

21, 427 

61,608 

24 

6, 941 

112, 049 

• 68, 029 69, 818 

• 836, 892 953,18! 

*) 20 

•

( 

130, 055 141, 383 

22, 512 22, 270 

10,885 8, 366 

149,914 134,805 

867, 482 1, 047, 813 

• 134, 759 136, 664 

97, 415 50, 859 

35, 390 18, 673 

135, 535 136, 849 

8,445 8, 287 

9, 191 10, 783 

75,059 38, 004 

9, 373 5, 808 

48, 992 57, 281 

25, 196 15, 157 

8,10 8,112 

4,625 5. 347 

10, 266 12, 401 

975 949 

• 2, 689, 133 2, 882, 832 

39, 036 27, 053 

209, 256 142, 366 

79, 891 50, 896 

110, 149 71, 829 

438,332 292.145 

I, 580, 229 

26,388 

78, 901 

60 

6, 700 

90, UM 

78 

673 

9, 274 

4, 025 

25,353 

3, 091 

3,706 

46 

2 

I, 504,197 

693 

20, 064 

12 

1954 1955 

FISCB year 

Sources of revenue 

Miscellaneous excise taxes: ff 

Sugar, per pound, approximately 1/1 cent 

Telephone, telegraph, cable, radio, 25 percent to 3/31/54 10 percent thereafter... 

Leased wires, 25 percent to 3/31/54, 10 percent thereafter; wire and equipment 

service, 8 percent 

Local telephone service, 15 percent to 3/31/54, 10 percent thereafter 

Transportation of oil by pipeline. 41/2 percent 

Transportation of persons, 15 percent to 3/31/54, 10 percent thereafter 

Transportation of property, 3 percent of amount paid, except coal which is 4 cents 

per ton 

Use of safe deposit boxes, 20 percent to 3/31/54, 10 percent thereafter 

Club dues and initiation fees, 20 percent 

Bowling alleys, pool tables, etc., $20 per alley or table 

Coin-operated amusement and gaming devices, $10 and $250 per device 

Admissions: 

Admissions, 1 cent for each 5 cents or fraction of the amount paid to 3/31/54, 

1 cent for each 10 cents thereafter ss 

Ticket brokers' sales, for amounts in excess of box office price, 20 percent to 

3/31/54, 10 percent thereafter an 

Leases of boxes or seats, of the amount for which similar accommodations 

are sold, 20 percent to 3/31/54, 10 percent thereafter rs 

Roof gardens, cabarets, etc., 20 percent of total paid for admissions, services, 

etc 

Admissions sold by proprietors in excess of established price, 50 percent of 

such excess 

Total admissions taxes 

Narcotics (Opium, coca leaves, or derivatives thereof): 

Opium, coca leaves, etc., per ounce or fraction thereof. 1 cent 

Opium order blanks, per hundred, $1 

Accepted offers in compromise, etc., on account of narcotics tax 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 oil 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 

Adulterated and process or renovated butter and filled cheese 

Firearms transfer and occupational taxes 

Diesel fuel, including special motor fuels, 2 cents per gallon 

Wagering: 

Occupational, $50 

Excise, 10 percent. 

Other receipts (including repealed taxes) 

Total miscellaneous excise taxes 

Undistributed depositary receipts-excise taxes 

Unclassified advance payments of excise taxes 

Grand total all internal revenue taxes 

• 74, 477 78, 512 

388, 893 212, 458 

23, 615 17, 793 

359,473 290,198 

• 29,730 36, 722 

• 247, 415 197, 201 

• 395, 554 398,023 

• 9,049 5,568 

31,978 41,963 

3,227 3, 364 

14,616 14,994 

270, 520 105,139 

812 492 

404 377 

38,312 39,271 

215 77 

310, 264 145,357 

• I, 936, 527 -Lama to* 

69,919,991 06,288,692 

1, 389 

113, 298 

360 416 

17 20 

46 44 

7 3 

16 15 

174 180 

258 267 

5 5 

883 150 

36 43 

14, 842 16, 064 

76 46 

21 17 

93 47 

I, 234 2, 776 

16, 266 18, 950 

12 23 

8 II 

• 17, 969 24, 876 

1, 008 835 

8, 550 6, 973 

3, 505 7, 355 

90 Commissioner of Internal Revenue Annual Report 

Table 3.-Internal revenue collections by sources, fiscal years 1954 and 1955- 

Continued 

[In thousands of dollars] 

Internal Revenue Collections 91 

Table 3.-Internal revenue collections by sources, fiscal years 1954 and 1955- 

Continued 

[In thousands of dollars] 

Footnotes on p. 93. 

Footnotes on page 93. 
A 

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92 Commissioner of Internal Revenue Annual Report Internal Revenue Collections 93 Footnotesonp. 93. 

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1940 1 941 1942 1943 

1944 1 94 5 1946 1947 1 948 1949 1950 1951 1952 1953 1954 1955 

Footnotes for tables I, 2, 3, and 4 

• Less than $500. 

I Includes tax on business income of exempt organizations. 

Includes old-age insurance tax on self-employment income. Rates of tax are as follows: 

Individual income tax: Graduated rates from 20 percent on first $2,000 net income in excess of exemption to 91 

percent on amount over $200,000. 

Self-employment tax: 3 percent of self-employment income. 

• Under revised accounting procedures effective July I, 1954. tax payments made to banks under the depositary receipts 

system are included in internal revenue collections for the month in which the depositary receipts are issued instead of 

the month in which tax returns supported by the depositary receipts are received in internal revenue offices. The revised 

procedure conforms to the practice followed in other Treasury Department reports dealing with internal revenue receipts. 

The classes of taxes affected by this change and its effect upon comparability of the data for 1954 and 1955 are shown in 

table 3, p. 89. It is not possible to make a complete classification of such payments until the returns are received. Accordingly, the items shown as "Undistributed depositary receipts" represent the amount of depositary receipts issued, less 

the amount of depositary receipts received with returns and distributed by classes of tax. 

4 Includes railroad employment compensation tax and tax on railroad employee representatives. 

5 Lower Manhattan district includes Puerto Rico; Baltimore district includes Maryland and the District of Columbia; 

Seattle district includes Washington and Alaska. 

Advance payments of estate and gift taxes are reported in combined amount only and for the purpose of this tabulation 

are included in estate tax. The total amount of such advance payments for 1955 is $16,116.000. 

Included this year for the first time are amounts of tax collected in Puerto Rico upon articles of merchandise of Puerto 

Rican manufacture coming into the United States. For amounts of such collections see table 5. In previous reports 

such collections were shown separately but were excluded from overall collections results. 

•

Includesexport stamps, bottled-in-bond container stamps, and bottled other. than-in-bond container stamps. See nate23. 

• Includes special or occupational taxes on manufacturers of stills, rectifiers, wholesale liquor dealers, retail dealers in 

liquor or medicinal spirits, and nonbeverage manufacturers of spirits. 

55 Includes floor stocks tax; tax on stills or worms manufactured; and seizures, penalties, etc. 

II Includes special or occupational taxes on wholesale and retail dealers in wines or in wines and beer. 

55 Includes special or occupational taxes on brewers and wholesale and retail dealers in beer. 

ix Includes taxes on large cigars, classes A through G, and on small cigars. 

55 Includes floor stocks taxes, taxes on cigarette papers and tubes, court fines, penalties, and taxes on Mat tobacco sold 

or removed in violation of sec. 5731, Internal Revenue Code of 1954. 

I• Includes taxes on silver bullion transfers and on playing cards. 

re Includes taxes on mechanical pens, pencils, and lighters; electric light bulbs; phonograph records; musical instruments; matches; business and store machines; cameras, lenses, and film; sporting goods; fishing rods, creels, etc.; 

firearms, shells, and cartridges; and pistols and revolvers. 

55 Includes taxes on ticket brokers' sales, leases on boxes or seats, and admissions sold by proprietors in excess of 

established price, as well as general admissions tax. 

55 Includes all narcotics and marihuana taxes. 

55 Includes taxes on coconut oil from the Philippines, the Trust Territory, and United States possessions as well as 

other coconut and vegetable oils processed. 

m Includes undistributed depositary receipts and unclassified advance payments of excise taxes. 

u Corporation income and profits tax rates: First $25,000 of net income, normal tax of 30 percent; net income in excess 

of $25,000, combined normal tax and surtax of 52 percent. Normal tax and surtax rates also apply to net income derived 

by certain exempt organizations from unrelated trade or business. 

42 Rates of income tax withheld and old-age insurance taxes: 

Income tax withheld: Wages in excess of exemptions taxed at 20 percent through Dec. 31, 1953; 18 percent beginning Ian. I, 1954. 

Old-age insurance taxes (including employers' and employees' taxes): Taxable portion of payrolls taxed at 3 percent through Dec. 31, 1953; 4 percent beginning Jan. 1, 1954. 

sec Effective January I, 1955, container stamps and export stamps are furnished without charge. 

54 The comparability of excise tax collections for the fiscal year 1955 with those for the fiscal year 1954 is affected by 

(1) the reductions in excise tax rates which were effective April I, 1954, under the Excise Tax Reduction Act of 1954, and 

(2) the change from a monthly basis to a quarterly basis for the filing of substantially all excise tax returns, effective with 

the quarter beginning July 1, 1953. Also beginning July I, 1953, the depositary receipt system for payment of taxes was 

extended to cover excise taxes. 

55 Rates applicable in the case of race tracks remain the same as in effect prior to Apr. 1, 1954. 

•• Beginning January 1951, withheld income taxes and social security employment taxes on employees and employers 

are paid into the Treasury in combined amounts without separation as to type of tax. The figures for prior periods have 

been combined accordingly in this table for purposes of comparison, but are shown separately in previous annual reports. 

• Revised. 
94 Commissioner of Internal Revenue Annual Report 

Table S.—Internal revenue tax on manufactured products from Puerto Rico, 

by objects of taxation, fiscal years 1994 and 1955 

Articles taxed 

Fiscal year 

1954 1995 

Distilled spirits, excise tax 

Distilled spirits, rectification tax 

Cigars, large: 

Class A 

Class B 

Class C 

Class D 

$14, 286, 853 

419, 219 

12, 782 

5 

$16, 285, 057 

459, 398 

5, 612 

Class E 1,859 4,267 

Class F 263, 027 642, 046 

Class G 2,946 2,582 

Cigars, small 320 568 

Cigarettes, small 

Chewing and smoking tobacco 560 

1, 925 

440 

I, 975 

Total 14, 989, 496 17, 401, 945 

Note.—Amounts of taxes collected in Puerto Rico on tobacco and liquor manufactures coming into the United States 

are covered into the Treasury of Puerto Rico under the provisions of section 7652 (a) (3) of the Internal Revenue Code of 1954. 

Such amounts are included in overall collections results (tables 1 through 4) this year for the first time. Previous 

years' reports included in the overall results only the amounts of such taxes collected at United States ports of entry. 

Alcohol any 

Tobacco Taxel 

Tables 6-1 
96 Commissioner of Internal Revenue Annual Report 

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

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

1954 and 1955, or to engage in the production or distribution of tobacco 

products as of Dec. 31, 1953 and 1954. 

June 30 

Class of establishment 

1954 

Alcohol, distilled spirits, 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 

Users of specially denatured alcohol and rum 

Reprocessors, rebottles, etc., of specially denatured alcohol articles 

Users of tax-free alcohol 

Beer: 

Breweries 

Wine: 

Bonded wine cellars 

Tax-paid wine bottling houses 2 

Vinegar: 

Vinegar factories using vaporizing process 

Beverage dealers: 

Importers 

Wholesale dealers in liquors 

Wholesale dealers in beer 

Retail dealers in liquors 

Retail dealers in beer 

Other: 

Manufacturers of nonbeverage products (drawback) 

Bottle manufacturers 

Carriers 

Fruit-flavor concentrate plants 

Dec. 31 

Tobacco 

1953 

Manufacturers of tobacco including snuff 

Manufacturers of cigars and cigarettes 

Sea stores warehouses 

Export warehouses 

Includes bonded wineries, bonded wine storerooms, and bonded field warehouses previously reported separately. 

• Category established by sec. 5352 of Internal Revenue Code of 1954. 

• Revised. 

Table 7.-Permits for operations relating to alcoholic beverages, under the 

Federal Alcohol Administration Act, fiscal year 1955 

Status 

Distillers 

(1) 

Warehousing 

and 

bottling 

(2) 

Red. 

Tiers 

(3) 

Wine 

Ills 

and 

blenders 

(4) 

Wine 

blenders 

(5) 

Importers 

(6) 

Wholesalers 

(7) 

Total 

(8) 

In effect July 1, 1954 

Issued 

Terminated 

Revoked 

Annulled 

Voluntarily surrendered 

Automatically terminated 

In effect lune 30, 1955 

Amended 

271 

42 

56 

29 

27 

257 

55 

319 

4b 

56 

45 

II 

303 

123 

2u9 

18 

35 

29 

6 

192 

56 

606 

56 

113 

44 

69 

549 

122 

75 

21 

30 

27 

3 

66 

11 

1, 246 

196 

153 

I 

94 

58 

I, 289 

153 

13, 193 

1,797 

2,215 

32 

I, 008 

1,175 

12, 775 

1,164 

15, 919 

2, 170 

2,658 

33 

1,276 

1,349 

15, 431 

1,684 

Alcohol and Tobacco Taxes 97 

Table 0,-Permits relating to industrial alcohol, under chapter 51, Internal 

Revenue Code, fiscal year 1955 

Status 

• 

Industrial alecho! plants, 

b nded warehouses and 

denaturing 

plants I 

Dealers in 

specially 

denatured 

alcohol 

Users of 

specially 

denatured 

alcohol 

Users of 

specially 

denatured 

rum 

Users of 

tax.free alcohol 

Carriers of 

tax-free 

and spa. 

malty denatured 

alcohol 

Total 

(1) (2) (3) (4) (5) (6) (7) 

In effect July 1, 1954 78 

COM OD 

4, 105 53 7, 608 469 12, 349 

Issued 5 297 289 31 625 

Terminated 10 371 5 305 30 725 

Revoked 2 7 9 

Voluntarily surrendered 9 294 5 236 , 23 571 

Involuntarily surrendered.._ 1 6 1 8 

Expired °.. 69 ....... __ 61 7 137 

In effect June 30, 1955 73 4, 031 48 7, 592 470 12.249 

Renewals approved 78 3,815 43 37, 707 445 12,123 

Amended 42 1,411 __ 681 39 2,181 

I Permits cover industrial alcohol plants, bonded warehouses, and denaturing plants, either s'ngly or in combination. 

2Represents permits terminated due to failure to file renewal apprise ions, or to disapproval of renewal applications. 

a Includes also the processing of renewal applications for permits to be issued during the ensuing year. 

Table 9.-Label activity under the Federal Alcohol Administration Act, fiscal 

year 1955 

Applications received Certificates issued 

Applications disapproved 

(6) 

Total 

(7) 

For upprover 

(1) 

For exemption 

(2) 

Total 

(3) 

Approvals 

(4) 

Exemp- 

(5) 

Distilled Spirits 

Domestic 14, 141 62 14, 203 13, 554 47 239 13, 840 

Imported 1, 429 1, 429 I, 255 98 I, 353 

Total 15,570 62 15, 632 14, 809 47 337 15,193 

Wines 

Domestic 8,064 747 8,811 7,573 711 60 8,344 

Imported 12, 514 12,514 12, 055 155 12,210 

Total 20,578 747 21,325 19, 628 711 215 20, 554 

Malt beverages 

Domestic I, 665 I, 665 I, 503 29 1, 532 

Imported 275 275 236 26 262 

Total 1,940 1,940 1,739 __________ 55 1,794 

Grand total 38,088 809 38, 897 36,176 758 607 37, 541 

7 

1,249 

7,069 

r 12, 165 

288, 367 

176, 450 

I, 124 

83 

469 

15 

256 

1,163 

53 

4 

106 

100 

231 

55 

151 

43 

53 

48 

35 

4, 156 

1,604 

7, 608 

296 

102 

95 

221 

52 

141 

37 

47 

46 

35 

4, 077 

I, 545 

7,592 

283 

621 

7 

1,290 

7, 555 

11, 461 

277, 466 

164, 323 

I, 049 

87 

470 

16 

1954 

1955 

246 

1, 016 

58 

6 
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Cases Receiving 

Appellate Consideration 

or in Litigation 

Tables 11-23 
9, 101 

272 

206 

I, 215 

52 

1, 051 

11,897 

110 Commissioner of Internal Revenue Annual Report 

Table 11.-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 1955 

Status 

Number 

of cases 

(1) 

Amount stated in revenue agent's 

report or in statutory notice 

Deficiency 

in tax 

(2) 

Penalty 

(3) 

Overassessment 

(4) 

Pending July I, 1954: 

Awaiting Appellate Division action 

Awaiting taxpayer's action an statutory notice directed or sustained_ 

Received during year 

Disposed of during year: 

12,251 

1,327 

10,608 

(In thousands of dollars) 

510, 362 

41, 975 

222, 345 

51, 513 

7,337 

18, 664 

116, 366 

2, 923 

III, 203 

Closed 11,897 207,459 26, 754 34, 455 

Petitioned to the Tax Court 3, 178 127, 931 18,282 846 

Total 15, 075 335, 390 45, 036 35, 301 

Pending June 30, 1955: 

Awaiting Appellate Division action 8,128 406, 530 27, 603 195,115 

Awaiting taxpayer's action on statutory notice directed or sustained. 983 32,761 4,876 78 

Tote 9,111 439,291 32,479 195,192 

Table 12.-Results obtained in Appellate Division disposals of moms, profits, 

estate, and gift tax cases not before the Tax Court, fiscal year 1955 

Decision of Appellate Division 

Disposal 

Agreements before statutory notice (including agreed overassessments 

and agreed claim rejections) 

Agreements on directors' statutory notice during 90-day period 

Agreements on reconsideration after Appellate Division's statutory 

notices 

Defaults on Appellate Division's statutory notices (no petition filed)._ 

Defaults on directors statutory notices sustained by Appellate Division 

(no petition filed) 

Unagreed overassessments and claims rejections 

Total 

573,547 110,071 

246, 726 45, 392 I, 654 

32,323 

Cases Receiving Appellate Consideration or in Litigation 111 

Table 13.-Appellate Division receipt and disposal of income, profits, estate, 

and gift tax cases docketed in the Tax Court (pending settlement or trial), 

fiscal year 1955 

Amount stated in statutory notice 

Number 

of cases 

(I) 

Deficiency 

in tax 

(2) 

Status Penalty 

(3) 

(In fly usands of dollars) 

Pending July 1, 1954 

Received during year 

Disposed of during year: 

Closed by stipulation-agreed settlement 

Closed by dismissal or default 

Tried before the Tax Court on merits 

Total 

Pending June 30, 1955: 

In hands of technical advisers 

In hands of regional counsel 

Total 

4, 087 

201 

1, 027 

245, 495 

3,964 

65, 604 

5,315 315,062 

7,961 505,211 

Includes 2, 905 cases considered before petition, 1,803 cases not considered before petition, and 73 cases reopened after 

trial. 

Table 14.-Results obtained in income, profits, estate, and gift tax cases 

docketed in the Tax Court and disposed of by stipulation (agreed settlement), 

fiscal year 1955 

Stipulations 

filed 

number 4, 087 

thousand dollars-- 81, 887 

do 10, 959 

do.. 18, 502 

do.... 74, 345 

40, 626 

3,371 

4, 590 260,661 

244, 550 

Overassessment 

(4) 

8,495 

I 4, 781 

44, 275 

114,837 

Itern 

Cases 

Deficiency in tax 

Penalty 

Overassessm en 

Net deficiency and penalty 

20, 610 

2 

449 

21,060 

7,532 

5, 385 

12,917 

Table 15.-Income, profits, estate, and gift tax cases docketed, stipulated, 

defaulted, and, defended on the merits before the Tax Court, fiscal years 

1940 to 1955 

Fiscal year 

Number 

docketed 

(1) 

Number 

stipulated 

(2) 

Number 

defaulted 

(3) 

Number 

defended on the merits 

(4) 

1940 4,240 3,383 267 I, 301 

1941 4, 366 3,064 239 1, 522 

1942 3, 676 2,517 175 I, 269 

1943 3, 380 2, 754 163 1,138 

1944 3, 178 I, 964 180 927 

1945 3, 185 1,787 160 993 

1946 2,777 1,787 142 873 

1947 3,652 1,913 217 791 

1948 4,402 2, 526 458 949 

1949 4, 537 3, 065 413 946 

1950 5,362 2,732 419 956 

1951 6,137 3,364 541 1,064 

1952 6, 870 3, 326 596 1,002 

1953 7, 122 4,189 520 1, 014 

1954 4,194 5, 465 300 1,191 

1955 4,971 4,018 201 1,027 

Total 72, 049 47, 854 4, 991 16, 963 

Source: For columns 1 and 2, data obtained from Tax Court records; for columns 3 and 4, data obtained from Appellate 

Division records. 

Amount of 

deficiency 

in tax 

(2) 

Amount of 

Penalty 

(3) 

Amount of 

@VMSsessment 

(4) 

(In thousands of dollars) 

I, 616 

105, 943 11,922 

6 

I, 159 

41,537 

Number 

of cases 

(1) 
112 Commissioner of Internal Revenue Annual Report Cases Receiving Appellate Consideration or in Litigation 113 

Table 16.-Appellate Division receipt and disposal of compromise and final 

closing agreement cases, fiscal year 1955 

Status Compromise 

cases 

Final closing 

agreement 

CMS 

Pending July I, 1954 626 25 

Received during year 299 126 

Disposed of during year: 

Accepted, granted, or approved 281 

Rejected 310 

Withdrawn 91 

Total 682 124 

Pending June 30, 1955 243 27 

Table 17.-Appellate Division receipt and disposal of nondocketed, docketed, 

and compromise cases (income, profits, estate, and gift taxes), fiscal years 

1945 to 1955 

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 

(10) 

1955 

(11) 

Nondocketed cases 

Receipts 6, 087 5.661 5, 325 7, 515 8,036 7, 384 7, 014 7, 398'20,962 8, 950 10, 608 

Disposals 5, 754 4,579 5,243 5,473 6,108 6,896 7,147 7,528 11,674 14, 737 15,075 

Pending June 30 4,718 5, 800 5, 882 7, 924 9, 852 10, 340 ID, 207 10,077 19, 365 13, 578 9, Ill 

Docketed cases 

Receipts 3, 181 2,745 3,332 4,598 4,624 5,335 6,115 6,434 7,677 4,433 4,781 

Disposals 2, 922 2, 816 2, 986 3, 879 4, 484 4, 097 4, 941 4, 971 5, 763 6, 858 5, 315 

Pending June 30_ 3,997 3, 926 4, 272 4, 991 5,131 6, 369 7, 543 9, 006 10, 920 8, 495 7, 961 

Compromise cases 

Receipts 960 787 1,075 1,629 2,434 3,810 3,862 3,184 1,742 807 299 

Disposals 815 702 863 1,293 1,942 2,327 3,348 3,445 3,263 2,085 682 

Pending June 30 564 649 861 1, 197 1,689 3,172 3,686 3,425 1,904 626 243 

Total cases 

Receipts 10,228 9,193 9,732 13, 742 15, 094 16, 529 16, 991 17, 016 1 30,381 14,190 15,688 

Disposals 9, 491 8, 097 9, 092 10, 645 12, 534 13, 320 15, 436 15, 944 20, 700 23,680 21,072 

Pending June 30 9, 279 0, 375 11,015 14, 112 16, 672 19, 881 21, 436 22, 508 32,189 22, 699 17, 315 

1Receipts of nondocketed cases for the fiscal year 1953 in lode 10,069 cases transferred from in ernel revenue agents' 

conference sections merged into the Appellate Division during 1952 under Reorganization Plan No. of 1952. 

Table 18.-Receipt and disposal of income, profits, estate, and gift tax 

cases in the Tax Court, fiscal year 1985 

Amount in dispute 

Table 19.-Results obtained in income, profits, estate, and gift tax cases 

disposed of in Tax Court, fiscal year 1955 

Basis of closing 

Number 

Amount in dispute Amount approved 

Deficiency 

and 

penalty 

(2) 

Overpayment 

(3) 

Deficiency 

and 

penalty 

(4) 

Overpayment 

(5) 

(In thousands of dollars) 

Dismissed 200 5, 545 2,111 5, 919 -1 

Decision on merits 907 39, 512 10,961 18, 933 2,106 

Agreed settlement 4, 087 278, 709 151,104 92, 846 -130, 595 

Total 5, 194 323, 766 164, 177 117,698 -128, 490 

Table 20.-Receipt and disposal of Tax Court cases in courts of appeals or in 

Supreme Court, fiscal year 1955 

Status 

In courts of appeals In Supreme Court 

Number 

of 

CMS 

Amount 

(thousand 

dollars) 

Number 

of 

cases 

Amount 

(thousand 

dollars) 

Pending July 1, 1954: 

Appealed by Commissioner 58 3,842 1 97 

Appealed by taxpayers 324 14, 979 

Appealed by both 25 5,576 

Total 407 24,397 1 97 

Appealed during year: 

By Commissioner 65 2, 857 2 219 

By taxpayers 230 9,978 4 1,810 

By both 7 261 

Total 302 13,095 6 2.030 

Disposed of during year: 

Favorable to Commissioner 150 6, 254 1 58 

Favorable to taxpayers 87 3,540 

Modified... 21 695 

Settled 15 723 

Dismissed 53 2,171 

Total 326 13,382 1 58 

Pending June 30, 1955: 

Appealed by Commissioner 59 4,681 3 316 

Appealed by taxpayers 

ealed 

309 15, 936 3 I, 753 App by both 15 3, 493 

Total 383 24,110 6 2,069 

Amount 

(6) 

410, 365 

Saved or recovered 

8, 031 

27, 788 

374,546 

Percent 

of 

amount 

in 

dispute 

(7) 

104. 9 

55. I 

87. 1 

84. 1 

Status 

Number of 

cases 

(1) 

Deficiency 

in tax 

(2) 

Penalty 

(3) 

Overpayment 

(4) 

(In thousands of dollars) 

Pending July 1, 1954 

Filed or reopened during year 

Disposed of during year 

Pending June 30, 1955 

9, 798 

4, 639 

5, 194 

9, 243 

638, 914 

242, 641 

283, 934 

597, 621 

119, 326 

44, 894 

39, 831 

124, 388 

951, 572 

292, 653 

164, 177 

1, 080, 048 
Courts 

Pendinfirly 1, Received during 

year 

Disposed of durins year Refunded Pending715.15uly I, 

Number 

(1) 

Amount 

In dispute 

(2) 

Number 

(3) 

Amount 

in dispute 

(4) 

Number 

(5) 

Amount 

in dispute 

(6) 

Amount 

(7) 

Percent 

(8) 

Number 

(9) 

Amount 

in dispute 

(10) 

Court of Claims 

District Courts 

Total 

477 

2,576 

(Thousand 

dollars) 

118,471 

115,054 

165 

852 

Court 

(Thousand 

dollars)

,73 

30,353 

149 

1,077 

(Thousand 

dollars)

ag ,

28,348 

(Thousand 

d23,Pgir 

6,441 

19.6 

22.7 

493 

'2,351 

(Thousand 

dollars) 

117,059 

3, 053 233, 526 1,017 84, 082 I, 226 40, 337 8, 796 21. 8 2, 844 277, 270 

I Includes 6 processing tax c ses, $259,876 In dispute. 

Note: Suits filed by axpayer are prim rily suits for refund of taxes to enjoin he collection of taxes (other than those 

relating to alcohol, tobacco, and firearms taxes). For distribution of these cases by court Involved and according to the 

nature of the decision s etexto p. 28. 

Table 22.-Receipt and disposal of claims pending and suits filed by the 

United States in Federal and State courts, fiscal year 1955 

Status 

Number 

in suit 

(1) 

Number 

not in suit 

(2) 

Total 

number 

(3) 

Amount 

in dispute 

(4) 

Amount 

recovered 

(5) 

Percent 

recovered 

(6) 

(In thousands of 

dollars) 

Pending July 1, 1954 572 459 1,031 43,566 

Received dunng year in suit and for institution 

of suit 114 131 245 38, 834 

Total 686 590 

Suits instituted during year 319 319 

Total to be accounted for 1, 005 271 1, 276 82, 400 

Disposed of during year 393 70 463 52,185 6, 354 12.2 

Pending July 1, 1955 612 201 813 30,215 ___ 

Note: Claims and suits by the United States are primarily suits to collect taxes or to recover erroneous refunds (other 

than those relating to alcohol, tobacco and firearms taxes). 

Lien cases ReortfoannizaPmc ingead s: Bankruoky 

and 

receivership 

erthecpeet 

MindIgneous 

insolv

c 

 ency 

Proeedings 3 

u Non-Co rt 

civil e-C

advisory 

cases 4 

Total 

in Court I Not 

Courts 

(I) (2) (3) (4) (5) (6) (7) 

Pending July I, 1954 2,053 180 1.261 921 I, 082 496 5,993 Received during year 1,393 1, 532 846 933 744 1, 461 6, 909 

Total cases 3, 446 I, 712 2,107 1, 854 I, 826 1, 957 12,902 

)isposed of during year 2, 371 1, 526 1, 283 1, 227 1,129 1,627 9,163 

Pending June 30, 1955 1, 075 186 824 627 697 330 3, 739 

I Primarily suits for foredo ure by mortgagees or other secured c editors and suits to quiet title to which the United 

States is made aperty. 

Primarily applications for discharge of property from tax liens. 

Proceedings instituted under the following sections or chapters of the Bankruptcy Act: secs. 75 (agricultural compositions and extensions) and 77 (railroad reorganizations) and chs. X (corporate reorganizations), XI (arrangements as to 

unsecured indebtedness), XII (reel property arrangements), and XIII (wage earners' plans) which involve tax claims 

and other rights and interests of the United States, and also require action by legal personnel. 

4 Bankruptcy liquidation proceedings and Federal or State receivership proceedings which involve tax claims of the 

United States, and also require action by legal personnel. 

I 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, and also require action by legal personnel. 

Primarily memorandums on civil advisory matters from Regional Counsel to District Directors which are not related 

to court proceedings or lien cases. 

• Includes cases handled at national and regional levels. 

114 Commissioner of Internal Revenue Annual Report 

Table 21.-Receipt and disposal of suits filed by taxpayers in Federal courts, 

fiscal year 1935 

Cases Receiving Appellate Consideration or in Litigation 115 

Table M.-Receipt and disposal by the Office of the Chief Counsel of lien 

cases, and insolvency and debtor proceedings,* fiscal year 1933 
Cost of 

Administration 

Tables 24-25 
118 Commissioner of Internal Revenue Annual Report 

Table 24.-Obligation, incurred by the Internal Revenue Service, fiscal year 

1955 

[In thousands of dollars] 

Cost of Administration 119 

Table 24.-Obligations incurred by the Internal Revenue Service, fiscal year 

955-Continued 

[In thousands of dollars] 

Internal Revenue office, 

district or region 

Salaries 

(1) 

Trayel 

(2) 

Rent and 

utility 

services 

(3) 

Communication 

services 

(4) 

Supplies 

and equipment 

(5) 

Other 

(6) 

Total 

(7) 

A. National office and regional 

totals (including Directors' 

offices) 

Total, Internal Revenue 

Service 

National office I 

Atlanta region 

Boston region 

Chicago region 

Cincinnati region 

Dallas region 

New York City region 

Omaha region s --- 

Philadelphia region 

San Francisco region 

Retroactive salary increase 

B. Regional offices (excluding Directors' offices) 

Atlanta region 

Boston region 

Chicago region 

Cincinnati region 

Dallas region 

New York City region 

Omaha region 2 

Philadelphia region 

San Francisco region 

C. District Directors' offices 

Atlanta: 

Atlanta 

Birmingham 

Columbia 

Greensboro 

Jackson 

Jacksonville 

Nashville 

Boston: 

Augusta 

Boston 

Burlington 

Hartford 

Portsmouth 

Providence 

Chicago: 

Chicago 

Detroit 

Milwaukee 

Springfield 

Cincinnati: 

Cindnnati 

Cleveland 

Columbus 

Indianapolis 

Louisville 

Parkersburg 

Richmond 

Toledo 

Dallas: 

Albuquerque 

Austin 

Dallas 

Little Rock 

New Orleans 

Oklahoma City 

New York City: 

Albany 

Brooklyn 

Buffalo 

Lower Manhattan 

Syracuse 

247, 911 

17, 674 

20,732 

15, 597 

28,470 

26, 884 

17, 557 

32, 795 

21, 810 

33,052 

27,828 

5, 511 

4,008 

2, 120 

4, 019 

5, 657 

2,746 

5,605 

2,911 

5,540 

4, 402 

2, 818 

2, 225 

1,327 

2,875 

1,246 

3,481 

2,748 

1,084 

6,649 

481 

3,223 

771 

1, 269 

9,724 

7,355 

4,113 

3,259 

2,335 

4,730 

1,476 

4, 053 

2,486 

1,618 

3, 023 

1,476 

725 

4,081 

4,019 

1,308 

2, 448 

2,200 

2,171 

6,252 

2,952 

6,089 

1,

7,936 

1,791 

6, 684 

578 

921 

336 

541 

870 

761 

340 

883 

602 

852 

266 

59 

111 

244 

172 

105 

210 

169 

229 

110 

90 

53 

128 

75 

115 

84 

50 

100 

23 

61 

29 

70 

133 

107 

119 

39 

81 

39 

112 

107 

71 

139 

37 

35 

175 

163 

60 

89 

67 

43 

25 

52 

39 

48 

28 

14 

I, 512 

175 

60 

15 

419 

155 

158 

222 

43 

126 

110 

9 

1 

14 

12 

2 

17 

38 

15 

10 

1 

10 

3 

7 

8 

20 

1 

1 

2 

4 

6 

1 

277 

96 

1 

(a) 

3 

125 

(a) 

4 

3 

2 

3 

4 

2 

133 

8 

3 

9 

1 

(I ) 

91 

8 

19 

6 

83 

6, 017 

4, 063 

171 

153 

265 

221 

159 

301 

162 

234 

288 

47 

23 

52 

36 

31 

54 

31 

39 

54 

20 

21 

8 

20 

9 

26 

18 

11 

70 

6 

24 

6 

12 

103 

53 

31 

26 

14 

52 

11 

29 

21 

11 

36 

11 

6 

38 

36 

12 

19 

18 

16 

69 

20 

38 

14 

91 

1, 766 

1, 125 

387 

230 

393 

407 

415 

416 

379 

448 

566 

178 

63 

115 

126 

107 

118 

100 

120 

153 

32 

31 

18 

34 

16 

54 

23 

15 

49 

10 

28 

11 

53 

98 

79 

49 

52 

21 

49 

38 

37 

30 

31 

45 

26 

21 

76 

71 

31 

64 

45 

33 

73 

26 

62 

20 

84 

11, 944 

8, 289 

445 

203 

379 

495 

398 

426 

356 

362 

587 

4 

212 39 

88 

143 

87 

95 

102 

85 

132 

36 

25 

16 

35 

45 

46 

29 

36 

58 

6 

34 

9 

21 

141 

68 

49 

34 

82 

77 

23 

42 

34 

20 

42 

32 

26 

62 

58 

65 

39 

61 

22 

74 

26 

78 

18 

113 

278, 834 

31, 903 

22, 715 

16, 533 

30,461 

29,037 

19, 115 

34,901 

23, 631 

34,82! 

30,261 

5, 51! 

4,721 

2,30; 

4, 43 

6,211 

3, 14 

5,99 

3,391 

5,91 

4,97! 

3,01. 

2, 40 

1, 42 

3,09 

I,39 

3,74 

2,90 

I,19 

6, 

53 

3,3 

82 

1,36 

10,41 

7,71 

4,35 

3,46 

2,4! 

5,11 

1,51 

4, 2; 

2,61 

1,71 

3, 21 

1, 51 

8 

4, 3 

4,3 

1,4 

2, 6 

2, 3 

2,2 

6,5 

3,0 

6,3 

1, 8 

8,3 

927 

Internal Revenue office, 

district or region 

Salaries 

(I) 

Travel 

(2) 

Rent and 

utility 

services 

(3) 

Communication 

services 

(4) 

Supplies 

and equipment 

(5) 

Other 

(6) 

Total 

(7) 

Omaha: 

Aberdeen. 

Cheyenne 

Denver 

Des Moines 

Fargo 

Kansas City 

Omaha 

St. Louis 

St. Paul 

Wichita 

Philadelphia: 

Baltimore 

Camden 

Newark 

Philadelphia 

Pittsburgh 

Scranton 

Wilmington 

San Francisco: 

Boise 

Helena 

Honolulu 

Los Angeles 

Phoenix 

Portland 

Rena 

Salt Lake City 

San Francisco 

Seattle 

672 

416 

2, 001 

2,636 

644 

I, 940 

I, 734 

2, 817 

3,642 

2,397 

6, 076 

1, 808 

5, 514 

7,1% 

4, 385 

I, 837 

697 

725 

740 

1,028 

7,967 

873 

1,779 

534 

892 

5,934 

2,955 

59 

97 

55 

64 60 

120 

103 

82 

44 

53 

118 

79 

41 

17 

27 

123 

31 

81 

19 

24 

119 

109 

44 

31 

41 

43 

47 

1 

1 

1 

a 

I 

(a) 

6 

0 

103 

(a) 

1 

(3) 

1 

(a) 

110 

(0) 

1 

4 

(a) 

13 

2 

'fl Mnw' t°".7.= W.: SSR°'nc"^ =27r^SA 

14 

11 

26 

43 

11 

28 

32 

39 

13 

33 

72 

32 

62 

79 

47 

24 

10 

20 

13 

20 

120 

39 

31 

22 

24 

69 

56 

17 

10 

23 

37 

28 

19 

26 

39 

25 

32 

73 

22 

60 

65 

35 

15 

6 

22 

13 

30 

162 

12 

39 

12 

9 

96 

61 

751 

471 

2, 133 

2,829 

729 

2,053 

1,865 

2 966 

3,

, 

 858 

2,588 

6, 367 

1, 918 

5,841 

7,503 

4,568 

I, 927 

733 

819 

az 1 

I, 117 

8, 564 

964 

1, 944 

597 

955 

6, 284 

3, 217 

I Includes processing branch, Kansas City, Mo. 

Includes Regional Service Cente , Kansas City, Mo. 

s Less than $500. 

Table 25.-Cost of printing and binding for Internal Revenue Service fiscal 

years 1954 and 1955 

[Figures in thousands] 

Class of work 

Fisca year 

1954 1955 

Quantity Cost Quantity Cost 

Tax return forms 

Instructions for tax returns 

Administrative forms 

Reports, regulations, etc 

Letterheads, miscellaneous binding, etc 

Reproductions 

Total 

871, 349 

29,863 

258, 537 

I, 065 

14,392 

32, 820 

32, 801 

11 

939 

184 

61 

130 

953, 260 

130, 091 

429, 326 

I, 643 

10, 802 

18, 827 

$2, 616 

300 

1,240 

191 

56 

92 

1, 208, 026 4,258 1, 543, 949 4, 495 

Includes school program. 

2 Includes $55,000 for field printing. 

U. S. GOVERNMENT PRINTING OFFICE: 1956 0-966952 

76 

3 

7 

5 

7 

6 

5 

5 

0 

8 

1 

4 

7