Contents 

Page 

Summary and transmittal III 

Commissioners of Internal Revenue 

Principal officers of the Internal Revenue Service 

Map of Internal Revenue regions and districts xiii 

Chart of Internal Revenue Service organization )(iv 

REPORT ON OPERATIONS 

Internal revenue collections 3 

General 3 

Individual income taxes 4 

Corporation income taxes 4 

Employment taxes 4 

Other internal revenue collections 4 

Receipt and processing of returns 7 

Number of tax returns 7 

Service centers 8 

Mathematical verification 11 

Information returns 12 

Enforcement work 13 

Audit of returns 13 

General 13 

Revision of informal conference procedures 13 

Expansion of excise tax audit program 13 

Promotional policies 13 

Training program 14 

Returns examined 14 

Fraud investigations 15 

Processing practitioner applications 18 

Alcohol and tobacco tax program 18 

Firearms program 19 

Rewards to informers 19 

Cases involving criminal prosecution 20 

Actions by the Supreme Court 21 

Collection of delinquent accounts 22 

Delinquent returns 23 
Contents VII 

Aids for taxpayers—Continued Page 

Taxpayer publications 51 

"Your Federal Income Tax" 51 

"Tax Guide for Small Business" 51 

"Farmers' Tax Guide" 51 

"Federal Use Tax on Highway Motor Vehicles" 51 

"Social Security Information for Crew Leaders and 

Farmers" 51 

"Federal Gas Tax Refund for Nonhighway and Transit 

Users" 51 

Other publications 51 

Information program 52 

School program 52 

International activities 53 

International operations 53 

International tax conventions 53 

Legislative developments 55 

Legislative preparations 55 

Legislation enacted 56 

Internal controls 57 

Internal audit 57 

Internal security 58 

Administrative functions 61 

Personnel 61 

Training 64 

Operating facilities 64 

Space and equipment 64 

Safety 65 

Records administration 65 

Fiscal management 67 

Enrollment of practitioners 68 

Statistics of income 69 

Expedited program 69 

Business Indicator data initiated 70 

Plans for Tax Analysis Series 71 

General management improvements and policy changes 72 

vI Commissioner of Internal Revenue Annual Report 

Page 

Appeals and civil litigation 25 

General 25 

Income, profits, estate, and gift taxes 25 

Excise and employment taxes 26 

Claims for relief from excess profits tax 27 

Compromise and closing agreement cases 28 

Other courts 28 

Results in other courts 28 

Decisions of Supreme Court 29 

Statements on adverse Tax Court decisions 31 

Changes in tax liability 33 

Additional taxes 33 

Overassessments and overpayments 34 

Refunds and repayments 34 

Excessive prepayments of individual income tax 35 

Carryback allowances 36 

Claims for refund 36 

Review of overassessments exceeding $100,000 37 

Offers in compromise 37 

Supervision of the alcohol and tobacco industries 39 

General 39 

Authorization of operations 39 

On-premises supervision 40 

Inspection of establishments 40 

Chemical analyses and research 41 

Technical services 42 

General 42 

Regulations program 42 

Regulations under the Internal Revenue Code of 1954 42 

Other regulations, Treasury Decisions, and related Executive orders 42 

Alcohol and tobacco tax 43 

Tax return forms program 43 

Tax rulings 44 

Determination letters 44 

Technical publication program 45 

Closing agreement cases 47 

Civil advisory legal services 47 

Aids for taxpayers 49 

General 49 

Direct taxpayer assistance 49 
Contents IX 

Ian Commissioner of Internal Revenue Annual Report 

STATISTICAL TABLES 

Internal Revenue Collections 

Table 

1. Internal revenue collections by sources and by internal revenue Page 

regions, districts, States, and Territories 78 

2. Internal revenue collections by sources and by quarters 94 

3. Internal revenue collections by sources 96 

4. Internal revenue collections by principal sources, fiscal years 

1940-1957 99 

5. Internal revenue tax on manufactured products from Puerto 

Rico, by objects of taxation 100 

Alcohol and Tobacco Taxes 

6a. Establishments qualified to engage in the production, distribution, storage, or use of alcohol and alcoholic liquors . . . 103 

6b. Establishments qualified to engage in the production or distribution of tobacco products 103 

7. Permits relating to industrial alcohol, under chapter 51, Internal 

Revenue Code, 1954 104 

8. Permits for operations relating to alcoholic beverages, under the 

Federal Alcohol Administration Act 104 

9. Permits relating to tobacco, under chapter 52, Internal Revenue 

Code, 1954 104 

10. Label activity under Federal Alcohol Administration Act . 105 

Stamp Taxes 

11. Number of occupational tax stamps issued, by class of tax and 

by internal revenue regions, districts, States, and Territories, 

covering the fiscal year 1957, or portion thereof 106 

Cases Receiving Appellate Consideration or in Litigation 

12. Appellate Division processing of protested income, profits, estate, 

and gift tax cases prior to issuance of statutory notice of deficiency (pre-90-day cases) 114 

13. Appellate Division processing of protested income, profits, estate, 

and gift tax cases in which statutory notices of deficiency were 

outstanding (90-day cases) 114 

14. Appellate Division processing of income, profits, estate, and gift 

tax cases petitioned to the Tax Court (docketed cases) . . . 115 

Table 

15. Receipt and disposal of income, profits, estate, and gift tax cases Page 

in the Tax Court 116 

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

disposed of in the Tax Court, fiscal year 1957 116 

17. Receipt and disposal of Tax Court cases in courts of appeals or 

in Supreme Court 116 

18. Receipt and disposal of suits filed by taxpayers in Federal courts 117 

19. Cases involving tax issues decided by Federal civil courts . . 117 

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

United States in Federal and State courts 117 

21. Receipt and disposal by the Office of the Chief Counsel of insolvency and debtor proceedings 118 

22. Receipt and disposal by the Office of the Chief Counsel of lien 

cases and noncourt civil advisory cases 118 

Cost of Administration 

23. Obligations incurred by the Internal Revenue Service . . . . 119 

24. Cost of printing and binding for Internal Revenue Service . . . 120 

INDEX 121 
x Commissioner of Internal Revenue Annual Report Principal Officers XI 

COMMISSIONERS OF INTERNAL REVENUE 

Name i State 

Service 

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

Joseph J. Lewis Pennsylvania Mar. 18,1863 June 30, 1865 

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

Edward A. Rollins New Hampshire Nov. I, 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. Raum 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. 27,1896 Dec. 31, 1897 

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

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

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

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

Royal E. Cabal! Virginia Sept. 1,1909 Apr. 27,1913 

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

Daniel C. Roper South Carolina Sept. 26, 1917 Mar. 31,1920 

William M. Williams Alabama Apr. I, 1920 Apr. 11,192 1 

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

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

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

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

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

Russell C. Harrington Rhode Island Dec. 5,1955 

Note.-Office of Commissioner of Internal Revenue created by act of Congress, July , 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. I, 1870, to Jan. 2, 1871; Henry C. Rogers, of Pennsylvania, from 

May 1 to May 10, 1883; John J. Knox, of Minnesota, from May 11 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, Mires, of Washington, from Aug. 

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

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

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

PRINCIPAL OFFICERS OF THE INTERNAL REVENUE 

SERVICE AS OF JUNE 30, 1957 

NATIONAL OFFICERS 

Office of the Commissioner 

Commissioner Russell C. Harrington 

Deputy Commissioner 0 Gordon Delk 

Assistant to the Commissioner Richard W. Nelson 

Division Directors: 

Planning Staff lames R. Turner Statistics rnest J. Engquist, Jr. 

Administrative Assistant to the Commissioner Wilber A. Gallahan 

Division Directors: 

Operating Facilities Bruce McNair Training Edwin N. Montague 

Personnel Amos N. Latham, Jr 

Fiscal Management Officer 

Technical Advisor to the Commissioner 

Director, Public Information Division 

Director of Practice 

Operations 

Assistant Commissioner 

Executive Assistant to Assistant Commissioner 

Clifford W. Stowe 

Arthur H. Klotz 

Division Directors: 

Dwight E. Avis Collection Robert L. Jack Alcohol and Tobacco Tax 

H. J. Donnelly, Jr. Intelligence J Perry August Appellate 

Ernest H. Vaughn International Operations L. Harold Moss Audit 

Technical 

Assistant Commissioner Justin F. Winkle 

Division Directors: 

Special Technical Services 

International Tax Relations Eldon P. King Tax Rulings Harold T. Swartz 

Ned W. Arick Technical Planning John W. S. Littleton 

Inspection 

Assistant Commissioner Harry J. Trainor 

Division Directors: 

Internal Audit Francis I. Geibel Internal Security Vernon D. Acree, Jr. 

Office of the Chief Counsel 

Chief Counsel Nelson P. Rose 

Assistant Chief Counsels: 

Administration 

Claims 

Enforcement 

John W. Burrus Litigation Rudy P. Hertzog 

Raymond F. Brown Technical Herman T. Reiling 

E Riley Campbell 

REGIONAL AND DISTRICT OFFICERS 

Atlanta Region 

Assistant Regional Commissioners: 

Regional Commissioner 

Administration Burton M. Graham Audit Frank A. Winter 

Alcohol and Tobacco Tax Louis E. Howell Collection James C. Van Voorhis 

Appellate Norman C. Bailey Intelligence Allen T. Hollinrake 

Ellison C. Palmer 

District Directors: 

Atlanta, Ga William J. Bookholt Jackson, Miss James L. Enochs 

Birmingham, Ala George D. Patterson, Jr. Jacksonville, Fla Laurie W. Tomlinson 

Columbia, S. C Robert C. Pitts Nashville, Tenn James M. Rountree 

Greensboro, N. C Philip K. Sanders 

William H. Loeb Regional Counsel Walter F. Connell Regional Inspector 

Boston Region 

Assistant Regional Commissione rs: 

Regional Commissioner 

District Directors: 

Regional Counsel John W. Edwards 

Regional Inspector Emanuel M. Schuster 

Director, Northeast Service Center, Lawrence, Mass William H. Weaver 

Administration Maurice J. Taggart 

Alcohol and Tobacco Tax Harold L. Henneberry 

Appellate Howard D. Taylor 

Augusta, Maine Whitney L. Wheeler Hartford, Conn Harold R. All 

Boston, Mass Frank J. Cavanagh Portsmouth, N. H Charles W. Emlet 

Burlington. Vt John W. Gaynor Providence, R. I John A. O'Connell 

Donald W. Bacon 

Chicago Region 

William N. Woodruff' Regional Commissioner 

Assistant Regional Commissioners 

Administration Milton T. Houghton Audit Edward D. Myers 

Alcohol and Tobacco Tax William N. Woodruff Collection Horace H. Stikeleather 

Appellate Clarence W. Sebring Intelligence Hugh S. Loyd 

District Directors: 

Chicago, Ill H Alan Long Milwaukee, Wis Emil J. Mahon 

Detroit, Mich Albert M. Menninger Springfield, Ill Hezzie J. White 

Regional Counsel John D. Kiley 

Regional Inspector Raphael I. Nixon 

Acting. 

Gray W. Hume, Jr. 

Leo Speer 

James C. Rivers 

George C. Lea 

Audit Walter F. Burke 

Collection Albert C. Hughes 

Intelligence John J. Deneen 
xn Commissioner of Internal Revenue Annual Report 

Cincinnati Region 

Regional Commissioner Norman B. Eshleman 

Assistant Regional Commissioners: 

Administration 

Alcohol and Tobacco Tax 

Appellate 

District Directors: 

Cincinnati, Ohio Russell A. Welch Louisville, Ky 

Regional Counsel 

Cleveland, Ohio 

Columbus, Ohio 

Indianapolis, Ind 

Parker C. Williams Parkersburg, W. Va 

Nathaniel Looker Richmond, Va 

Sterling M. Dietrich Toledo, Ohio 

Regional Inspector 

Dallas Region 

Regional Commissioner 

Assistant Regional Commissioners: 

Administration Roy W. Hann 

Alcohol and Tobacco Tax Joseph F. Black 

Appellate William G. Cullen 

District Directors: 

Austin, Tex Robert L. Phinney 

Albuquerque, N. Mex Steven P. Vidal 

Dallas. Tex Ellis Campbell Jr. 

Regional Counsel 

Regional Inspector 

New York City Region 

Regional Commissioner 

Assistant Regional Commissioners: 

Administration 

Alcohol and Tobacco Tax 

Appellate 

District Directors: 

Albany, N. Y 

Brooklyn, N. Y 

Buffalo. N. Y 

Regional Counsel 

Regional Inspector 

Omaha Region 

Regional Commissioner 

Assistant Regional Commissioners: 

Administration Orland V. Steele 

Alcohol and Tobacco Tax William K. Lilley 

Appellate Vance N. Bates 

District Directors: 

Aberdeen, S. Dak 

Cheyenne, Wyo 

Denver, Colo 

Des Moines, Iowa 

Fargo, N. Dak 

Regional Counsel 

Regional Inspecto r 

Director, Midwest Service Center, Kansas City, Mo 

Philadelphia Region 

Regional Commissioner L Alfred Chamberlin 

Assistant Regional Commissioners: 

District Directors: 

Administration Robert D. McDowell 

Appellate William E. Steynen 

Alcohol and Tobacco Tax Louis DeCarlo 

Audit Joseph M. Shatz 

Collection Edward J. Manning 

Intelligence Wesley E. Craig 

Baltimore, MO Clarence I. Fox, Jr. 

Camden, N 1 Chris L. Gross 

Newark, N.1 Joseph F.J. Mayer 

Philadelphia, Pa Edgar A. McGinnes 

Regional Counsel Cecil H. Haas 

Regional Inspector William A. Costello 

San Francisco Region 

Regional Commissioner 

Assistant Regional Commissioners: 

Administration Hamer C. Gant 

Alcohol and Tobacco Tax Henry G. Morthorst 

Appellate Joseph B. Harlacher 

District Directors: 

Boise, Idaho 

Helena, Mont 

Honolulu, Hawaii 

Los Angeles, Calif 

Phoenix, Ariz 

Regional Counsel 

Regional Inspector 

Director, Western Service Center, Ogden, Utah 

XIII 

Alvin M. Kelley Audit 

Henry R. Peterson Collection 

GWaldron Snyder Intelligence 

Melvin Burton 

 William I. Grabo 

Thomas P. McGovern 

William M. Gray 

Philipp L. Charles 

Clifford W. Glotzbach 

Gilbert C. Hooks 

Clarence E.Pricc 

Gordon M. Anderson 

BFrank White 

Audit Dallas A. Sims 

Collection Carl E. Webb 

Intelligence William E. Beloate, Jr. 

Olin S. Godwin 

 Chester A. Usry 

Earl R. Wiseman 

 1 Marvin Kelley 

David 0. Lawry, Jr. 

Little Rock, Ark 

New Orleans, L 

Oklahoma City, Okla 

Alfred W. Fleming 

Norman D. Nowak 

William E. Dunigan 

Ralph M. Horne 

Audit 

Collection 

Intelligence 

Richard D. Donoghue 

 Raymond A. Hennessy 

Francis J. Kennedy 

Riley J. Ratterree 

Thomas E. Scanlon 

Eugene C. Coyle, Jr. 

Raphael Meisels 

 Kenneth W. Moe 

Alva M. Meyers 

Elmer T. Kemper 

 Frank S. Turbett, Jr. 

Lower Manhattan 

Upper Manhattan 

Syracuse, N. 

Harold Hawkins 

Audit Vacant 

Collection Roger R. Kaiser 

Intelligence Harold B. Holt 

William C. Welsh 

Frank G. Clark 

George H. Allan 

VLee Phillips 

Byron J. Rockwood 

Edwin 0. Bookwalter 

James L. McCrory 

Ernest M. Flinn 

Arthur R. Knox 

Gustave F. Koehler 

Douglas L. Barnes 

Winslow B. Randall 

Arnold S. Dreyer 

Kansas City, Mo 

Omaha, Nebr 

St. Louis, Mo 

St. Paul, Minn 

Wichita, Kans 

Pittsburgh, Pa 

Scranton, Pa 

Wilmington, Del 

John H. Bingler 

Richard P. Brownell 

Horace L. Brown 

Ernest C. Wright 

Audit Joseph M. Cullen 

Collection Homer O. Croasmun 

Intelligence Walter H. Thomas 

Calvin E. Wright 

Frank J. Healy 

Henry Robinson 

Robert A. Riddell 

Wilson B. Wood 

Portland, Dreg 

Reno, Nev 

Salt Lake City, Utah 

San Francisco, Calif 

Seattle, Wash 

Ralph C. Granquist 

Vaughn W. Evans 

Charles I. Fox 

Vacant 

William E. Frank 

Melvin L. Sears 

Scott C. McCarl 

Frederick W. Bearman 
REPORT 

ON 

OPERATION -4 

XIV 
Note.-In many tables and charts, figures have 

been rounded and therefore will not necessarily 

add to the printed totals which are based on 

unrounded figures. 

INTERNAL REVENUE COLLECTIONS 

General 

Internal revenue collections rose to a total of $80,171,971,000 in the 

fiscal year 1957. This represents an increase of more than $5,000,000,000, 

or almost 7 percent, over the $75,112,649,000 collected in the fiscal 

year 1956. 

All major classes of taxes contributed to the overall increase in collections. Income taxes of all types rose by 6.9 percent. The additional 

$3,924,261,000 collected from income taxes accounted for over three-fourths 

of the rise in grand total internal revenue collections. Employment tax 

collections increased by $284,738,000, or 3.9 percent. Excise tax collections (including alcohol and tobacco taxes) in fiscal year 1957 increased 

by $633,349,000, or 6.3 percent more than collections in the preceding 

year. Estate and gift taxes rose by $206,762,000, or 17.7 percent. 

A comparison of collections by major categories follows: 

Internal revenue collections 

[In thousands of dollars. For details, see appendix table 3, pp 96-98] 

Fiscal yearSource 

1957 1956 

80, 171, 971 75,112, 649 

Grand total 

60, 560, 425 56, 6367164 

Income taxes, total 

21, 530, 653 21,298,522 

Corporation 39, 029, 772 35,337.642 

Individual, total 

26, 727, 543- 24, 015, 676 

Withheld by employers 2 12, 302, 229 II, 321, 966 

Other 

7,580, 522 7,295, 784 

Employment taxes, total 

6, 634, 467.• 6, 336,805 

Old-age insurance s 330, 034 324, 656 

Unemployment insurance 616, 020 634, 323 

Carriers taxes-old-age benefits 

1, 377, 999 1,171, 237 

Estate and gift taxes 2, 973, 195 2, 920, 574 

Alcohol taxes 1, 674, 050 1, 613, 497 

Tobacco taxes 5, 990, 299 5,470,124 

Other excise taxes 15, 482 5.269 

Taxes not otherwise classified 

'Collections during fiscal year 1957 are adjusted to exclude $3,767,000 transferred to the Government of Guam. For 

details, see appendix Table land footnotes 3 and 6. 

2 

 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(aX2) of the Social Security Act 

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

the 2 classes of individual income taxes were derived by subtracting the old-age insurance tax estimates from the combined 

Includes amounts of unidentified and excess collections, depositary receipts outstanding 6 months or more for which totals reported. 

no tax account can be found, and profit from sale of acquired property. 

447270 0 58 2 

3 
internal revenue collection 

fiscal years 1956 and 1957 

billions o 

CORPORATION 

INCOME AND 

PROFITS TAXES 

INDIVIDUAL 

INCOME TAXES 39.0 

. ................. .. 

4 

EMPLOYMENT 

TAXES 

ALL OTHER 

(ESTATE, GIFT, 

AND EXCISE) 

TOTALS: 1956 — $75.1 BILLION 

4 Commissioner of Internal Revenue Annual Report 

Individual Income Taxes 

The continued rise in personal incomes was reflected in the collections of 

- individual income taxes during fiscal year 1957. Total individual income 

taxes, including those withheld and those not withheld, rose by over 

10 percent, from $35,337,642,000 in fiscal year 1956 to $39,029,772,000 in 

fiscal year 1957. These taxes accounted for almost one-half of the total 

internal revenue. Withheld taxes rose by 11.3 percent from the preceding 

year, and accounted for more than two-thirds of all individual income 

taxes. Nonwithheld taxes, accounting for less than one-third of all individual income taxes, increased by 8.7 percent. 

Corporation Income Taxes 

Corporation income taxes collected during fiscal year 1957 aggregated 

$21,530,653,000, and accounted for almost 27 percent of total internal 

revenue. These collections were $232,131,000, or 1.1 percent, more than 

collections in fiscal year 1956. 

Employment Taxes 

Employment taxes collected during fiscal year 1957 totaled $7,580,522,-

000, an increase of $284,738,000, or 3.9 percent, over the preceding year. The increase in employment taxes was the net result of 

an increase of almost $300,000,000 in Federal old-age insurance taxes, and 

a moderate increase in taxes collected under the Federal Unemployment 

Tax Act, offset in small part by a decline in taxes collected under the 

Railroad Retirement Act. 

Other Internal Revenue Collections 

Other internal revenue collections, including estate and gift taxes, alcohol 

and tobacco taxes, and other excise taxes, amounted to $12,031,025,000 

during fiscal year 1957. This represents an increase of $850,324,000, or 

7.6 percent, over similar collections during fiscal year 1956. The largest 

relative increase occurred for estate and gift taxes which rose by 17.7 

percent. Alcohol and tobacco tax collections rose by 2.5 percent, and 

other excise taxes increased by 9.5 percent. 
low 

number of returns filed 

fiscal years 1956 and 1957 

(mil 

INDIVIDUAL 

AND FIDUCIARY 

DECLARATIONS OF 

ESTIMATED TAX 

(INDIVIDUAL) 

PARTNERSHIP 

CORPORATION 

EMPLOYMENT 

EXCISE AND 

ALL OTHER 

TOTALS: 1956-90.2 MILLION 

RECEIPT AND PROCESSING OF RETURNS 

Number of Tax Returns 

A total of 93,160,000 tax returns of all kinds was filed during the year. 

This represents an increase of 2,964,000 returns, or 3.3 percent, over the 

number filed in the previous year. 

Generally, the increase was spread throughout the various categories of 

returns. However, a significant shift of individual income tax returns 

from Form 1040 to Form 1040A occurred as the result of new Revenue 

Service policies encouraging the use of the punchcard Form 1040A so as 

to facilitate mechanical processing in regional service centers (see page 8). 

The combined number of individual income tax returns was 59,427,000, 

an increase of 2.6 percent. However, the 45,323,000 filed on Form 1040 

were 79,000 fewer than the number filed in the previous year, while the 

14,105,000 filed on Form 1040A represented an increase of 1,566,000 for 

the year. 

An extension of coverage under the Federal Unemployment Tax Act 

was the principal factor in a 4.7 percent increase in employment tax 

returns from 18,892,000 in fiscal 1956 to 19,776,000 in fiscal 1957. Effective with returns for 1956, the unemployment tax applied to employers of 

four or more persons, instead of eight or more as in prior years. This 

change resulted from Public Law 767, approved September 1, 1954. 

Excise tax returns, other than those relating to special occupational 

taxes, increased by almost 10 percent, from 2,922,000 in fiscal year 1956 

to 3,205,000 in fiscal year 1957. This increase was principally due to the 

Highway Revenue Act of 1956. During the fiscal year 1957, there were 

filed over 100,000 floor stocks tax returns and 75,000 use tax (trucks and 

buses) returns required by that Act. 

A new tobacco tax return, required to be filed monthly by manufacturers 

and importers of cigars, became effective July 1, 1956. During the fiscal 

year 1957 slightly over 10,000 such returns were filed. 

7 
8 Commissioner of Internal Revenue Annual Report 

A comparison of the number of returns filed in fiscal 1957 with the number 

filed in fiscal 1956, by principal types of returns, follows: 

Number of returns Med, by principal type of return 

[Figura in thousands] 

Type of return 

Fiscal year1957 19% 

Grand total 93, 160 

• 90, 196 

Income tax returns, total 68, 841 

• 67, 064 

Individual and fiduciary, tota l 60, 186 58, 640 

Individual—citizens and resident aliens, total 59, 427 

-57, 941 

Form 1040 45, 323 45, 402 

Form 1040A 14, 105 12.539 

All other individual and fiduciary 758 699 

Declarations of estimated tax, total 6, 291 '6, 238 

Individual 6,271 

• 6, 221 

Corporation 20 

• 17 

Partnership 1,120 I, 028 

Withholding agents 11 10 

Corporation 911 869 

Other' 324 280 

Employment tax returns, total 19, 776 18, 892 

Withheld income tax and old-age insurance 18, 550 18, 265 

Railroad retirement and unemployment insurance 1, 227 628 

Estate tax 49 44 

Gift tax 77 68 

Special occupational taxes 1,212 

• 1, 205 

All other excise taxes 3, 205 

• 2, 922 

• Revised. 

Includes exempt organization income tax returns, 34,000 Form 1010PR returns filed for 1957 in Puerto Rico with respect 

to self-employment tax only, and 24,000 Form 1040PR returns filed for 1956. 

Income tax returns of all classes—individual, fiduciary, corporation, and 

other—accounted for 74 percent of all tax returns filed in the fiscal year 

1957. Employment tax returns represented 21 percent of all returns 

filed. Almost 5 percent of the returns related to special occupational 

taxes and all other excise taxes. The distribution by major categories 

reflects a relatively negligible shift from income taxes to employment and 

excise taxes as compared with the fiscal year 1956. 

The latter half of the fiscal year 1957 showed a continued shift in filing 

of individual income tax returns from March to the postponed filing date 

of April 15 introduced in the Internal Revenue Code of 1954. January 

1957 receipts of returns were somewhat in excess of those in January 1956. 

However, February and March receipts showed a drop of about 1,000,000 

from the preceding year, while April 1957 receipts were 2,000,000 in excess 

of those in April 1956. 

Service Centers 

Three service centers were in operation during the year, utilizing largescale tabulating equipment and servicing a total of 38 districts in 29 

states for the processing of individual income tax returns, and declarations 

of estimated tax. 

Report on Operations 9 
10 Commissioner of Internal Revenue Annual Report Report on Operations 11 

The Midwest Service Center, located at Kansas City, Mo., continued to 

service the nine Middle Western States in the Omaha Region and Illinois, 

and, in addition, undertook processing for Michigan and Wisconsin. 

The Northeast Service Center, located at Lawrence, Mass., in its second 

year of operation, serviced the six New England States, New York, New 

Jersey, and the Cleveland District in Ohio. The Western Service Center, 

located at Ogden, Utah, went into operation in fiscal year 1957 and serviced 

eight states in the San Francisco Region. 

The principal functions of the service centers involved the processing, 

including mathematical verification, of all Forms 1040A filed in the 

districts which were serviced and of those Forms 1040 which were readily 

adaptable to the tabulating machine program; the processing of taxable 

declarations of estimated tax filed by individuals; the establishment and 

subsequent processing of accounts receivable originating from the returns 

processed in the centers; the matching of information documents; and the 

mailing of returns. 

The growth of the service center program is indicated by the fact that 

the number of income tax returns processed in these locations has increased 

from 1,100,000 in the fiscal year 1955, to 11,000,000 in 1956, and to. 

22,000,000 in 1957. Some of this increase was due to the addition of more 

centers and more districts covered by centers, and some was due to 

broadening of the program to take in more classes of returns. 

In addition, the programs of the Midwest and the Northeast Service 

Centers included the processing of all claims for refund of federal tax on 

gasoline used on a farm, which were filed throughout all district offices. 

The service center program is being expanded in the fiscal year 1958 

to provide for machine processing of tax returns for 50 of the Internal 

Revenue districts, located in 36 states. There will also be a shift of some 

districts to different centers than the ones which serviced them last year. 

The Midwest Service Center will continue to service Illinois, Michigan, 

and Wisconsin and will undertake processing for the four districts in Ohio, 

as well as for Indiana, Kentucky, Virginia, and West Virginia. The 

Northeast Service Center will service the New England States, New York, 

and New Jersey, and in addition, Pennsylvania, Delaware, and Maryland. 

The Western Service Center will expand its operations to include the nine 

states in the Omaha Region as well as the eight states in the San 

Francisco Region. 

Mathematical Verification 

During the year, 56,000,000 income tax returns were mathematically 

verified. This represents an increase of 11,400,000 over the number 

verified in the fiscal year 1956. Most of the increase in 1957 was due to 

the 8,000,000 Forms 1040A filed for the tax year 1956, on which the 

taxpayers took the new option of figuring their own tax. These returns 
Number of returns verified thousands_ _ 

Number of returns on which changes were made do_ Returns with increase: 

Number do Amount thausand dollars._ Returns with decrease: 

Number 

Amount thousands 

thousand dollars._ 

12 Commissioner of Internal Revenue Annual Report 

were included for the first time in the mathematical verification operation. 

late verification process does not cover those returns on which the tax is 

computed by the Revenue Service in the first instance. 

The number of error cases as disclosed in the mathematical verification 

operation increased 29 percent over the preceding year, which is fairly 

consistent with the 26 percent increase in the number of returns verified. 

Similarly, the gross amount of tax change, including both tax increases 

and decreases, rose by almost 30 percent. The tax increase component of 

gross tax change rose by 29 percent, while the tax decrease rose by 32 

percent. 

The average amount of tax change, regardless of direction, remained at 

$83 for each of the last two fiscal years. For the fiscal year 1956, data are 

not available distributing number of error cases into number with tax 

increase and number with tax decrease as a result of mathematical verification. For the fiscal year 1957, these data show that 64 percent of the error 

cases resulted in tax increase, averaging $90, and that 36 percent of the 

error cases resulted in tax decrease, averaging $70. 

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 

Type of return 

Total, fiscal 

year— 

1957 1956 1957 1956 1957 1956 

55, 983 44, 582 55, 069 43, 758 914 825 1, 705 1, 317 I, 702 1, 314 3 3 

1,090 n. a. 1, 087 n. a. 2 n. a. 98,123 76, 266 96, 363 74, 855 I, 760 1,411 

615 n. a. 615 n. a. I n. a. 42, 979 32, 601 42, 375 32, 147 604 454 

n. a. Not available. 

Information Returns 

A total of almost 245,000,000 information returns was received and processed by the Internal Revenue Service during 1957. The majority of these, 

numbering 155,000,000, consisted of Forms W-2 (employers' statements of 

wages paid and tax withheld) which were filed by employers and employees. 

Forms 1099 (information returns on payments of dividends, interest, and 

various other items) totaled over 83,000,000, whereas other types of information documents aggregated over 6,000,000. 

New procedures were installed to assure appropriate checking of information returns against tax returns. 

ENFORCEMENT WORK 

Audit of Returns 

General.—The enforcement program was substantially expanded during 

the year as indicated by a 10 percent increase in the number of returns 

examined. Due to the ever-increasing number of returns filed, the Revenue 

Service is constantly surveying its audit techniques and procedures in order 

to realize its enforcement objectives. 

Significant improvements were made in the informal conference procedures. In connection with the selection, training, and promotion of revenue 

agents, new policies were introduced to assure higher levels of competence 

and performance. A new plan was adopted to permit taxpayers to appeal 

unagreed excise and employment tax cases prior to assessment. Audit operations were also benefited through savings in clerical manpower as a result 

of expanded use of area service centers in the mechanical processing of low 

income returns. A further expansion of these facilities is anticipated in 

future years. Many other policy and procedural changes were effected 

during the year which should benefit the enforcement program. 

Revision of informal conference procedures.—After a special survey of the views 

and experiences of taxpayers, tax practitioners, and personnel of the Revenue Service concerned with the examination of returns, the informal conference procedures were strengthened during the year. Under the new 

2procedures, basic responsibility for the effective direction and control of 

this function has been vested in the new position of "conference coordinator." By centralizing this responsibility, improvements are anticipated in 

the uniform application of the tax laws and regulations. 

Expansion of excise tax audit program—The program adopted in 1956 to 

develop a balanced excise tax program was virtually completed this year. 

Regional and district staffing and organization changes were carried out, 

and there were increases in the numbers of excise tax returns examined 

and in the additional assessments resulting from this type of enforcement 

activity. Under the program, the number of full-time excise tax group 

supervisors has more than tripled. 

Promotional policies.—As a part of a plan to develop a "Blue Ribbon" 

Revenue Service a planned promotion program for revenue agents and 

office auditors was initiated. This program is designed to recruit the best 

available individuals for these positions, to give them necessary training to 

qualify them for assignments of a high professional nature, and to encourage 

the best of them to remain in the Revenue Service by assuring prompt 

promotion upon reaching prescribed standards of achievement and experi13 

Item Individual and 

fidu iary, 

fiscal year— 

Corporation, 

fiscal year- 
14 Commissioner of Internal Revenue Annual Report 

ence. Under the program, a junior (newly recruited) revenue agent may 

progress to a semisenior technical employee within three and one-half years. 

Training program.—As a result of a study made by a special committee on 

the training of audit technicians, an entirely new training program was 

adopted during the year. The program provides for basic and advanced 

training for income tax agents and office auditors, as well as specialized 

training for excise, estate, and gift tax agents. Training courses for the 

basic program have been completed and are in use in classes currently 

being held in all regions. Materials for the advanced phases of the program are being developed and are progressing on schedule. When fully 

implemented, the program will provide the Revenue Service with the most 

complete and forward-looking training program in its history and will 

provide specific training at each grade level. 

Handbooks were distributed for use of regional analysts in discharging 

the management responsibilities of their regions and for revenue agents 

engaged in field examinations of offers in compromise. These handbooks 

will provide for better management through a more thorough understanding 

of the duties and responsibilities connected with these functions. 

- In addition, orientation films have been made for use in the training program to acquaint new employees with the operations of the Revenue 

Service. These presentations follow the return through the filing, processing, and examining stages, including the appeal procedures. 

Returns examined.—There were 2,622,000 returns examined by the district 

audit divisions in this fiscal year: This is an increase of 233,000, or 10 percent, over the number of returns closed by examination of taxpayers' 

books and records in the preceding year. Improvements in auditing 

procedures and techniques and effective utilization of available manpower, 

as well as the reduction in the number of technical personnel assigned to the 

taxpayer assistance program, are responsible for the increase. 

Also considered by the audit divisions were some 1,747,000 returns 

which were scrutinized and closed without taxpayer contact. This was a 

reduction of 195,000 in the number of returns closed by this method in 

this year, indicating improved selection of returns. This is attributable, 

for the most part, to improvements in the classification program (selection 

of returns for examination) brought about by the establishment of the chief 

classifying officer position, and by information developed from continuing 

analysis of the results being obtained from audit programs. 

A two-year comparison of the number of examinations by type of returns 

follows: 

Report on Operations 15 

Number of tax returns examined 

[Figures in thousands] 

Fiscal yearType of return 

Grand total 

Income and profits tax, total 

Corporation 

Individual and fiduciary 

Estate and gift tax 

Excise and employment tax 

i Excludes examinations resulting in no tax change where such examination was made f om the taxpayer's copies of 

returns in the course of an audit covering both income and excise and/or employment tax The number of such "no 

change" returns thus excluded is 941,000 for fiscal year 1957 and 964,000 for 1956. 

During the year, 6,923 offer-in-compromise cases were disposed of after 

field examinations. These cases involved income, profits, estate, gift, employment, and withholding taxes, and required the expenditure of 143 

man-years by technical personnel of the audit divisions. 

Fraud Investigations 

In fraud investigation activities, emphasis was placed on selecting better 

cases—from the standpoint of serious tax consequences and from the standpoint of deterring other would-be violators. The result was that, although 

the number of full-scale investigations was about the same as the year before, 

the additional taxes and penalties involved in these cases were 23 per:ent 

above the previous year. The number of prosecutions recommended in 

tax cases (other than tax on wagering and coin-operated gaming devices) 

rose from 1,368 in the fiscal year 1956 to 1,399 in the current year, establishing an all-time high. This record was accomplished in spite of the fact 

that 18 fewer technical personnel were engaged in this work. 

There was also a substantial gain in the number of investigations of 

original applications for enrollment of practitioners. In addition, more than 

31,000 applications for renewal of enrollment cards issued in 1952 were 

processed. 

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

decreased from 34,886 to 30,438 due principally to the decreases in unnumbered (preliminary) investigations and numbered (full-scale extensive) 

investigations of wagering tax violations. 

Unnumbered (preliminary) investigations represent inquiries to determine whether prospective cases warrant full-scale numbered investigations. The decrease in this case category is not significant because the 

number is subject to wide fluctuations dictated by whether agents can be 

spared from work on numbered cases, and also by the varying seriousness 

of the allegations to be evaluated. A more effective screening of such 

allegations was emphasized during the year, which permitted earlier dis1957 1956 

2,622 2,389 

2,310 2,117 

2, 

170 

140 1, 

166 

951 

28 

284 

27 

245 
seizures and arrests for 

liquor law violations 

fiscal years 1956 and 1957 

STILLS SEIZED 

(NUMBER) 

ILLEGAL 

LIQUOR SEIZED 

(WINE GALLONS) 

MASH SEIZED 

(WINE GALLONS) 

ARRESTS 

(NUMBER) 

235,903 

Report on Operations 17 

position of matters having questionable prosecution potential, thereby 

eliminating the need for unnumbered investigations in many instances. 

In emphasizing better initial selectivity of cases, recognition has been given 

to the continuing necessity for individual inquiries and surveys to broaden 

the enforcement area. 

The full effect of a policy change in the wagering tax program adopted 

in the latter part of fiscal 1956 was not felt until the current year. This 

change, which resulted in fewer wagering cases during this year, was aimed 

at the independent initiation and development of wagering cases by the 

Revenue Service against important violators and in situations involving widespread noncompliance. Basically, the change voided the policy of adopting 

wagering violation cases made by local enforcement agencies, thus eliminating an area of enforcement duplication and affording a broader coverage in the wagering field, and promoting the initiation and completion of 

more significant wagering cases. 

Greater uniformity in the application of investigative techniques and in 

the processing of Intelligence cases has been stressed in meetings of InteTgence group supervisors with National Office technicians which were 

initiated during the year. This emphasis will be continued in the future. 

A summary of investigations by the special agents during the last two 

years follows: 

Tax fraud and other Investigations completed by intelligence Division 

Type 

Fiscal year1957 1956 

Grand total 

Suspected fraud and miscellaneous type cases investigated: 

30, 438 34, 886 

Unnumbered (preliminary) investigations, total 17,759 24,121 

Fraud 14, 888 19, 874 

Wagering 2,982 2,474 

Coin.operated gaming devices 620 I, 631 

Miscellaneous 169 142 

Numbered (full-scale) investigations, total 4, 538 4, 650 

Prosecution recommended: 

Fraud I, 399 I, 368 

Wagering 603 734 

Coin-operated gaming devices 241 235 

Miscellaneou 28 42 

Prosecution not recommended: 

Fraud I, 290 1, 346 

Wagering 73 99 

Coin-operated gaming devices 141 55 

Miscellaneous 24 10 

Investigations discontinued: 

Fraud 701 689 

Wagering 

Coin-operated gaming devices 

30 

8 

65 

7 

Other investigations, total 8,141 6,115 

Applications for admission to practice before the Treasury Department 

Charges against enrollees to practice 

i 8, 081 

60 

6,039 03

76 

Ile addition to the applications for admission to practice before the Treasury Department, there were more than 31,000 

renewal applications processed and renewal cards issued during fiscal year 1957. 
1957 1956 

Receipt and disposal of claims for informers' rewards 

Fiscal yearStatus 

Pending July 1 

Received during year 

Disposed of during year, total._ 

Rejected 

Allowed 

Pending June 30 

Amount allowed on claims disposed of during year 

number__ 7,494 6,624 

do__ 3,938 3,908 

do.. 4,356 3,038 

do 3,732 2,560 

do 624 478 

do 7,076 7,494 

dollars._ 518, 437 563, 979 

Report on Operations 19 

A comparison of seizures and arrests follows: 

Seizures and arrests for alcohol, tobacco, and firearms violations 

Item 

Fiscal year1957 1956 

Seizures: 

Stills number_ 

Nontaxpaid distilled spirits wine gallons__ 

Nontaxpaid wine do__ 

Mash do__ 

Vehicles number__ 

Property (appraised value) dollars 

Arrests number 

11,820 

'226, 574 

9,329 

6,756, 563 

3, 355 

3, 529, 274 

i II, 513 

14,499 

247, 277 

6,635 

8,643,208 

1,035 

3, 851, 035 

i 11, 380 

1 Includes 4 arrests for tobacco tax violations and 415 arrests for firearms violations during 1957, and 18 arrests for 

tobacco tax violations and 429 arrests for firearms violations during 1956. 

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

Action under the Liquor Enforcement Act of 1936 against persons attempting to import liquor into the State of Oklahoma resulted in 38 

arrests and the seizure of 1,515 wine gallons of taxpaid liquor and 29 

vehicles (the liquor and property being valued at $59,987). 

Firearms Program 

Investigative work under the National and Federal Firearms Acts and 

the Act of August 9, 1939 (49 U. S. C. 781) resulted in 415 arrests, the 

seizure of 97 vehicles, and the making of 367 cases. Registrations of firearms during the year totaled 154,874. The increase in registrations from 

2,358 in the preceding year reflected an increase in the manufacture of 

firearms requiring registration. 

Rewards to Informers 

Claims were filed by 3,938 individuals for rewards as informers during 

the year. Of the total claims available, 624 were approved, resulting in 

recommended payments of $518,437. A total of 3,732 claims was disallowed 

for lack of substantiation or failure to fulfill eligibility requirements under 

the regulations. 

The following table shows the claims for reward activity during the last 

two years: 

447270 0-58-7 

i4 irr 18 Commissioner of Internal Revenue Annual Report 

Processing practitioner applications.—During the year, in cooperation with 

the Director of Practice, the procedures for the renewal of enrollments of 

practitioners before the Treasury Department were revised. This revision 

was necessitated by changes in Treasury Department regulations pertaining to enrollees. The revised procedures placed upon the Intelligence 

Division the responsibility for processing applications for the renewal of 

enrollment cards. As a result of changes in the enrollment prog rim in 

1 1952, which limited the validity of enrollment cards to a five-year period, 

a peak workload in the renewal of such cards was anticipated in calendar 

year 1957. (For further details on enrollment of practitioners, see p. 68.) 

Alcohol and Tobacco Tax Program 

Fundamental improvements in the strategy of the alcohol tax enforcement program were made during the year. Formerly, the program relied 

primarily on a persistent search for and seizure of individual stills and 

operators. Although this work continues, the new program places primary 

emphasis on (1) a concerted drive to detect and prosecute organized groups 

of large-scale operators, (2) the extension of investigations and the planning 

of raids so as to capture groups of violators together (more arrests per 

seizure), and (3) an intensified raw materials preventive program. 

Substantial progress has been made in devising and perfecting new 

investigative techniques and in developing and using the most modern 

crime detection devices and equipment in order to more effectively combat 

the operations of major liquor law violators. There has been a steady 

reduction in no-defendant still seizures and an overall increase in the 

number of arrests in 1957 over 1956. 

In addition, there are indications that violators are being driven to the 

purchase of sugar (the usual raw material), in five- and ten-pound bags, 

and to the use of sugar substitutes. Contributing to the success of the 

program has been the support and cooperation of dealers in sugar and 

other essential raw materials, who refuse to make sales to known or suspected violators, and the general mobilization of public opinion through 

the support of newspapers and trade publications and the wide distribution 

of pamphlets, posters, and other displays. 

Seizures for violations of alcohol, tobacco, and firearms tax laws decreased, except for wines and vehicles. Arrests increased during the year. 

As compared with the preceding fiscal year, the seizure of stills decreased 

by 18 percent; wine gallons of nontaxpaid distilled spirits decreased by 8 

percent; and the appraised value of property seized decreased 8 percent, 

from $3,851,035 to $3,529,274. The number of vehicles seized increased 

4 percent from 3,229 to 3,355. Seizures of nontaxpaid wines increased 

from 6,635 to 9,329. The number of arrests, including 4 arrests for 

tobacco tax violations and 415 arrests for firearms violations, rose from 

11,380 to 11,513. 
Report on Operations 

Results of criminal action 

21 

20 Commissioner of Internal Revenue Annual Report 

Cases Involving Criminal Prosecution 

The number of income and excise tax cases prosecuted increased sharply 

last year, in line with the trend of recent years. The number of indictments in wagering, alcohol, tobacco, and firearms cases, however, declined. 

A total of 1,825 cases of all kinds was forwarded to the Department of 

Justice with recommendations for criminal proceedings against 1,919 

prospective defendants. This represents a reduction of about 7 percent 

from the number of cases referred during the preceding year, and such decrease was confined primarily to the number of wagering tax cases. 

Indictments in wagering tax cases dropped during the year about 26 

percent from the prior year. However, indictments in income, estate, 

gift, and miscellaneous excise tax cases, exclusive of wagering, alcohol, 

tobacco, and firearms tax cases, rose from 831 to 1,104, an increase of 33 

percent. 

An analysis of cases flowing from the special agents through the regional 

offices of the Chief Counsel and the Department of Justice follows: 

Receipt and disposal of cases in Chief Counsel s Office 

Fiscal yearStatus 

Total 

Indictments returned I 

Disposals, total 

Plea—guilty or nob contendere 

Convicted after trial 

Acquitted 

Nol-prossed or dismissed 

Income tax and miscellaneous cases' 

Indictments returned 

Disposals, total 

Plea—guilty or nolo contendere 

Convicted after trial 

Acquitted 

Nol-prossed or dismissed 

Action 

Number of defendants, 

fiscal year7,831 8,380 

8,370 9,162 

5, 991 6, 586 

1, 018 1, 062 

429 535 

2 932 979 

1,104 831 

I, 028 995 

769 705 

88 132 

48 46 

123 112 

1956 

Wagering tax 

Indictments returned I 

Disposals, total 

Plea—guilty or nolo contendere 

Convicted after trial 

Acquitted 

Nol-prossed or dismissed 

562 762 

581 848 

349 667 

so 68 

16 14 

166 99 

Alcohol, tobacco, and firearms taxes 

Indictments returned 

Disposals, total 

Plea of guilty 

Convicted after trial 

Acquitted 

Nol-prossed or dismissed 

6165 6787 

6,761 7,319 

4,873 5,214 

880 862 

365 475 

643 768 

Prosecution not warranted 

Department of Justice declined to prosecute 2 

Prosecutions 

Opinions delivered 

All other closings 

Pending June 30 

I Includes cases awaiting action in Department of Justice. 

5 Includes 137 wagering tax cases during 1957 and 191 during 1956. 

In income, excise, and wagering tax cases reaching the courtroom, 1,118 

defendants pleaded guilty or nolo contendere, 138 were convicted after 

trial, 64 were acquitted, and 289 were dismissed. In alcohol, tobacco, and 

firearms tax cases, 4,873 pleaded guilty, 880 were convicted after trial, 365 

were acquitted, and 643 were dismissed. 

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

follows: 

Includes defendants prosecuted on the basis of informations. 

2 Includes cases dismissed for the following reasons: 16 because of death of principal defendant, 7 because of serious 

illness of principal defendant, 181 because defendant had pleaded guilty or had been convicted in a related case, and 16 

because of the Supreme Court's decision iii the Achilli case, described below. 

Includes income, estate, gift, and excise taxes other than wagering, alcohol, tobacco, and firearms taxes. 

Actions by the Supreme Court.—The Supreme Court affirmed the conviction 

in Achilli v. United States, 353 U. S. 373, and disposed of an issue not answered in the Court's decision in the Berra case noted in last year's report. 

The taxpayer, having been convicted for the attempted evasion of his 

income taxes, appealed on the contention that the conduct for which he 

was convicted was also an offense under the misdemeanor provisions of 

section 3616(a) of the 1939 Code. The Supreme Court held that such 

section was not applicable to income taxes. 

In United States v. Korpan, 354 U. S. 271, the Court held that the $250 

tax on gaming devices applied to coin-operated pinball machines when the 

player receives cash, premiums, merchandise, or tokens and such machines 

are not operated solely for amusement. In United States v. Calamaro, 

354 U. S. 351, the Court held that salaried employees who pick up wagers 

placed with lottery writers and transport the wagers to the "banker" are 

not subject to the $50 tax imposed on persons engaged in receiving wagers. 

The Supreme Court reversed and remanded the Crunewald and Bolick 

cases, 353 U. S. 391, because of error in the charge to the jury under which 

the verdict of guilty might have rested on impermissible ground. 

Pending July 1 

Received during year, total 

With recommendation for prosecution 

With requests for opinion 

Disposed of during year, total 

3,140 3, 140 
DELINQUENT ACCOUNT ACTIVITY, FISCAL YEARS 1955-1957 

1957 1956 1957 1956 

Number, fiscal year 

(thousands) 

Amount, fiscal year 

(thousand dollars) 

Status 

Assemblies issued 

Closed, total 

Collected 

Returned as uncollectible 

Abatements and other 

2, 744 2, 307 1,299, 176 I, 082,113 

2,762 2,360 1,32!,108 1,152, 531 

2,342 

206 

214 

I, 943 

200 

216 

943, 249 

179,617 

198, 242 

824, 504 

160, 085 

167, 942 

22 Commissioner of Internal Revenue Annual Report 

Collection of Delinquent Accounts 

For the second straight year, inventories of delinquent accounts were 

reduced. Although the reductions were small, they were of major significance in contrast to decades of steadily rising backlogs of overdue taxes. 

The reductions were the result of a top priority program calling for 

concentrated and vigorous action in the delinquent accounts area. At 

the end of June 1957, the inventory of delinquent accounts comprised 

1,488,000 cases, or a drop of 1.1 percent from the 1,505,000 cases on hand 

on June 30, 1956. Dollarwise, inventory dropped by 1.7 percent from 

$1,588,008,000 to $1,560,530,000. 

The decrease in inventory during 1957 was achieved despite the fact 

that there was a marked increase in issuances of delinquent account 

notices during the year as compared with the preceding fiscal year. During 

1957 a total of 2,744,000 delinquent account assemblies was issued. An 

"assembly" is a set of form notices used in following up and recording a 

delinquent account. There were 437,000, or 19 percent, more assemblies 

issued than during 1956. The amount of tax in these cases aggregated 

$1,299,176,000, an increase of $217,063,000, or 20 percent, over the amount 

during 1956. The increase continued to reflect an accelerated program 

aimed at earlier contact with the delinquent taxpayer. In prior years, 

the Revenue Service's policy called for the issuance of a first notice, followed by a second notice, and subsequent assignment of the case to the 

field collection force if payment was not forthcoming as a result of the 

notices. During 1956 the second notice was discontinued. First notices 

were promptly issued on accounts which showed tax payments to be due. 

Report on Operations 23 

If such payments were not made within the prescribed period, the delinquent accounts were assigned for special collection action. 

An important factor in the 1957 achievements was the program instituted 

throughout the Revenue Service calling for a strengthened office collection 

force to handle the newer and relatively simpler accounts, thus permitting 

the collection officers to concentrate on the more difficult and the older 

cases. A total of 2,762,000 delinquent accounts involving $1,321,108,000 

was closed during the year, as compared with 2,360,000 accounts aggregating $1,152,531,000 which were closed in 1956. 

During 1957, 85 percent of all accounts closed were by collections. 

This method accounted for 82 percent of closings in 1956. Dollarwise, 

collections continued to represent over 71 percent of all closings. 

The following table presents the data on collection of delinquent 

accounts: 

Taxpayer delinquent accounts 

Pending lune 30, total 1, 488 1,505 1,560,530 1,588,008 

Active 1, 321 • 1,321 935, 519 • 922, 287 

Inactive 166 • 185 625, 010 • 665, 722 

• Revised. 

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

action unless immediate payment is made. 

Consists of inactive accounts on which collection has been deferred, such as cases involving military personnel, offers 

in compromise, etc. 

Delinquent Returns 

An increase in the number of delinquent returns obtained and in the 

amount of tax from such returns was achieved in 1957 in spite of the fact 

that it was still necessary to give first priority on the time of collection 

officers to the collection of delinquent accounts, as described in the preceding 

section. 

However, as district offices improved the condition of their delinquent 

account inventories, it was possible for them to devote somewhat more 

effort to the constant lookout for occasional persons or firms who have failed 

to file required returns. 

A total of 888,627 delinquent returns was secured by all regions in 1957, 

representing an increase of 6 percent over the 838,284 secured in the 

preceding year. The amounts of tax, interest, and penalty with respect 

to the delinquent returns secured during the fiscal year 1957 aggregated 

$111,557,000, or 29 percent more than the $86,689,000 secured during 1956. 

The vast majority of these delinquent returns were quarterly payroll and 

excise tax returns. Only a small percentage were annual income tax 

returns. 
appeals 

(INCOME, PROFITS, ESTATE, 

AND GIFT TAXES) 

fiscal years 1956 and 1957 

METHOD OF DISP 

AGREEMENT REACHED 

BEFORE ISSUANCE OF 

STATUTORY NOTICE 

UNAGREED 

OVERASSESSMENT ON 

CLAIM REJECTION 

AGREEMENT REACHED 

WHILE STATUTORY 

NOTICE WAS PENDING 

TAXPAYER DEFAULTED 

AFTER ISSUANCE OF 

STATUTORY NOTICE 

SETTLEMENT REACHED 

AFTER PETITION TO 

TAX COURT BUT 

BEFORE TRIAL 

DISMISSED BY TAX 

COURT OR TAXPAYER 

DEFAULTED AFTER 

PETITION 

TRIED IN TAX 

COURT 

TOTAL NUMBER OF INCOME, PROFITS, ESTATE AND GIFT 1956 —15,1 

APPEALS AND CIVIL LITIGATION 

General 

For the fourth consecutive year the number of protested income, profits, 

estate, and gift tax cases received by the nine regional appellate divisions 

showed an increase. This appeared to be the natural result of the expanded 

audit program. 

The 1957 receipts of income, profits, estate, and gift tax cases were 122 

percent of the receipts for 1956. In addition, 1957 receipts of excise and 

employment tax cases substantially exceeded those for 1956. 

In the face of these increases in workload, appellate offices nevertheless 

were able to consider protested cases about as rapidly as taxpayers and 

their representatives were prepared to proceed with them. As the result, 

workload at the close of the year was in a substantially current condition 

. even though the number of pending cases had increased. 

Despite the increases in receipts and disposals of protested income, 

profits, estate, and gift tax cases, taxpayer petitions to the Tax Court 

showed a slight decrease in 1957 as compared with 1956. Disposals of 

petitioned cases slightly exceeded those for the previous year with the 

result that the number of petitioned cases pending increased only nominally. 

Income, Profits, Estate, and Gift Taxes 

The following tables reflect case receipts, dispositions, and pending 

inventories for the regional appellate divisions as a whole during the 

last two fiscal years: 

Appellate Division processing of protested income, profits, estate, and 

gift tax cases prior to issuance of statutory notice of deficiency (pre-90-

day cases) 

Status 

Number of cases 

1957 1956 

Pending in pre-90-day status July 1 8, 750 8, 029 

Net receipts from District Director during year 15,786 13, 028 

Processed during year, total 13, 413 12,307 

Agreed 8,807 8, 062 

Unagreed overassessments and claim rejections 693 781 

Statutory notice issued—transferred to 90-day status 3, 913 3, 464 

Pending in pre-90-day status June 30 11,123 8, 750 

25 
Report on Operations 27 

The following table reflects the results in excise and employment tax cases: 

Appellate Division processing of protested excise and employment tax 

cases 

26 Commissioner of Internal Revenue Annual Report 

Appellate Division processing of protested income, profits, estate, and 

gift tax cases in which statutory notices of deficiency were outstanding 

(90-day cases) 

Status 

Number of cases 

1957 1956 

Pending in 90-day status July 1 1, 089 1, 082 

Net receipts during year, total 4,927 4,252 

By transfer from pre-90-day status I 3,945 3,516 

Received from Director in 90-day status 982 736 

Processed during year, total 4,563 4,245 

Agreed 1,133 833 

Defaulted 1,116 936 

Petitioned to the Tax Court-transferred to docketed status 2,314 2,476 

Pending in 90-day status June 30 1,453 1,089 

Difference from preceding table is caused by cases being combined or split for the pur ose of issuing the statutory 

notice, cases in transit, etc. 

Appellate Division processing of income, profits, estate, and gift tax cases 

petitioned to the Tax Court (docketed cases) 

Status 

Number of cases 

1957 1956 

Pending in docketed status July 1 8,422 7,961 

Net receipts during year, total 4,875 4,971 

Petitions filed in response toDistrict Director's statutory notice 2,613 2,697 

Appellate Division's statutory notice' 2,184 2,211 

Cases reconsidered after trial 78 63 

Processed during year, total 4,536 4, 510 

Agreed-stipulated 3,496 3,523 

Dismissed or defaulted 190 186 

Tried before the Tax Court on merits 850 801 

Pending in docketed status June 30 8, 761 8,422 

Difference from number shown aspetitioned in preceding table is caused by excluding District Director's statutory 

notices considered by Appellate in 90-day status, cases in transit, etc. 

Excise and Employment Taxes 

During the latter part of the year, a new policy was adopted for administrative appeals in unagreed excise and employment tax cases so that now 

taxpayers ordinarily obtain Appellate Division review of such cases prior 

to the assessment of additional tax. These changes make uniform the 

appeal procedures for all taxes over which the Appellate Division has jurisdiction. Previously, excise and employment taxpayers could not appeal 

directly to the Appellate Division prior to assessment of the unagreed tax, 

but could obtain a hearing after assessment of tax by filing a claim for 

abatement or refund. 

Status 

Number of cases 

1957 1956 

Pending July 1 

Received during year 

Processed during year, total 

Settled by agreement 

Unagreed partial allowances and claim rejections 

Pending June 30 

286 

1,093 

240 

662 

751 616 

380 

371 

354 

262 

628 286 

Claims for Relief from Excess Profits Tax 

Further reduction was made during the year in the claims for relief from 

the World War II excess profits tax (section 722, Internal Revenue Code 

of 1939). 

By the close of the year, all nondocketed cases had been disposed of except 

for two cases pending before the Excess Profits Tax Council and one case 

which is still being considered by a field office. The number of cases pending in the Tax Court was reduced from 357 to 239. 

The results in cases before the Council and the Tax Court were as follows: 

Claims for relief from excess profits tax 

Status 

Council cases Tax Court cases 

Number of 

cases 

Amount 

claimed 

(thousand 

dollars) 

Number of 

cases 

Amount 

claimed 

(thousand 

dollars) 

Pending July 1, 1956 

Received 

Tota l 

Closed 

Pending June 30, 1957 

3 

2 

29,994 

436 

357 

11 

815,494 

45,155 

5 30,430 368 860,649 

3 

2 

28,591 

1,840 

129 

239 

152,987 

707,662 
28 Commissioner of Internal Revenue Annual Report 

Compromise and Closing Agreement Cases 

Results of Appellate Division consideration of offers in compromise and 

of closing agreement cases ate shown in the following table: 

Appellate Division processing of compromise and final closing agreement 

cases 

Status 

Compromise cases Final closing agreement cases 

1957 1956 1957 1956 

Pending July 1 235 283 7 27 

Received during year 422 442 49 73 

Processed during year, total 447 490 41 93 

Accepted, granted, or approved 112 158 

Rejected 269 270 

Withdrawn 66 62 

Pending June 30 210 235 15 

The closing agreement cases referred to above relate to completed transactions by taxpayers. Rulings on proposed closing agreements involving 

prospective transactions are discussed on page 47. 

Although the offer-in-compromise cases shown in the above table are 

included with similar cases in the material on pages 37 and 38, this table is 

intended to show the number of such cases in which taxpayers appealed 

to the Appellate Division, and the results of such appeals. 

Other Courts 

Results in other courts.—In courts other than the Tax Court, disposals of 

pending tax cases generally exceeded new cases, and backlogs were reduced correspondingly. 

The Supreme Court decided six cases which originated in the Tax Court 

and four tax cases from other courts. The Commissioner's position was 

sustained in all of the Tax Court cases and in three of the other cases. 

The circuit courts of appeals disposed of 360 Tax Court cases and 190 

other tax cases (exclusive of bankruptcy, receivership, insolvency, compromise, and liquor cases). 

In cases outside the jurisdiction of the Tax Court and in most cases 

within the Tax Court jurisdiction, taxpayers who have paid a disputed tax 

can, if they wish, sue for refund in the Court of Claims or in a United 

States district court. Last year the district courts decided 193 cases for 

the government, 219 for the taxpayer, and 62 cases were decided partly for 

the government and partly for the taxpayer. The Court of Claims decided 28 cases for the government, 36 cases for the taxpayer, and 4 cases 

partly for each. 

Report on Operations 29 

As of June 30, 1957, there were 2,758 civil cases (principally suits for 

refund and for collection of taxes) involving tax questions pending in district and State courts, 57 pending in courts of appeals, and 468 pending in 

the Court of Claims. 

For details of the cases in courts other than the Tax Court, see tables 

17-20, on pages 116 and 117. 

Decisions of Supreme Court.—Among civil cases (see "Enforcement" section 

for criminal cases) decided by the Supreme Court were the following: 

The case of Allen-Bradley Company v. United States, 352 U. S. 306, was decided January 22, 1957, in favor of the government. The Court, in reversing the Court of Claims, sustained the government and held that the 

authorized executive body had authority to issue certificates certifying that 

only a part of the cost of essential wartime improvements was necessary to 

the national defense. The basis for computing the amortization deduction 

under section 124(f) of the 1939 Code was limited to only such amount 

that constituted the adjusted basis as the certifying authority had certified 

as necessary in the interest of national defense during the emergency period. 

The case of Ohio Power Company v. United States, 353 U. S. 98, was decided 

on April 1, 1957. The government was upheld on the merits of a $5,885,300 

tax liability, turning upon whether the taxpayer was entitled to deduct the 

entire cost of emergency facilities over the accelerated five-year period provided in sear= 124, 1939 Code, or whether it was limited to 35 percent 

of such cost, as contended by the government and as verified by the War 

Production Board. This decision was significant not so much because 

cases involving over $90,000,000 in revenue were at stake, as because of 

the Court's action in reopening the case after denying certiorari and after 

denying two subsequent petitions for rehearing on its denial. When 

certiorari was granted in the Allen Bradley case, the Court reopened this 

case on its own motion. The opinion discusses solely this procedural issue, 

being an exception to the Court's own rule and its "deep-rooted policy 

that adjudication must at some time become final." 

The case of Libson Shops, Inc. v. Koehler, 77 S. Ct. 990, was decided in 

favor of the government on May 27, 1957. It involved the right of a corporation, succeeding 16 separate corporations by state statutory merger, 

to carry over and deduct from its postmerger income the net operating 

losses of three of the old corporations incurred in the premerger year. 

Under sections 23(s) and 122(b)(2)(c), 1939 Code, the question was 

whether succession by operation of law (merger) made the petitioner "the 

taxpayer," but the Court found it unnecessary to answer this. It concluded that the relief was intended by Congress to be applicable only in 

the case of continuity of a business enterprise where the income and loss 
30 Commissioner of Internal Revenue Annual Report 

were produced by the same business, that the statute granted no special 

privilege to be acquired through a merger, and that on the facts the carryover was to be denied. 

The case of Haynes v. United States, 353 U. S. 81, was decided on April 1, 

1957, in favor of the taxpayer. The Court held that sickness disability 

benefits received from taxpayer's employer, Southern Bell Telephone and 

Telegraph Company, under a "Plan for Employees' Pension, Disability 

Benefits and Death Benefits," constituted amounts received through health 

insurance within the meaning of section 22(b)(5) of the 1939 Code. The 

government contended that the plan did not have the essential characteristics of health insurance in that there were no definable premium payments 

by the employee, no separate fund established out of which benefits were 

paid, and the amounts and duration of the benefits varied with the length 

of service. It was also contended that the payments represented "fringe 

benefits" taxable as compensation for services. However, the Court decided that the term "health insurance" as used in section 22(b)(5) should 

be given its broad general meaning since legislative history did not indicate 

that Congress had intended to restrict the exemption to conventional 

modes of insurance and not to include employer disability plans. This 

decision provided the basis for concluding litigation in approximately 44 

cases which were pending in the courts. In addition, this decision allowed 

the processing of an estimated total of 66,000 claims for refund involving 

approximately $6,620,000 which were pending throughout the nation on 

this issue. 

In Putnam v. Commissioner of Internal Revenue, 352 U. S. 82, decided on 

December 3, 1956, the taxpayer, the controlling stockholder of a corporation, guaranteed payment of promissory notes which the corporation executed in obtaining bank loans. The corporation became insolvent and the 

taxpayer, as guarantor, was required to pay the bank. The Supreme Court 

held that the corporation being unable to repay him upon his payment as 

guarantor, taxpayer, by subrogation, acquired a debt; the loss resulting 

from the worthlessness of which is deductible as a short-term capital loss 

for nonbusiness bad debt under section 23(k)(4) of the 1939 Code, and 

not as an ordinary nonbusiness loss deduction under section 23(e) (2). 

In National Lead Company v. Commissioner of Internal Revenue, 352 U. S. 313, 

decided on January 22, 1957, it was held that the War Production Board 

was empowered under section 124 of the Internal Revenue Code of 1939 to 

issue certificates covering only a part of the cost of petitioner's wartime 

improvements. Accordingly, petitioner was not entitled to accelerate the 

amortization of the full cost of those facilities covered by the Board's 

"partial certifications." 

Report on Operations 31 

In Automobile Club of Michigan v. Commissioner of Internal Revenue, 353 

U. S. 180, decided on April 22, 1957, it was held that the Commissioner 

was not estopped from revoking a ruling holding that an automobile club 

was exempt from income tax where such ruling was based on a mistake of law. 

The action of the Commissioner retroactively revoking taxpayer's exemption 

was not an abuse of discretion. 

Statements on adverse Tax Court decisions.—There were published in the 

Internal Revenue Bulletin acquiescences of the Commissioner in 464 

adverse decisions of the Tax Court and nonacquiescences in 94 adverse 

decisions. 
tax, interest, and penalties 

from enforcement efforts 

fiscal years 1956 and 1957 

(millions 

ADDITIONAL TAX, 

INTEREST, 

AND PENALTIES 

FROM AUDIT 

INCREASE IN TAX 

FROM MATHEMATICAL 

VERIFICATION 

TAX, INTEREST, 

AND PENALTY ON 

DELINQUENT RETURNS 

SECURED BY 

COLLECTION DIVISION 

TOTALS, 1 05AS1 AM MII I ION 

CHANGES IN TAX LIABILITY 

Additional Taxes 

Assessments of additional taxes, interest, and penalties as the result of 

enforcement activities totaled $1,661,354,000 for 1957, an increase of 18 

percent over the preceding year. This was the highest total for any year 

since the enforcement activities were reorganized along present lines. 

The policies and programs adopted in recent years were contributing 

factors to the increased tax results in this fiscal year. Among these were 

improved methods for selecting returns for investigation and audit, the 

training of audit technicians, and less diversion of enforcement personnel 

to other assignments. 

About half of the dollar increase in additional assessments resulted from 

the examination of corporation income tax returns. Regular audits, as 

distinguished from prerefund audits, of individual and fiduciary returns 

also resulted in a dollar increase in additional assessments. These increases 

reversed the trend of last year. 

Prerefund audits continue to show improvement. The additional tax 

resulting from this program increased from $73,759,000 during the preceding 

fiscal year to $79,064,000. The growth of this program is attributable to 

improved selection procedures and audit techniques. 

There was also a substantial increase in certain other types of enforcement 

activity such as the securing of delinquent returns and mathematical verification. Delinquent returns secured by collection divisions produced 

assessments of tax, interest, and penalty in the amount of $111,557,000, or 

an increase of 29 percent over the previous fiscal year. In addition, as a 

byproduct of the audit of returns, the audit divisions secured $10,424,000 

on delinquent returns during the period January through June, 1957 

(audit figures not available for prior periods). Additional tax resulting 

from mathematical verification increased 29 percent. 

33 
34 Commissioner of Internal Revenue Annual Report 

Following is a comparison of results for the last two years: 

Tax, Interest, and penalties resulting from enforcement efforts 

fin thousands of dollars] 

Item 

Fiscal year1957 1956 

Total 2, 159,007 I, 964, 869 

Additional tax, interest, and penalties assessed 1, 661, 354 I, 412, 823 

Claims disallowed 497, 653 552, 046 

Analysis of additional tax, interest, and penalties 

From audit, total I, 451, 674 I, 249, 868 

Income and profits taxes, total I, 292, 278 1, 120, 723 

Corporation income and profits__ 678, 268 566, 074 

Individual and fiduciary: 

Prerefund audit 79, 064 73, 759 

Regular audit 534, 945 480, 889 

Employment taxes 8,174 5, 700 

Estate and gift taxes 123, 446 108, 063 

All other taxes 27, 776 15,381 

From mathematical verification, tota l 98, 123 76, 266 

Individual 96, 363 74, 855 

Corporation 1,760 I, 411 

From delinquent returns secured by: 

Collection Division III, 557 86,689 

Audit Division 2 10, 424 

n. a.-Not available. 

I Includes withheld income tax. 

2 6 months only; not included in grand total or subtotal. 

Overassessments and Overpayments 

Refunds and repayments.-The total amount of refunds and repayments, 

including interest, drawbacks, and stamp redemptions, rose from 

$3,772,359,000 during fiscal year 1956 to $4,009,335,000 during fiscal year 

1957, an increase of more than 6 percent. There were corresponding 

increases of more than 6 percent each in number of refunds and in amount 

of interest allowed. 

Over half of the increase in number of refunds occurred among the 

manufacturers' and retailers' excise taxes. For fiscal year 1957 these included over 1,200,000 claims by farmers for refund of gasoline tax, aggregating about $25,000,000, which were filed under the provisions of Public 

Law 466, approved April 2, 1956. 

The following table shows by class of tax the number and amount of 

refunds and interest allowed during the last two years: 

Report on Operations 35 

Number and amount of internal revenue refunds, including Interest 

Type of tax 

Number 

Amoun refunded 

(principal nd interestthousa d dollars) 

Amount of 

interest 'ncluded 

(thousand dollars) 

Fiscal year 

1957 

Fiscal year 

1956 

Fiscal year 

1957 

Fiscal year 

1956 

Fiscal year 

1957 

Fiscal year 

1956 

Total refunds of internal revenue__ 36, 403, 197 • 34, 313, 911 4, 009, 335 3, 772, 359 57,009 53,747 

Corporation income and profits taxes..__ 58, 741 64, 081 399, 563 453, 659 35, 983 35, 549 

Individual income and employment 

taxes, total 35, 084, 969 •34, 186, 668 3, 487, 887 • 3, 230, 492 16, 887 15, 741 

Excessive prepayment income tax... 34, 125, 607 •33, 514, 687 3, 315, 690 3, 106, 728 6,413 6,768 

Other income tax and old-age insurance I 939,838 655, 019 169, 533 121, 416 10, 390 8, 890 

Railroad retirement 103 91 100 61 8 16 

Unemployment insurance 19, 421 16, 871 2, 563 2, 287 75 68 

Estate tax 3, 965 3,219 13,809 10, 728 I, 496 I, 336 

Gift tax 594 445 I, 125 I, 014 187 165 

Alcohol taxes a 9,234 8, 382 57, 462 52,063 73 I 

Tobacco taxes 2 354 398 187 2, 028 (t) (•) 

Manufacturers' and retailers excise 

taxes I, 217, 901 2,084 27, 766 2, 303 310 76 

Redemption of stamps, total 4, 566 • 5,175 8, 495 • 7, 768 32 307 

Alcohol I, 032 1,323 I, 293 2,031 (•) 9 

Tobacco 1, 887 2, 012 4, 842 4, 023 1 

Other 3 1, 647 • 1, 840 2, 359 • I, 713 32 297 

Other 4 22, 873 '43, 459 13, 041 • 12, 303 2, 042 572 

• Revised. 

• Less than $500. 

Figures have not been reduced by amounts of $58,190,000 in 1957 and $66,000,000 i n 1956 reimbursed from the Federal 

old-age and survivors insurance trust fund. 

2 Includes drawbacks. 

Includes narcotics, silver, and wagering stamps previously reported separately. 

4 Includes capital stock tax, wagering tax (excise) and other excise refunds previously reported separately. 

Excessive prepayments of individual income tax.-The great majority of refunds 

to taxpayers result from excessive prepayments of the individual income 

tax through withholding by employers and from overpayment of estimated 

tax. 

During the period January through June 1957, almost 33,100,000 refunds 

were scheduled on individual income tax returns filed for the tax year 

1956. This represents an increase of 886,000 over those scheduled in the 

comparable period of the preceding year. The excess is due partly to 

accelerated scheduling during 1957 and partly to an expected increase in 

volume for the year, consistent with the increase in number of individual 

income tax returns filed. The average refund scheduled through June 

1957 with respect to the tax year 1956 returns was $94, as compared with 

an average of over $90 scheduled through June 1956 with respect to the 

year 1955 returns. 

The following table shows the number and amount of refunds and 

credits, and interest paid, as a result of excessive prepayments of tax for 

447270 0-58---4 
Status Claimed Adjusted 

36 Commissioner of Internal Revenue Annual Report 

returns filed for the tax years 1952 through 1956 (usually received and 

processed by June 30 of the following year): 

Refunds and credits resulting from excessive prepayments of individual 

income tax 

Refunds Credits 

Tax year 

1956 

1955 

1954 

1953 

1952 

Figures are preliminary and reflect refunds or credits to June 30, 1957. Re ised figures to Dec. 31, 1957, will appear in 

next years report. 

2 Includes 180,000 returns requiring split betw en credit to ensuing tax year or prior yea and current year refund. 

3 Includes 271,000 returns requiring split betw en credit to ensuing tax year or prior year and current year refund, 

Carryback allowances.-Fewer applications were received during this 

fiscal year requesting tentative adjustments of prior years' taxes as the 

result of net operating losses. However, the dollar amount involved in 

these claims was slightly higher than the amount claimed in the previous 

fiscal year. Applications filed by individuals declined at a greater rate 

than those filed by corporations. 

Of the total applications available 86.2 percent were adjusted this fiscal 

year. The amount claimed in the applications adjusted was $259,325,000, 

of which $241,162,000 was allowed. 

The number of applications pending at the end of this fiscal year was 

12.8 percent less than at the end of the prior year. 

A comparison of carryback applications received and adjusted during 

the last two years follows: 

Receipt and disposal of tentative carryback applications 

Number Amount (thousand dollars) 

Pending July 1 

Applications received 

Applications adjusted, total 

43, 401 45, 972 261, 518 259, 696 

44,446 53, 033 259, 325 320, 014 

8,152 15, 213 41, 078 101, 396 

Allowed n. a. n. a. n. a. n. a. 

Disallowed n. a. n. a. n. a. 

Pending June 30 7, 107 8, 152 43, 271 41,078 

n. a.-Not available 

Claims for refund.-District audit divisions closed 300,870 claims for 

refund in this fiscal year. These claims involved $406,377,000, of which 

$235,122,000 was disallowed. 

Report on Operations 37 

As in the preceding year, individual income tax claims accounted for 

the largest number of cases, while the major portion of the total dollar 

amount involved corporation income and profits taxes. 

About 65 percent of the amount claimed by corporations was disallowed, 

compared with 36 percent claimed by individuals. 

An analysis of the action taken on these claims for refund follows: 

Claims for refund closed by district Audit Divisions, fiscal year 1957 

Class of tax Number 

Amount (thousand dollars) 

Claimed by 

taxpayer 

Allowed Disallowed 

Total 300, 870 406, 377 171,255 235,122 

individual income taxes 249, 279 88,144 56, 444 31, 701 

Corporation income and profits taxes 21, 157 262,498 92, 615 169, 884 

Estate tax 867 14,190 7, 646 6, 544 

Gift tax 180 478 184 293 

Excise taxes 7,644 34,793 11, 249 23, 544 

Employment taxes 21, 743 6,273 3, 118 3,155 

Review of overassessments exceeding $100,000.-A total of 277 cases involving 

overassessments of $266,419,941 was reported to the Joint Committee on 

Internal Revenue Taxation in accordance with the provisions of section 

6405 of the Internal Revenue Code of 1954 which requires review by the 

committee of all refunds and credits of income, war profits, excess profits, 

estate, or gift tax exceeding $100,000. These figures compared with 205 

cases involving $160,420,683 reported in the preceding year. 

Offers in Compromise 

The inventory of offer-in-compromise cases on hand was reduced during 

the year to the lowest level in many years. 

This was the result of a campaign during the last few years to expedite 

consideration of cases. The work has now reached what appears to be as 

current a condition as can be expected in view of the technical and administrative problems entailed. The continuance of this condition, however, 

depends on economic and other factors. 

Noteworthy measures were taken to improve evaluation techniques and 

stabilize compromise operations at the district level. Of particular significance were procedures established to implement the collateral agreement 

functions. These agreements are an integral part of the compromise 

activity-they represent a method for the recovery of additional sums not 

obtainable in any other manner. Recoupments from this source are 

attained by prevailing upon taxpayers, in exchange for remission of their 

liabilities, to give up tax benefits, present or potential, or agree to make 

additional payment from annual income contingent upon their financial 

success in future years. The resultant sums obtained through this medium 

Number 

(thousands) 

Principal 

(thousand 

dollars) 

3, 122, 256 

3, 074, 128 

2, 932, 261 

2, 739, 932 

2, 373, 989 

Number 

(thousands) 

Amount 

(thousand 

dollars) 

347, 548 

543, 501 

573,243 

462, 818 

396,081 

241,162 

26, 388 

297, 920 

22, 537 
13,753 

10, 836 

1,430 

50 

851 

481 

105 

14, 829 

12,437 

1,318 

59 

683 

320 

12 

38 Commissioner of Internal Revenue Annual Report 

represent substantive revenue not reflected in the offer amounts shown in 

the accompanying statistical table. 

During the year, district audit divisions received for consideration 6,294 

tax offers, 7,731 delinquency penalty offers, and 3,601 specific penalty 

offers. The district offices, together with the National Office's Compromise 

Branch and regional appellate divisions, disposed of 18,448 offers, leaving 

6,980 on hand as of June 30, 1957. 

The Chief Counsel and offices of regional counsels have original jurisdiction over tax offers in cases in which court proceedings (except those of the 

Tax Court of the United States) are involved, or criminal prosecution is 

pending. These offices received 310 offers, disposed of 314, and had 264 

offers on hand as of June 30, 1957. 

In the alcohol, tobacco, and firearms categories, the alcohol and tobacco 

tax divisions, both national and regional, received 580 offers and disposed 

of 622 offers, leaving a total of 66 cases on hand as of June 30, 1957. 

The overall compromise workload as of June 30, 1957, consisted of 7,310 

cases awaiting consideration at all Revenue Service levels. This represents 

a major accomplishment when compared with the inventory of approximately 21,000 unprocessed compromise cases on hand July 1, 1953. 

A summary of cases closed for the last two years follows: 

Offers in compromise disposed of 

Amount, fiscal year-(thousand 

dollars) 

Type of tax or penalty 

Liabilities 

1957 1956 1957 1956 1957 1956 

Offers accepted, total 13.494 14, 515 46, 107 47, 973 14, 093 

Specific penalties 

Alcohol taxes 

Employment and withholding taxes 

Other excise taxes 

Delinquency penalties on all taxes 

Income, profits, estate, and gift taxes 

3, 925 3, 806 100 

6, 498 6, 992 2, 327 2, 249 476 

1, 329 1, 712 36, 572 38, 323 11, 232 

1, 303 1, 524 4, 686 3,688 1, 562 

269 366 1,839 3, 375 570 

170 115 683 338 153 

Offers rejected or withdrawn, total 5, 890 6, 965 90, 285 95, 022 12, 545 

Income, profits, estate, and gift taxes 

Employment and withholding taxes 

Alcohol taxes 

Other excise taxes 

Delinquency penalties on all taxes 

Specific penalties 

SUPERVISION OF THE ALCOHOL AND 

TOBACCO INDUSTRIES 

General 

Further progress was made this year in the legislative program for simplifying and bringing up to date the system of alcohol and tobacco tax 

administration. 

H. R. 7125, which was passed by the House of Representatives on June 20, 

1957, incorporates, with minor modifications, the proposals of the Revenue 

Service for extensive revision of the distilled spirits provisions of the Code. 

In the fields of tobacco, wine, and beer, this goal was largely accomplished 

through recommendations to the Congress which were embodied in the 

1954 Code. 

In general, the purposes of the changes relating to distilled spirits are to 

modernize the laws and to provide greater uniformity in the provisions 

relating to production, warehousing, processing, removal, and use of all 

types of distilled spirits. Additional purposes are to facilitate utilization of 

plants and equipment for national emergency purposes, to eliminate artificial statutory distinctions between similar operations, and to establish a 

more efficient system of liquor tax administration. 

In effectuating these purposes, the responsibility of proprietors for the 

proper conduct and control of their operations has been recognized. It 

has also been recognized that qualified proprietors of distilled spirits plants 

should be free to conduct their operations and to utilize their facilities in 

an efficient and businesslike manner, subject only to such controls as are 

reasonably necessary to protect the government's interests. 

Detailed tabulations relating to the production of alcohol, distilled spirits, 

beer, wine, and tobacco manufactures during the fiscal year 1957 (corresponding to the tables which appear in the appendix of issues of this report 

for the fiscal year 1952 and earlier years) are presented in a separate Internal Revenue Service publication entitled "Statistics Relating to the Alcohol 

and Tobacco Industries," which may be obtained from the Superintendent 

of Documents, Washington 25, D. C. 

Authorization of Operations 

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

beginning and the end of the fiscal year, under the provisions of chapters 

51 and 52 of the Internal Revenue Code and sections 3 and 4 of the Federal 

Alcohol Administration Act, are shown in appendix tables 7-9 on page 

104, and the totals of all liquor and tobacco establishments qualified 

under the Internal Revenue Code are shown in appendix tables 6a and 6b 

39 

Number, fiscal 

yearOffers 

2, 264 2, 643 78, 600 82, 749 10, 186 

I, 371 1, 611 5, 837 6, 248 1, 396 

205 195 891 768 65 

387 434 3, 736 3, 865 671 

1, 630 2, 052 1, 221 I, 392 218 

33 30 9 
40 Commissioner of Internal Revenue Annual Report 

on page 103. One hundred twenty-five applications for approval of interlocking directorates under section 8 of the Federal Alcohol Administration 

Act were acted on. Table 10, 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 105. 

On-Premises Supervision 

During the fiscal year 1957, storekeeper-gauger supervision was provided 

at distilleries, warehouses, denaturing and rectifying plants, bottling houses, 

and other facilities which accounted for the production of 425,418,101 proof 

gallons of ethyl alcohol, the denaturation of 436,469,185 proof gallons of 

ethyl alcohol, the warehousing of 26,590,971 proof gallons of ethyl alcohol, 

the production of 224,947,755 tax gallons of distilled spirits of various kinds, 

the warehousing of 853,012,351 tax gallons of distilled spirits, the tax payment on 169,857,035 tax gallons of distilled spirits, including alcohol, the 

rectification of 84,400,486 proof gallons of distilled spirits and wines, and 

the bottling of 191,106,135 wine gallons of distilled spirits. 

Inspection of Establishments 

Inspections of establishments for the fiscal year aggregated 52,336, of 

which 38,449 related to plants and permittees other than dealers. Duripy 

the previous fiscal year total inspections numbered 52,072, of which 37,92: 

related to plants and permittees other than dealers. 

During the year, the plants and permittees (other than dealers), which 

were inspected and had no on-premises supervision, produced alcoholic 

beverages and tobacco products as follow: 89,881,935 barrels (of 31 

gallons each) of beer, 148,791,596 wine gallons of still wines, 2,478,512 

wine gallons of effervescent wines, 3,741,991 wine gallons of vermouth, and 

1,197,878 wine gallons of special natural wines other than vermouth. 

The inspected tobacco plants, in the calendar year 1956, produced 

5,830,151,293 cigars, 424,246,872,839 cigarettes, and 184,910,128 pounds 

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

The total reported inspections include periodic inspections of all qualified 

plant operations and permittees, special inspections such as those covering 

plant changes, claims, surveys or instructional activities, investigations 

incidental to the qualification of establishments, and investigations of 

alleged infractions of law and regulations. As an incidental duty in their 

regular enforcement work, enforcement personnel also made 119,440 

inspections of retail liquor dealers and 507 inspections of nonpermittee 

wholesale liquor dealers. 

Report on Operations 41 

Chemical Analyses and Research 

The National Office laboratory and the laboratories in each of the regions 

are primarily concerned with the examination of samples submitted in 

connection with the regulatory and enforcement functions of the Internal 

Revenue Service and the Bureau of Narcotics. 

Of approximately 40,000 samples received, 29 percent were submitted 

by the Enforcement Branch of the Alcohol and Tobacco Tax Division, and 

approximately 19 percent were submitted by the Bureau of Narcotics. 

The remaining samples related to the administration of labeling and 

denaturing regulations, and to the identification of articles subject to 

miscellaneous excise taxes. The samples submitted by the Enforcement 

Branch were principally "moonshine" and mash. The National Office 

laboratory tested and certified 519 gauging instruments, tested 122 beer 

meters, repaired 47 beer meters, and ran 564 tests in the evaluation of a 

new type of beer meter. 

A study of the proofing techniques and gauging instruments demonstrated that increased accuracy in proofing can be obtained by better 

training of personnel and the issuance of more precise instructions for the 

use of gauging instruments. 

A research program carried out in the laboratories during the year 

resulted in the development and publication of 21 new and improved 

methods of analysis and the compilation of 5 comprehensive tables for 

reference use, the development of a simple method for determining the 

obscuration of proof in straight whiskies, and the designing of a marking 

device for hydrometers that will substantially reduce manpower requirements in testing the accuracy of hydrometers. The publication "Methods 

of Analysis for Alkaloids, Opiates and Synthetic Drugs" was revised and 

published as IRS Publication No. 341. 
TECHNICAL SERVICES 

General 

In the fiscal year 1957, the Revenue Service's technical offices were 

busily engaged on two principal fronts. On the one hand there was the 

continuous task of preparing regulations, designing and revising tax 

return forms, issuing and publishing rulings, and developing tax guide 

material under the 1954 Code. On the other hand, a substantial volume of 

work was devoted to assisting congressional subcommittees studying the 

need for revision of the Internal Revenue Code of 1954. (See p. 55.) 

Regulations Program 

Regulations under the Internal Revenue Code of 1954.—Twenty-six notices of 

proposed rulemaking and 29 Treasury Decisions relating to regulations 

under the 1954 Code were published during the year. In the case of 

subtitle B, relating to estate and gift taxes, publication of regulations in 

proposed form was completed. Of the total of 139 separate Treasury 

Decisions; not including alcohol and tobacco tax provisions; scheduled for 

preparation and issuance under the 1954 Code to date, 60 have been 

published in final form and an additional 34 in "proposed" form. Most of 

the remaining 45 Treasury Decisions have been drafted and are in various 

stages of review. Publication of regulations under subtitle D, relating to 

excise taxes, continued to lag during the year because of manpower limitations and the need to give priority to regulations under other provisions of 

the Code. Some of the more important regulations published were: 

Regulations under sections 401 to 404 inclusive, and section 6033(a) of the 1954 

Code relating to pension, profit sharing, and stock bonus plans (T. D. 6203). 

Regulations under sections 4261 to 4264 inclusive, and sections 4291 to 4293 inclusive, of the 1954 Code, as amended by Public Laws 796 and 1015, 84th Congress, 

relating to the tax on transportation of persons (T. D. 6206). 

Regulations under sections 72, 1021, and 1035 of the 1954 Code, relating to annuities 

and certain proceeds of life insurance contracts (T. D. 6211). 

Regulations under subparts A-E inclusive, part I, subchapter J, chapter 1 of the 

1954 Code, relating to income taxation of estates and trusts (T. D. 6217). 

Regulations under sections 441, 442, and 443 of the 1954 Code relating to accounting 

periods (T. D. 6226). 

Other regulations, Treasury Decisions, and related Executive orders.--Regulations under public laws other than the 1954 Code have become an increasingly important factor in the program of issuing new regulations. 

One notice of proposed rulemaking and 5 Treasury Decisions were published during the fiscal year under such laws. Most noteworthy of these 

were regulations under the Highway Revenue Act of 1956, relating to 

42 

Report on Operations 43 

floor stocks taxes (T. D. 6204), and relating to the tax on use of certain 

highway motor vehicles (T. D. 6216). 

Also processed to completion were 11 other Treasury Decisions, 3 

notices of proposed rulemaking, and 5 related executive orders. These 

Treasury Decisions conformed existing regulations to subsequent court 

decisions or administrative determinations that the rules in existing regulations should be changed or clarified. 

Alcohol and tobacco tax.—Of the 29 regulations required to implement the 

alcohol and tobacco tax provisions of the 1954 Code, 27 have been issued. 

One of these, 26 CFR Part 245, "Beer," effective January 1, 1957, was 

completely rewritten during the year to eliminate most of the detailed 

requirements of the 1955 edition. A new regulation, 26 CFR Part 212, 

"Formulas for Denatured Alcohol," effective May 1, 1957, was issued to 

supersede the appendixes to 26 CFR Part 182. Two tobacco regulations, 

26 CFR Part 285, relating to cigarette papers and tubes, and 26 CFR 

Part 290, relating to the exportation of tobacco materials and products, 

remain to be issued. 

Treasury Decisions of major import issued during the year included: 

T. D. 6221, effective March 1, 1957, which reduced the requirements for record 

keeping and submission of reports by liquor dealers, distillers, warehousemen, and 

bottlers. 

T. D. 6224, effective April 1, 1957, which similarly reduced requiremerns for record 

keeping and submission of reports by importers and persons bringing liquor into 

the United States from Puerto Rico. 

T. D. 6241, effective June 29, 1957, which permits the consolidation of certain 

types of spirits for further warehousing or withdrawal from bond. 

Tax Return Forms Program 

Numerous improvements in forms and instructions were made during 

the year under a continuous program of seeking designs which balance the 

needs of taxpayers for clarity and simplicity, the needs of revenue officials 

for efficient processing and audit, and the overall necessity for legal accuracy. 

A total of 186 tax return forms and instructions were reviewed and 

revised. Noteworthy among the changes were: 

Form 1040A, U. S. Individual Tax Return 1956, was revised to give the taxpayer a 

choice between computing his own tax or having the Revenue Service do it for him. 

Form 1040 instiuctions were rearranged so that the instruction items follow the 

sequence of the pages and lines of Form 1040 and the related schedules. 

Form 720, Quarterly Federal Excise Tax Return, was revised to eliminate columns 

for the reporting of gross sales, exemptions, and adjustments. These columns 

were introduced in 1953 when Form 720 was developed, and their need had been 

questioned by taxpayers in view of the reporting burden involved. 

Form 755, Application for Exemption from Admissions Tax, was revised so that the 

taxpayer files it in duplicate. If the application. is approved, the district director 

so indicates on the duplicate copy, and returns it to the applicant. The revision 
44 Commissioner of Internal Revenue Annual Report 

eliminates a typing operation in the district director's office and expedites the 

processing of applications. 

Form 1042 and related forms used in connection with the withholding of income 

tax from nonresident aliens were revised to carry out the change in reporting 

methods effected by Treasury Decision 6213. 

Form 2240, Claim for Refund of Federal Tax on Gasoline Used on a Farm, was 

changed from a folded form to a single punchcard with a separate sheet containing 

instructions with claimant's retained copy. This will permit the mailing each 

year of a pre-addressed form and instruction sheet to each person who had filed 

a claim for the previous year. 

Tax Rulings 

A total of 40,157 requests for tax rulings and technical advice wa s 

, processed in the National Office during the year. Of these requests

 30,874 related to income and excess profits taxes. The requests included 

35,672 from taxpayers and 4,485 from field offices of the Revenue Service. 

In addition, 16,515 technical conferences with taxpayers and their representatives were held on these and related matters. 

An analysis of the cases processed, by subject matter, is as follows: 

Requests for tax rulings and technical advice processed, fiscal year 1957 

Subject Total Taxpayers' 

requests 

Field 

requests 

Total 40,157 35,672 4,485 

Income and excess profits taxes 30, 874 29, 623 I, 251 

Employment and self-employment taxes I, 831 1, 360 471 

Estate and gift taxes 912 717 195 

Alcohol and tobacco taxes 2, 328 842 1,486 

Other excise taxes 3, 430 2, 560 870 

Engineering questions (depreciation, etc.) 782 570 212 

Determination Letters 

The audit divisions of the district offices issue determination letters where 

a reply can be made on the basis of clearly established rulings and regulations. If a request for a ruling involves a novel or difficult issue, it must 

be referred to the National Office. 

Nine appeals were processed under the procedure instituted in fiscal 1956 

permitting taxpayers to appeal to the National Office in connection with 

adverse determination letters relating to pension and profit-sharing plans. 

Four of the adverse determinations were sustained, three were overruled, 

and two others were modified. 

An analysis of the scope of the determination letter program as applied 

to employee benefit plans and to exempt organizations during the past year 

follows: 

Report on Operations 

Pension trust and exempt organization determination 

fiscal year 1957 

Item 

Pension trust plans 

Exempt 

organizaProfit- tions 

sharing 

Pension or 

annuity 

Stock 

bonus 

Initial qualifications: 

Approved 2, 549 3,483 10 5, 015 

Employees participating under plan 

Total number employed 

145, 638 

973, 643 

584,3% 

1,459,441 

2, 

15, 

511 

703 

Disapproved 22 21 371 

Terminations 126 181 

Closed without issuance of determination letter 70 88 1, 723 

Technical Publication Program 

During the year, there was a 10 percent increase in the number of Revenue 

Rulings and Revenue Procedures published in the Internal Revenue Bulletin. Most significant was the 78 percent increase in the number of excise 

tax rulings published—from 116 in fiscal 1956 to 207. 

Among the more significant Revenue Rulings and Revenue Procedures 

published during the year were the following: 

Amounts incurred or paid by a corporation as contributions to an independently 

controlled trust fund for the purpose of furnishing unemployment benefits to eligible employees under a supplemental unemployment benefit plan constitute proper 

accruals during the taxable year deductible from gross income; excluding, however, 

amounts computed as a contingent liability for contributions to such fund (Rev. 

Rul. 56-671, C. B. 1956-2, 117). 

Credits to a "dealers reserve" by banks or finance companies upon the purchase of 

notes from "dealers" constitute income to the dealers employing the accrual method 

of accounting at the time such credits are made (Rev. Rul. 57-2, I. R. B. 57-1, 12). 

An organization qualifying for exemption from income tax as a club organized and 

operated for pleasure, recreation, etc. is considered to be a social, athletic, or sporting club for purposes of the excise tax on dues (Rev. Rul. 56-334, C. B. 1956- 2, 831). 

Retirement age is defined, for the purpose of determining the termination of the 

exclusion provided with respect to disability pensions received by employees while 

absent from work on account of personal injuries or sickness (Rev. Rul. 57-76, 

I. R. B. 57-9, 10). 

A compilation of guides for the qualification of stock bonus, pension and profitsharing, and annuity plans under the 1954 Code appear in Rev. Rul. 57-163, 

I. R. B. 57-16, 10. 

Procedures for the issuance of rulings as to whether certain exempt organizations, 

and exempt employees' trusts, will be held to have engaged in a prohibited transaction are set forth in Rev. Proc. 56-33, C. B. 1956-2, 1394. 

Procedures as to the issuance of notification letters and the granting of conferences 

in the National Office with respect to cases involving prohibited transactions 

appear in Rev. Proc. 57-5, I. R. B. 57-6, 30. 

45 

letters Issued, 
1957 1956 

Total 737 672 

Fiscal yearType 

Income tax 

Employment taxes 

Estate and gift taxes 

Alcohol and tobacco taxes 

Other excise taxes 

Excess profits tax 

Firearms 

Engineering issues 

Administrative and miscellaneous 

264 279 

64 72 

15 32 

138 122 

207 116 

3 2 

8 15 

12 15 

26 19 

46 Commissioner of Internal Revenue Annual Report 

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

Revenue rulings and procedures published 

The program of issuing separate pamphlets containing key Treasury 

Decisions under the 1954 Code was continued. Following is a list of the 

additional pamphlets issued during the year: 

Publication No. 2'. D. No. Subject matter 

311 6182 Depreciation. 

337 6203 Employee pension, annuity, profit-sharing, and 

stock bonus plans. 

350 6206 Excise tax on the transportation of persons. 

76 (Rev. 11-56) 6211 Annuities. 

352 6216 Complete highway motor vehicle use tax regulations. 

During the year, a cumulative pamphlet containing all portions of the 

Income Tax Regulations under the 1954 Code issued as of May 31, 1956, 

was published as Internal Revenue Service Publication No. 329-1. An 

additional pamphlet in this series, No. 329-2, which will contain the portions of the Income Tax Regulations issued during June-December, 1956, 

was in the hands of the printer as the year ended. 

An advisory group was appointed to undertake a study and make recommendations with respect to the schedule of useful lives of depreciable 

property contained in the 1942 edition of Bulletin "F". This group consists of three government representatives and two outside consultants. 

The study will include types of property not previously included, as well 

as those previously listed. 

Interested taxpayers and representatives of industries and trade associations were invited to submit suggestions as to the types of depreciable 

property to be included, and their experiences regarding useful lives, including operating conditions, technological improvements, and economic 

changes. The advisory group has received considerable data to date. 

In addition to the Internal Revenue Bulletin, which is the Service's 

technical journal, many other publications for the assistance of taxpayers 

are published. They are described on page 51. 

Report on Operations 47 

Closing Agreement Cases 

Work was kept current on closing agreements involving prospective 

transactions. (For action on cases involving completed transactions see 

p. 28.) 

The following table reflects the action of the Tax Rulings Division as to 

this type of case: 

Tax Rulings Division receipt and disposal of closing agreement cases 

Status Number of 

CMS 

Pending July I, 1956 

Received during year 

4 

8 

Disposed of during year 9 

Pending June 30, 1957 3 

Civil Advisory Legal Services 

During the year, the regional counsels generally expanded their civil 

advisory activities to meet local needs by assisting district directors in the 

training of collection and other personnel who deal with the administrative 

matters which give rise to the legal problems comprising the civil advisory 

field of legal work. 

There was a substantial increase in the number of cases received. A 

total of 8,704 new cases (3,911 being noncourt cases) was received, whereas 

during the previous year, 7,903 cases (3,492 being noncourt cases) were 

received. This increase of 801 cases received is especially meaningful in 

that 382 cases represent court proceedings. 

These cases relate to proceedings under the Bankruptcy Act, receiverships, and other insolvencies, Federal tax liens in quiet title actions and 

suits for foreclosure by mortgagees and other secured creditors, the discharge 

of property from liens, the release of liens, the administration of estates of 

decedents or incompetents (see appendix tables 21 and 22), and the 

handling of offers in compromise, as well as to collection and injunction 

cases. 

Several decisions by United States Courts of Appeals brought into 

sharper focus the much-litigated question frequently arising in civil 

advisory cases involving the extent to which the proceeds of an insolvent 

taxpayer's life insurance may be reached by proceeding against the 

beneficiary as a transferee. In United States of America v. Nelle A. Hoper, 

et al. (C. A. 7th, 1957) 242 F. 2d 468, it was held that where assessments of 

income taxes were made against the insured taxpayer during his lifetime, 

the government had a lien upon the cash-surrender values of the taxpayer's 

life insurance policies which could be enforced after the taxpayer's death. 

In the case of United States v. Bess (C. A. 3rd, 1957) 243 F. 2d 675, the court 

held Mrs. Bess liable for her deceased husband's income taxes as a transferee, 
48 Commissioner of Internal Revenue Annual Report 

in the absence of a lien, but only to the extent of the cash-surrender value 

of the decedent's life insurace at date of death. The Bess case is in direct 

conflict with the case of Stern v. Commissioner of Internal Revenue (C. A. 6th, 

1957) 242 F. 2d 322, in which the Court of Appeals (reversing the Tax 

Court of the United States) held that a life insurance beneficiary is not 

liable for the deceased taxpayer's income taxes as a transferee either with 

respect to the proceeds or the cash-surrender value of the decedent's life 

insurance. Petitions for certiorari in the Stern and Bess cases have been 

filed on behalf of the government, so that a final solution of the problems 

involved may be obtained. 

Each regional counsel has continued and emphasized the program under 

which legal personnel who handle civil advisory matters make regular 

periodic visits to the offices of district directors within the region. During 

each visit the civil advisory legal personnel are able to resolve a substantial 

number of problems relating to civil law as distinguished from criminal 

law. 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. 

AIDS FOR TAXPAYERS 

General 

Further progress was made last year in the Revenue Service's long-range 

program to increase the quantity and quality of assistance to taxpayers 

but to reduce the cost. 

Better techniques in handling direct taxpayer requests during the income 

tax filing season—such as expanded telephone service—and a better supply 

of indirect aids—such as booklets, television films, and school texts—

contributed to these goals. 

Direct Taxpayer Assistance 

Approximately 11,000,000 taxpayers were assisted in the preparation of 

their income tax returns during the annual filing period. This was a 

7 percent decrease from the prior year and is due to the success of the 

publicity and educational programs of the Revenue Service to encourage 

taxpayers in "do-it-yourself" methods. 

More significant from the enforcement viewpoint were the savings in 

manpower effected during this year's filing period. Over 38,000 fewer 

man-days were required in the 1957 program than in the prior year's 

program, automatically increasing the personnel engaged in audit and other 

enforcement work by that amount 

The cost of the assistance program this year was $3,260,000, considerably 

less than that of $4,040,000 in the preceding year. 

The results of the publicity and educational programs are indicated by the 

changing pattern in the type of assistance furnished. Although 6,000,000 

taxpayers found it necessary to come to the field offices for help, this direct 

assistance decreased about 12 percent in the current program. On the other 

hand, the telephone question-answering service, which accounted for the 

remaining number of taxpayers assisted, increased slightly over the prior 

year. Continued expansion of the telephone service is expected since this 

type of assistance is the most convenient to taxpayers and the most economical to the government. During 1957, there were 117 taxpayers assisted 

per man-day by this method as compared to 108 taxpayers per man-day 

in the previous year. 

Fewer taxpayers received individual assistance in the preparation of their 

returns during the annual filing period than in the prior year's program. 

Personal assistance is given whenever necessary. However, expansion of 

the self-help methods is being encouraged. 

49 
50 Commissioner of Internal Revenue Annual Report Report on Operations 51 

The self-help methods of assisting taxpayers in the completion of their 

returns have resulted in large savings of time and money to the Revenue 

Service. During 1957, 5 out of every 6 taxpayers assisted received this type 

of help as compared to 5 out of 7 in 1956. 

Taxpayer Publications 

Significant progress was made in the extension and improvement of the 

Taxpayer Publications Program. 

"Your Federal Income Tax," IRS Publication No. 17, was revised, expanded, and improved. This 112-page booklet is the Revenue Service's 

comprehensive income tax manual for individual taxpayers. Improvements 

effected in the 1955 edition were continued in the 1956 edition with greater 

emphasis on plain layman's language and more examples. The expanded 

subject matter in the 1956 edition resulted in part from suggestions received 

from taxpayers and field personnel. Approximately 587,000 copies were 

sold this year, representing an increase of about 190,000 over the previous 

year. 

"Tax Guide for Small Business," IRS Publication No. 334, is a 128-page 

booklet which was issued for the first time this year. The booklet is a comprehensive tax reference tool for the small businessman. It covers most of 

the tax problems of the sole proprietor, the partnership, and the corporation. It includes a detailed explanation of the tax results of the establishment, operation, and disposition of a business. Federal income, excise, 

employment, and withholding taxes are discussed. Also included is a 

complete Federal Tax Calendar for 1957, together with a detailed Federal 

Tax Check List, which is of special interest to new businesses. Approximately 117,000 copies were sold. 

"Farmers' Tax Guide," IRS Publication No. 225, was significantly improved as a result of comments received from field personnel and discussions with representatives of the Agricultural Extension Service of the 

U. S. Department of Agriculture. One million copies of the second edition 

of the 64-page booklet were distributed to farmers. 

"Federal Use Tax on Highway Motor Vehicles," IRS Publication No. 349, 

was issued to explain this new tax on heavy trucks, buses, etc., under the 

Highway Revenue Act of 1956. 

"Social Security Information for Crew Leaders and Farmers," IRS Publication 

No. 365, was issued jointly with the Social Security Administration to 

explain certain provisions of the Social Security Amendments of 1956. 

"Federal Gas Tax Refund for Nonhighway and Transit Users," IRS Publication 

No. 378, was issued to explain the refunds allowable under the Highway 

Revenue Act of 1956 for fiscal year 1957 and subsequent fiscal years. 

Other Publications.—Eight separate chapters of "Your Federal Income 

Tax" were modified and printed as six separate pamphlets for free distri447270 0-58-5 
52 Commissioner of Internal Revenue Annual Report 

bution to taxpayers during the Taxpayer Assistance Program and as inserts 

in replies to requests for determination letters, advice, and other information. 

The six pamphlets contained a detailed explanation of: 

Personal Exemptions and Dependents. 

Sick Pay. 

Employee and Travel Expenses. 

Retirement Income and Credit. 

Sale of a Residence. 

Medical and Dental Expenses. 

Information Program 

The Revenue Service expanded its program of distributing tax information to the public. Over 80 releases for dissemination by the press, radio, 

television, magazines, and other communications media were prepared and 

distributed by the National Office, and all field offices supplemented this 

material with additional programs according to local needs. 

During the year, the National Office also continued its practice of preparing suggested releases for use by field offices. This Field Information 

Program was expanded during the filing period by the use of a "Taxpayer 

Assistance Kit" containing news and technical releases, and scripts for radio 

and television shows and spot announcements. 

A series of 18 "spot" announcements and "station-break" slides for publicservice use by television stations was prepared. A short film, in which the 

Commissioner asked taxpayers to remember certain filing requirements and 

to file early, also was produced. 

School Program 

The National Office distributed well over 3,000,000 student handbooks 

and more than 43,000 teacher kits in 32,650 junior and senior high schools, 

both public and private. In addition, 517 colleges and universities requested these teaching aids, which were designed to help students understand basic tax problems and to acquaint them with the tax forms in 

preparation for the time when they will enter business or professions. 

These materials are also being used by colleges and universities in training 

future teachers for teaching tax subjects and by business and civic organizations as a part of their employee- and member-training activities. 

INTERNATIONAL ACTIVITIES 

International Operations 

This was the International Operations Division's first full year of existence 

and it witnessed the establishment of a full program of collection, audit, 

and other activities at its headquarters in Washington, D. C., and in its 

permanent field offices in Paris, France; Frankfurt, Germany; Ottawa, 

Canada; Manila, Philippines; San Juan, Puerto Rico; and Balboa, Canal 

Zone. 

In addition, brief visits were made by revenue agents to 30 other countries 

to assist persons (both United States citizens and others) to file returns 

during the usual filing period, and also to hold conferences on disputed 

tax cases; and to assist in other matters. 

The extensive tax assistance required by military forces overseas was provided primarily in the form of special tax schools conducted by the division 

in Europe and the Far East. Approximately 450 military tax assistance 

officers attended the six 1-week intensive schools, and thus became qualified 

to render, upon return to their respective units, direct tax assistance to the 

many thousand uniformed and civilian personnel stationed throughout the 

world. 

The division began enforcement work notwithstanding difficulties in recruiting and training personnel suitable to its specialized work. Basic policies and procedures were developed for filing, auditing, and otherwise handling of returns under its jurisdiction. Improved liaison arrangements were 

initiated with several foreign governments for the exchange of information 

on specific tax cases. 

Approximately 100 audit, intelligence, and other investigations were conducted for the various district directors and other offices in the United 

States. Some of these matters required extensive work abroad. Also it 

acted on several thousand requests to help in collection matters. 

A unique feature of the division's operations has been its abnormally 

high percentage of refund cases. During the year, for example, 53 percent 

of the cases closed resulted in refunds. These were made principally to 

nonresident citizens and aliens who filed claims for refund of income tax 

withheld. This percentage should drop somewhat as the division is able 

to give more attention to selected audit cases. 

International Tax Conventions 

Honduras.—An income tax convention between the United States and 

Honduras, the first such convention between the United States and a LatinAmerican country, became effective as of January 1, 1957, upon an exchange 

of ratifications on February 6, 1957. 

53 
54 Commissioner of Internal Revenue Annual Report 

Pakistan.—After extended negotiations, an income tax convention between 

the United States and Pakistan was completed in final form and signed in 

Washington by the Secretary of State and the Pakistani Ambassador on 

July 1, 1957. This is the first convention to provide for the crediting against 

United States income tax of income tax forgiven or "spared" by Pakistan 

to encourage industrial development; a type of provision which was publicly 

mentioned with favor by Secretary Humphrey in October 1954, and subsequently in messages of the President to Congress. 

Italy.—On October 26, 1956, instruments of ratification of an income tax 

convention between the United States and Italy were exchanged in Rome, 

and the convention became effective as of January 1, 1956. Instruments 

of ratification of an estate tax convention between the two countries were 

also exchanged in Rome, and the convention became effective with respect 

to estates of persons dying on or after October 26, 1956. 

France.—On June 13, 1957, ratifications were exchanged in Paris of the 

supplemental income tax convention between the United States and France. 

Besides provisions relating to income tax, the convention also provides for 

the exemption from French stamp taxes of security transactions executed 

in this country; and, by an exchange of notes, it was agreed that United 

States inventors be entitled to the same right of claiming exemption of 

royalties from French turnover tax as is available to French inventors. 

Austria.—On January 17, 1957, President Eisenhower transmitted to 

the Senate for approval the income tax convention with Austria, which was 

signed October 25, 1956. This convention awaits ratification. 

Canada.—On August 8, 1956, there was signed, at Ottawa, a convention 

modifying and supplementing the income tax convention between the 

United States and Canada. This convention awaits ratification by the 

United States. 

Japan.—Negotiations which were begun in Washington in September 

1956, led to the signing, on March 23, 1957, of a protocol to the income 

tax convention with Japan. This protocol awaits ratification by both 

countries. It provides reciprocal tax exemption by each country of interest 

paid to the Export-Import Bank of the other. 

Foreign visitors.—During the year a marked increase was noted in the 

number of foreign officials who visited the National Office to study the 

administration and operation of the United States tax laws. A total of 

106 foreign officials from 60 countries was received, compared with 67 

officials from 24 countries received in the previous year. 

LEGISLATIVE DEVELOPMENTS 

Legislative Preparations 

The Subcommittee on Excise Taxes of the House Ways and Means 

Committee undertook a revision of the excise tax provisions of the 1954 

Code. In July 1956, a bill, H. R. 12298, containing amendments agreed 

upon up to that time, was introduced. Revenue Service technicians made 

a detailed analysis of H. R. 12298 and recommended many changes and 

additions. 

Later in the year the subcommittee held further public hearings on excise 

tax revision and agreed upon substantial changes and additions to H. R. 

12298. This activity culminated in the introduction of H. R. 7125, the 

Excise Tax Technical Changes Act of 1957. H. R. 7125 was passed by 

the House of Representatives on June 20, 1957, and was pending in the 

Senate at the close of the fiscal year. 

The Subcommittee on Internal Revenue Taxation was active on the 

following projects: 

1. A bill to correct technical defects and unintended benefits and hardships in the 

1954 Code. 

2. A study of tax forms. 

3. A study of the administration of tax laws. 

4. Proposed revision of subchapters C (Corporate Distributions and Adjustments), 

J (Estates, Trusts, etc.), and K (Partnerships) of chapter 1 of the 1954 Code. 

The first project resulted in the preparation and introduction of H. R. 

8381, the Technical Amendments Act of 1957. The other studies are 

continuing. 

Service representatives attended the public hearings and executive 

sessions of these subcommittees and the full committee. They also performed services in connection with the drafting of the bills and the committee reports. 

During the year, 49 reports on bills were prepared and forwarded to the 

office of the Deputy to the Secretary. In addition, the Revenue Service 

carried out its own research and study projects to develop information 

about tax administrative problems, tax loopholes, and tax inequities. 

55 
56 Commissioner of Internal Revenue Annual Report 

Legislation Enacted 

During July 1956, Congress passed H. R. 7225, the Social Security Act 

Amendments of 1956. Some of the more important provisions of the Act 

are the following: 

1. The rate of tax on self-employment income was increased by % of 1 percent and 

the rates of the employee tax and the employer tax were each increased by of 

1 percent. 

2. Coverage was extended to self-employed lawyers, dentists, veterinarians, chiropractors, naturopaths, optometrists, and osteopaths. 

3. A new optional method of computing self-employment income by farmers was 

provided. 

4. It was provided that rental income from a farm under certain share-farming 

arrangements is not excluded from net earnings from self-employment, thereby 

extending coverage to many farm owners previously excluded. 

Of the eleven other tax bills enacted, the following are of particular 

interest: 

P. L. 784 (84th Cong.) extended the 1955 formula for taxing the income of life 

insurance companies to taxable years beginning in 1956. 

P. L. 796 (84th Cong.) exempted certain additional foreign travel from the tax on 

the transportation of persons. 

P. L. 1010 (84th Cong.) increased the maximum price of admission which is exempt 

from the admissions tax from 50 cents to 90 cents. 

Before the close of the fiscal year, the first session of the 85th Congress 

passed the Tax Rate Extension Act of 1957, extending until July 1, 1958, 

the present corporation income tax rate and the rates of certain excise 

taxes which otherwise would have been reduced on April 1, 1957. 

INTERNAL CONTROLS 

Internal Audit 

The effectiveness of the internal audit function was increased materially 

during the year. In order to assure that maximum benefits are derived 

from it, procedures were revised to make the internal audit function a 

completely integrated part of the management control system of the 

Revenue Service. These procedures require prompt and effective action 

on all deficiencies reported by the Internal Audit Division and district 

directors and regional commissioners have been made personally responsible 

for the adequacy of the actions taken. 

A policy statement also was issued to clarify the function of Internal 

Audit in the review of closed tax cases. This statement makes it clear that 

Internal Audit's review of closed tax cases is not for the purpose of questioning the judgment of technical personnel on technical issues, but rather to 

assure management that the prescribed policies and procedures are 

adequate and are being followed. In addition it was pointed out that 

Internal Audit has no authority to reopen or require the reopening of any 

closed tax case. 

There were 319 internal audits completed during the year as compared 

with 272 during the preceding fiscal year. This increase, which gave 

management more timely information concerning the condition of offices 

examined, was made possible to a large extent by a better understanding 

of the internal audit function by operating personnel. 

Statistics covering the internal audit activity of the nine regional inspection offices for fiscal year 1957 follow• 

Internal audit activity 

In process 

July 1,1956 

Started Completed In process 

June 30,1957 

50 297 319 28 

6 55 54 7 re f %I ■•■• I, /,--. co r■ es =Of OfI, COICI,CCCD 

.1■1 N. V' ,4 

44 240 263 21 

12 59 66 5 

14 60 62 12 

10 59 67 1 

8 62 68 2 

2 2 

Activity 

Grand total 

Regional offices, total 

Regional counsels' offices 

Regional commissioners' offices: 

Collection. 

Audit 

Intelligence 

Alcohol and Tobacco Tax 

Appellate 

Administrative 

District directors' divisions, total 

Collection 

Audit 

Intelligence 

Administrative 

Service centers 

57 
58 Commissioner of Internal Revenue Annual Report 

In addition to conducting regular audits, the Internal Audit Division 

participated in a number of other assignments. These included: the 

participation in a factfinding study of the organizational structure of the 

- regional offices; a special survey of the internal management document 

system; a survey of the work of the regional analysts (audit); an internal 

audit of the Accounting Branch of the National Office's Fiscal Management 

Division, and the completion of a survey of the National Office's Alcohol 

and Tobacco Tax Division. Internal Audit also participated in the special 

study and investigation of a scheme to defraud the government of over 

$267,000 through fraudulent tax refund claims. 

In another special assignment, the efforts of the Internal Audit Division 

and the Internal Security Division were coordinated in a joint investigation 

and audit of one of the large district offices. Members of the staff participated in the audit of the Treasury Department's Exchange Stabilization 

Fund, as well as the Treasury review of bureau inspection programs. 

Assistance also was rendered to the General Accounting Office in its audit 

of the reporting requirements prescribed by section 1311 of the Supplemental Appropriation Act of 1955. 

Internal Security 

A substantial stride toward bringing its workload to a current status was 

made during the year by the Internal Security Division. 

There were 7,512 personnel investigations closed during fiscal year 1957 

compared with 7,063 in fiscal year 1956. This increase of 6 percent was 

accomplished with no increase in personnel during the year. As a result, 

the number of unassigned character investigation cases was reduced by 

48 percent during the year, and there was an overall reduction of 34 

percent in the number of pending personnel investigations. 

Eleven Internal Security Division inspectors attended the Treasury Law 

Enforcement School during the year, and five inspectors attended the 

Enforcement Technical School. In addition, on-the-job training programs 

were conducted on a continuing basis in the regional inspectors' offices. 

Confidential Defense Clearance Letters were issued to 828 employees 

during the year. 

Report on Operations 59 

A comparison of personnel cases in the last two years follows: 

Personnel investigations and disciplinary actions 

Type of investigation and action 

Fiscal year1957 1956 

Personnel investigations 

Number of cases closed, total 7,512 7,063 

Character and security investigations 4,949 4,868 

Conduct investigations 785 1,003 

Special inquiries 1,778 1,192 

Disciplinary actions against employees as a result of personnel investigations 

Disciplinary actions, total 821 681 

Separations, total 355 308 

Bribery, extortion, or collusion 5 7 

Embezzlement or theft of government funds or property 13 8 

Failure of employee to pay proper tax 34 26 

Falsification or distortion of government reports, records, etc 101 145 

Unauthorized outside activity 13 12 

Failure to discharge duties properly 

Personal misconduct unrelated to tax cases 

13 

se 

9 

50 

Refusal to cooperate 4 1 

Divulgence of confidential information 4 6 

Acceptance of fees or gratuities 5 13 

Other misconduct 95 31 

Suspensions from duty and pay 23 47 

Reprimands, warnings, transferrals, and demotions__ 443 326 

Includes resignations, retirements, or other separations while employees were under investigation or before administrative decision was made on disciplinary action where investigation disclosed derogatory information. 

In addition to the personnel investigations reflected in the above table, 

the Inspection Service completed 83 tort claim investigations and conducted police checks on 2,637 employees who received temporary appointments for 90 days or less. 
personnel on rolls 

fiscal years 1956 and 1957 

NATIONAL 

OFFICE 

REGIONAL AND 

DISTRICT OFFICES 

distribut 

COLLECTION 

OFFICERS 

OFFICE 

AUDITORS 

RETURNS 

EXAMINERS 

REVENUE 

AGENTS 

SPECIAL 

AGENTS 

ALCOHOL TAX 

PERSONNEL 

ALL OTHER 

:0,137 

1,466 

ADMINISTRATIVE FUNCTIONS 

Personnel 

Attention was focused during the year on the development of a "Blue 

Ribbon" career service to attract and retain the highest possible caliber of 

people for Revenue Service work. 

This program consists of seeking better qualified individuals for employment, providing more extensive and more professional training for both 

new employees and for those who are about to enter upon more difficult 

assignments, setting salary grades for positions which are consistent with 

high professional requirements, assuring prompt promotion of individuals 

who have demonstrated qualifications for more responsible work, and 

selecting executive and supervisory officials on a strictly merit basis. 

The labor market was exceedingly tight for most classes of jobs, particularly professional accountants. However, through its second all-out college 

recruitment campaign, the Revenue Service appointed 757 internal revenue 

agent trainees. Approximately 91 percent of these recruits are recent 

college graduates with 24 or more semester hours in accounting subjects. 

The first full-scale campaign to recruit trainee collection officers from 

college campuses was launched in the spring. Despite the late start, 225 

trainee collection officers were appointed. Approximately 76 percent of 

these recruits are college graduates. 

Keeping employees carefully informed on matters of interest to their 

careers in the Revenue Service was a key feature of the increased emphasis 

placed on maintaining effective employee relations. 

The increasing concern with maintaining a capable, satisfied, and productive work force was further spotlighted by the publishing of policies and 

procedures for the fair and equitable handling of employee complaints and 

grievances. These policies and procedures emphasized the responsibility 

of management and employees alike for working together in a manner that 

will minimize the situations from which grievances and complaints arise. 

New qualification standards were developed by the Revenue Service and 

approved by the Civil Service Commission for the positions of chief and 

assistant chief, collection division; assistant chief (trainee), collection 

division; and director and assistant director, service center. The new 

standards stress managerial ability in contrast to technical knowledge. 

Another major move in the qualifications area was the completion of an 

agreement with the Civil Service Commission which would permit the 

Revenue Service noncompetitively to select employees for the internal 

revenue agent training program, provided such employees have had experience of Grade GS-5 or better in the Revenue Service, and at least 24 

semester hours in accounting. 

61 
Report on Operations 63 

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62 Commissioner of Internal Revenue Annual Report 

As an essential part of the "Blue Ribbon" program, plans have been 

drawn for classification guides and standards covering every major type 

of Revenue Service job. These guides and standards are designed to set 

classifications which will enable the recruitment and retention of wellqualified people, and permit employees to look up to opportunities for 

higher paying jobs along well-defined promotional ladders. 

Completed, during fiscal year 1957, were new standards for collection 

officers and guides covering regional appellate positions, collection division 

chiefs, and audit conference coordinators. Nearing completion or awaiting approval are guides covering classification of alcohol and tobacco tax 

inspectors, supervisory intelligence positions, attorney positions under the 

regional counsel, inspection internal audit positions, district personnel 

officer, and regional operating facilities positions. 

Progress was made also in the Revenue Service's Incentive Awards Program. A significant development was the increase in Superior Work 

Performance and Special Acts or Services Awards. There were approximately 618 of these approved in fiscal year 1957, as compared with 140 in 

fiscal year 1956. 

The previous year's alltime participation record for employee suggestions 

was surpassed. A total of 4,500 suggestions for operational improvements 

was received during fiscal year 1957, of which nearly 1,000 were adopted. 

The total number of employees and the number in each major category 

remained approximately the same as the year before. A comparison 

follows: 

Personnel on the rolls 

Location and type 

Number on tolls at 

close of fiscal year1957 1956 

Grand total 51,364 50, 682 

By location 

National Office I 2.832 

• 2, 689 

Regional and district office s 41, 532 

• 47, 993 

By type 

Permanent personnel, total 50, 797 50, 308 

Supervisory personnel 523 511 

Enforcement personnel, total 24,001 23,856 

Collection officers 5, 782 5,660 

Office auditors 2,137 2,127 

Returns examiners I, 466 1, 361 

Revenue agents 10, 822 10, 862 

Special agents 1, 542 1, 549 

Alcohol tax inspectors 465 481 

Alcohol tax investigators 954 922 

Storekeeper-gaugers 833 894 

Legal personnel 501 467 

Other technical personnel 3, 978 4, 057 

Clerical personnel, messengers, and laborers 21,794 21,417 

Temporary personnel 567 374 

Revised. 

National Office figures include International Operations Division personnel (headquarters and field offices numbering 

106 for 1956 and 230 for 1957. This group was included with regional and district office personnel in the 956 report. 
64 Comm ss oner of Internal Revenue Annual Report 

Training 

During the year the training function was separated from the personnel 

- function and established as a separate division in the National Office. 

Developmental work on basic agent training was completed and preparation of advance agent training material was begun. Progress in the 

development of the new alcohol and tobacco tax program continued with 

additional new courses added. A committee was appointed to study and 

recommend with regard to training in the collection function. This committee consists of a regional commissioner (chairman), the dean of a college 

of business administration, a former officer of the National Association of 

Credit Men, and the training officer of a large bank. It is expected that 

this committee will report early in the next fiscal year and that a revised 

plan and new training procedures will be installed almost immediately 

after consideration of the report. 

A class of 13 completed the 6-month Executive Development Course. 

All members of the original class of 1956 have been placed in assistant 

district director positions. Management institutes using recognized authorities as instructors were conducted for directors, assistant directors, 

assistant regional commissioners, district division chiefs, various levels of 

alcohol and tobacco tax supervisors, and district group supervisors. In 

all about 550 supervisors received this type of training. In-service supervisory training was continued in the National Office, regions, and districts. 

To inaugurate training in effective writing and in secretarial development, workshops were run in each region by a member of the National 

Office's Training Division. A comprehensive instructor kit was developed 

as a training aid in teaching effective writing. 

The first training films produced by the Revenue Service were completed. Enrollment in correspondence courses remained at normal levels. 

The law courses are still undergoing revision to bring them into conformity 

with the Internal Revenue Code of 1954 and recent regulations promulgated 

under that Code. 

In the alcohol and tobacco tax area, work was completed on the preparation of a 13-text in-service training course for storekeeper-gaugers, a 

4-text special accounting course for inspectors, and 11 texts of a projected 

15-text course on the subject of inspections. A 6-week training course at 

the Treasury Law Enforcement Officer Training School in Washington, 

D. C., was completed by 159 alcohol and tobacco tax investigators during 

the same period. 

Operating Facilities 

Space and equipment.—Upgrading and consolidation of space were accomplished at six major offices. These were the district offices at Albany, 

Lower Manhattan, Newark, Atlanta, Oklahoma City, and Richmond. 

Report on Operations 65 

Similar projects are in progress at Camden, Pittsburgh, Columbia, Jacksonville, Baltimore, and Brooklyn. Twenty-nine emergency space improvements were also approved. 

Procurement authority was decentralized, property accounting was 

streamlined, and stock control procedures were simplified. A survey 

showed a need for $14,000,000 for upgrading our equipment and furniture 

to a reasonable standard. Of the items needed, production equipment (typewriters, calculators, bookkeeping machines, etc.) accounts for $3,800,000. 

Safety.—Thirteen districts received safety awards for completing the calendar year 1956 without a lost-time accident as compared with eight 

districts receiving awards in 1955. The Internal Revenue Service Annual 

Regional Safety Award was presented to the Philadelphia Region for having the lowest accident frequency rate: 2.5 lost-time accidents per million 

man-hours worked. 

Records administration.—The records administration program has led to a 

substantial improvement and reduction of paperwork and the release of 

manpower and equipment for other types of work. To assist in rooting 

out extraneous paperwork, additional guidelines and techniques were developed for improving the creation, processing, maintenance, and disposition of records; studies were conducted to demonstrate what could be 

accomplished; all proposed new and revised forms were reviewed, and the 

development and installation of more efficient records handling equipment 

were facilitated. 

Emphasis was placed on developing standardized forms which are more 

economical to use and which insure greater uniformity in dealing with 

taxpayers. As part of this program, all field offices were asked to submit 

all new forms for coordination with regional and national forms. As a 

result, there has been a 25 percent increase in the number of regionally 

standardized forms, and a 14 percent decrease in local district office forms. 

Inventory 

July 1, 

1956 

New forms 

added durfag year Forms 

eliminated 

Inventory 

June 50, 

1967 

Net reduction or 

increase 

All regional forms 3, 789 1, 210 182 4, 817 +1, 028 

All district forms 

Total 

28, 470 3, 729 7, 692 24, 507 —3, 963 

32, 259 4, 939 7, 874 29, 324 —2, 935 

Substantial progress is being made in eliminating mail-inserting problems 

in district offices by the redesign of some forms as self-mailers. Not only 

do the self-mailers result in savings of manpower, but they also eliminate 

the need for millions of envelopes each year and for expensive inserting 

and mailing equipment. 

In the past year, the emphasis in the correspondence management program has been to develop guides for more effective preparation of typed 

letters, and to effect greater standardization of field form letters. Part I 

of an Internal Revenue Service Correspondence Handbook has been drafted 
urnsinCarta FilingTaxR 

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66 Commissioner of Internal Revenue Annual Report Report on Operations 67 

and should be released during the next fiscal' year. This will greatly simplify the problem of training new Revenue Service employees and facilitate 

the shifting of stenographic personnel by providing standardized correspondence practices. Form letter design standards have been drafted to 

provide field offices with techniques for designing form letters which can 

be prepared with minimum typing effort. 

The emphasis in files management has been on developing and installing 

shelf-filing equipment to improve the handling of Revenue Service records. 

Equipment has been installed in all regions to handle individual income 

tax returns. One region has reported that this project increased production by 8 man-years, released for office use about 51,000 square feet of 

space, and released about $82,000 worth of filing equipment for use elsewhere in the government. At present, standards are being prepared for 

equipment to house the smaller tax forms and other documents. A series 

of projects has been started on improved methods of filing tax returns to 

facilitate the segregation of these records according to disposal date. This 

will result in eliminating costly screening to select permanent preservation 

records and will insure better preservation of important documents. 

Disposal of inactive records by destruction or transfer to Federal Records 

Centers has continued at the same high rate. To further reduce the volume 

of retained records, one new records disposal schedule was issued and five 

existing schedules were greatly revised to provide better coverage. A major 

survey of records in the National Office covered 29,000 cubic feet of record 

material, of which 4,500 cubic feet were destroyed and 11,500 cubic feet 

transferred to the records center. 

Fiscal Management 

Emphasis continued on improved financial planning for the Revenue 

Service. The increased production shown elsewhere in this report is, in 

part, due to the more stable operation which results from such advance 

planning. 

In addition, the program for regular analysis and review of performance 

against the plan contributed towards more effective utilization of appropriated funds. For example, after a thorough midyear review, it was 

possible to reprogram funds to provide for employment of a number of 

additional temporary employees to assist with peak filing-period operations. 

As a result, field offices were able to clean up much of the heavy load of 

clerical work which usually is carried over from the filing period, and to 

begin the new fiscal year in better shape. 

In continuation of the effort to do a better fiscal management job with 

fewer personnel, a survey of regional fiscal management branches was 

begun. The objectives of these surveys are to learn just what each region 

is doing in the fiscal management area, to evaluate these functions in the 

light of performance and Revenue Service policies, and to make suggestions 

447270 0-58-6 
68 Commissioner of Internal Revenue Annual Report 

and recommendations to improve operations, streamline procedures, and 

reduce manpower. Surveys of four regions were completed during 1957, 

and the remainder are planned for the first part of 1958. 

- In the accounting area, a long-range program was inaugurated for the 

application lbf improved mechanical and electronic techniques to fiscal 

accounting, payroll, budget, and related operations. A pilot payroll 

installation in the Northeast Service Center is the first step in this program. 

A comparison of obligations, by classes of expenditures, follows: 

Obligations incurred by the Internal Revenue Service 

can thousands of dollars] 

Activity 

Total, fiscal year- Salaries, fiscal year- Other, fiscal year1957 1956 1957 1956 1957 1956 

Total 

Rulings, technical planning, and special technical 

services 

Collection of revenue 

Audit of tax returns 

Tax fraud and special investigations 

Alcohol and tobacco tax regulatory work 

Taxpayer conferences and appeals 

Legal services 

Inspection 

Statistical reporting 

Executive direction 

305, 538 199, 895 270, 853 266, 572 34, 685 33, 313 

4, 633 

128, 866 

106, 702 

15,739 

23, 200 

9, 771 

7, 044 

4, 097 

1, 735 

3, 751 

4,360 

125, 609 

106,186 

15,154 

23, 050 

9, 782 

6, 705 

3, 899 

1, 905 

3, 245 

4,282 

110, 078 

99, 376 

14,071 

19, 966 

9, 289 

6, 405 

3, 427 

I, 475 

2, 484 

4, 060 

106, 855 

98, 831 

13,692 

20, 246 

9, 329 

6,193 

3, 347 

1, 553 

2, 466 

351 

18, 788 

7, 326 

1,668 

3, 234 

482 

639 

670 

260 

I, 267 

300 

18, 754 

7, 355 

1,462 

2, 804 

453 

512 

552 

352 

779 

Enrollment of Practitioners 

The first 5-year enrollment cards expired this year. Of the cards issued 

in 1952 which expired in 1957, 29,673 were renewed between January 1 

and June 30, 1957. In addition, 1,365 other cards that terminated in 

1952, for which no renewal had been requested previously, were renewed 

as a result of belated applications, making a total of 31,038 renewals issued 

to practitioners during the year. 

Prior to 1952, the regulations prescribed no expiration time for enrollments, with the result that the enrollment roster was badly out of date. 

Action was taken in November of 1951 to purge the roster by eliminating 

those proved to have been dishonest or otherwise delinquent and to bring 

it up to date by eliminating those who had died after enrollment. 

To accomplish those ends, the regulations were amended to terminate 

all enrollments as of March 31, 1952, subject to renewal prior to June 30, 

1952, under a prescribed procedure designed to screen applicants. This 

amendment provided that enrollments thereafter would be for a 5-year 

period only. 

A total of 55,632 renewal cards was issued as a result of renewal applications filed between January 1 and June 30, 1952. In addition, about 

6,000 cards were issued as a result of original applications received during 

Report on Operations 69 

that fiscal year. Inasmuch as all of those cards issued in 1952 became void 

five years later, they were subject to renewal beginning January 1, 1957. 

In October 1956, the regulations were revised to provide for a renewal 

procedure which followed substantially that which was adopted for the 

renewals in 1952, except that under the latest amendment an application 

for a renewal may be submitted at any time during a 24-month period 

commencing 12 months before and ending 12 months after the expiration 

of an enrollment card. The purpose of providing for this 24-month period 

is to stagger the renewal of enrolLnents on a voluntary basis. 

The processing of original applications, re-enrollment applications, and 

disbarment cases has been kept current. Listed below are comparative 

statistics showing the disposition of cases for the last two years: 

Disposition of enrollment and disbarment cases 

Type of case 

Fiscal year1957 1956 

General enrollment-attorneys and agents: 

Applications for enrollment approved 

Applications for enrollment disapproved 

Applications withdrawn on advice of the Director 

Applications abandoned 

Special enrollment to practice before the Internal Revenue Service: 

Applications approved by reason of examination 

Applications approved pursuant to standards and procedures based upon former service with the 

Treasury Department. (Sec. 12, Department Circular No. 230, revised) 

Applications approved by reason of having passed CPA examination though CPA certificates not 

issued 

Applications of former employees denied 

Applications withdrawn 

Applications abandoned 

Renewal of enrollment cases: 

Applications for renewal approved 

Applications for renewal disapproved 

Applications for renewal withdrawn 

Applications for renewal abandoned 

Disbarment cases: 

Disbarments 

Resignations accepted 

Resignations accepted with prejudice 

Reprimands issued 

Suspensions 

Closed without action 

Formal complaints pending against enrolled persons 

31, 038 

6,987 

27 

192 

20 

220 

35 

9 

14 

4 

4 

17 

2 

2 

33 

3 

27 

9 

2 

4, 522 

28 

138 

25 

139 

19 

15 

15 

35 

710 

7 

41 

4 

11 

6 

19 

6 

21 

34 

I Of the 31,038 applications for renewal approved, 29,673 were renewed since January 1, 1957, due to the fa t that the 

renewed cards issued to those enrollees in 1952 had expired. 

Statistics of Income 

Expedited release of publications.-Substantial progress was made during the 

year in expediting the release of the several publications of "Statistics of 

Income"-the detailed presentations of data compiled from income tax 

returns. This information is used extensively by the Congress, the Treasury Department, other federal and state agencies, and business organizations in charting and forecasting tax revenues, national income, business 

profits, and other important factors. 
NUMBER (Millions of returns) 

Is Total filed 

(taxable 

S

t4ontaxabls 

INDIVIDUAL INCOME TAX RETURNS, INCOME YEARS 1951.1955 

Number filed, meow of Incase, and teat 

1951 1952 1953 1954 1955 

AMOUNT (Billions of dollars) 

250 

Adlusted gross income, 

total 

200 

%Adjusted gross incorde, 

taxable 

150 

100 

50 

Income tax (after credits) 

1 

I I I I 0 

1951 1952 1953 1954 1955 

60 

50 

40 

30 

20 

10 

0 

70 Commissioner of Internal Revenue Annual Report 

Since the program for accelerating the release of these publications was 

instituted a few years ago, the time between the filing of individual income 

tax returns and the publication of the complete statistics has been reduced 

from 75 months (for statistics relating to 1946) to 36 months (for 1953). 

In the case of corporation income tax returns, the interval has been reduced 

from 52 to 29 months. This is a long-range program which is expected to 

cut these schedules further in the coming years. 

The speedup has been made possible partly by the introduction of highspeed electronic computers and partly by improved procedures in both the 

National Office and the district offices. Last year was the first in which the 

entire "Statistics of Income" tabulations were made by the new computers. 

The various printed reports may be obtained from the Superintendent 

of Documents, Government Printing Office, Washington 25, D. C. All of 

them carry the main title "Statistics of Income" and are subtitled to indicate scope: data from individual, fiduciary, estate, and gift tax returns; 

data from corporation income tax returns; data from partnership returns 

and other special classes when they occur. 

Business Indicator data initiated.-To provide an improved statistical basis 

for the national income accounts produced by the Department of Commerce 

and to assist the Council of Economic Advisers, plans and procedures were 

Report on Operations 71 

completed for a new accelerated tabulation of certain business indicator 

information taken from the tax returns. Beginning with the income year 

1956, key items, including business earnings, depreciation, and inventory, 

are being tabulated by industry groups for nonmanufacturing corporations 

as well as for both partnerships and sole proprietorships. These data, 

taken from the 1956 tax returns filed during 1957, should be available in 

the spring of 1958. 

Plans for tax analysis series.-A second accelerated tabulation of a few items 

of information from the tax returns was recommended by the Joint Committee on Internal Revenue Taxation in its Staff Study dated January 15, 

1957. Statistics included in this tabulation are needed by the tax committees of the Congress and the Treasury Department for analysis of 

operations of the income tax laws at a comparatively early date after the 

tax returns are filed. Late in fiscal 1957 plans were completed and provision was made in the budget for fiscal 1958 to initiate this tabulation with 

1957 individual returns. 

A comparison of major classifications of data in the "Statistics of Income" 

for the five latest available years follows: 

Major characteristics of individual income tax re t , 1951-55 

Items 

Income year1955 (preliminary) 

1954 1953 1952 1951 

Number of individual returns, total 58, 250, 188 56, 747, 008 57, 838, 184 56, 528, 817 55, 447, 009 

Taxable 44, 689,065 42, 633,060 15,223, 151 13, 876, 273 42, 648, 610 

Nontaxable 13, 561,123 14, 113, 948 12, 615, 033 12, 652, 544 12, 798, 399 

Returns with itemized deductions, total 16, 891, 084 15,701,595 11,426,417 12, 835, 776 11, 581, 696 

Taxable 15, 434, 733 13, 711, 830 12, 932, 132 11, 462, 609 10, 212, 822 

Nontaxable 1,156,351 I, 989, 765 1,494,285 1, 373, 167 1, 368, 874 

Returns with standard deduction, total 41, 359, 104 41,045, 413 43,411,767 43, 693, 041 43, 865, 313 

Taxable 29, 254, 332 28, 921, 230 32, 291, 019 32, 413, 664 32, 435, 788 

Nontaxable 12, 104, 772 12, 124, 183 11, 120, 748 11, 279, 377 11,429, 525 

(Thousand dollar ) 

Amount of adjusted gross income, total 249, 429, 182 230, 235, 855 29, 863,109 216, 087, 449 203, 097, 033 

Taxable returns 229, 595,449 209, 668, 830 12, 421, 184 198, 531, 784 185, 171, 964 

Nontaxable returns 19, 833, 733 20, 567, 025 17,112,225 17, 555, 665 17, 925, 069 

Adjusted gross deficit 898, 865 1, 014, 480 1,155, 153 797, 541 760, 548 

Taxable income 128, 020,111 115, 331, 301 

Income tax (after credits) 29, 613, 722 26, 665, 753 29, 430, 659 27,802,831 24, 227, 780 

Self-employment tax 463, 213 301,498 226,614 217,457 211,293 

Note: The classification of taxable and nontaxable returns for 1954-55 was based only on the income tax (after credits); 

for the years 1951-53 it was based on the combined income tax (after credits) nd self-employment tax. For 1955, nontaxable returns with adjusted gross deficit and returns with a breakeven in adjus ed gross income were classified as returns 

with a standard deduction, whereas in prior years they were classified as returns with itemized deductions. Taxable 

income shown for 1954-55 was not tabulated for prior years. 
72 Commissioner of Internal Revenue Annual Report 

Major characteristics of corporation income tax returns, 1950-54 

Items 

Income year1954 1953 1952 1951 1950 

Active and inactive corporations 

Number of corporation returns, total 754, 019 730, 974 705, 497 687,310 665,992 

Active corporations 722, 805 697,975 672, 071 652,376 629, 314 

With net income 441, 177 441, 767 442,577 439,047 426, 283 

Without net income 281,628 256, 208 229, 494 213, 329 203, 031 

Inactive corporations 31,214 32, 999 33, 426 34, 934 36, 678 

(Thousand dollars) 

Active corporations 

Total compiled receipts 554, 822,450 58, 242, 262 531, 307, 298 517, 039, 183 458, 130, 069 

Gross sales 443, 636, 814 52,060,604 429, 513, 705 421, 922, 320 374, 406, 271 

Gross receipts from operations 85, 268, 894 82,506,914 79, 804, 962 75, 280, 590 65, 475, 261 

Other income 25, 916, 742 23,674,744 21, 988, 631 19,836, 273 18, 248, 537 

Compiled net profit or net loss 36, 720. 838 39,801,471 38,735,375 43, 799, 526 42,831,310 

Income and excess profits taxes, total 16, 860, 952 19, 869, 049 19,147,694 22, 082,117 17,316,932 

Income 16,823,241 18,255,625 17, 596,969 19,623,441 15, 929, 488 

Excess Profits 37, 711 1,613,424 1, 550, 725 2,458,676 1, 387, 444 

Excess profits tax law expired Dec. 31, 1953, and does not apply to income earned after that date. 

General Management Improvements and Policy 

Changes 

Headlining the continued effort to improve management practices and 

procedures during the year were the "Blue Ribbon" policy for raising 

professional standards among employees, a reorganization of the Commissioner's staff offices, the expansion of the service center program, and 

the establishment of a more effective "Office Collection Force" as part of 

the program for collecting delinquent accounts. 

The "Blue Ribbon," service center, and "Office Collection Force" 

programs are discussed elsewhere in this report in connection with the 

functional activities of which they are a part. Among other items were 

the following: 

Several components of the National Office were reorganized in order 

to clarify their staff functions and to enable them to give more direct 

assistance to the Commissioner. The former position of Assistant Commissioner (Administration) was changed to Administrative Assistant to 

the Commissioner and made a part of the Commissioner's personal staff. 

The former position of Assistant Commissioner (Planning) was changed to 

Assistant to the Commissioner, was transferred to the Commissioner's 

personal staff, and was given additional duties in the management planning 

and reporting field. The Fiscal Management (budgeting) Division was 

separated from other administrative offices so that it, too, reports directly 

to the Commissioner as part of his personal staff. 

A milestone in improving federal-state tax cooperation was reached 

with the signing of a formal agreement between the Commissioner and the 

Report on Operations 73 

Governor of Minnesota covering the exchange of enforcement information 

and other reciprocal activities. The Minnesota agreement differs from 

previous understandings with five other states in that the Minnesota agreement covers the whole field of tax administration and is not limited to 

audit reports. 

Specific bills were introduced in the Congress covering the plan for 

modernizing the laws regulating the alcoholic beverage industry (H. R. 

7125) and the plan for simplifying employer reporting of wages to the 

Internal Revenue Service and the Social Security Administration (H. R. 

8309 and H. R. 8602). 

Following a pilot study in three regions extending over a period of nine 

months, a realignment of authority and of frontline permissive functions 

between regional and branch office levels of the Alcohol and Tobacco 

Tax Division was authorized to provide a more effective organizational 

structure. This involved the establishment of an analysis and control 

section in the permissive branch of each alcohol and tobacco tax regional 

office to promote uniformity and effectiveness of permissive operations 

throughout the region and to conduct regionwide projects, studies, or 

surveys touching on permissive procedures. As regards management of 

inspection and on-premises supervisory activities, it also involved a transfer 

of operating responsibilities from regional to combination (enforcement and 

permissive) branch offices in the six largest regions, and in those regions the 

permissive branch retained only staff responsibilities. 

The accounting for tax payments received through banks under the 

depositary receipt system was improved, and operating economies were 

effected as a result of a new system, effective January 2, 1957, under which 

the Bureau of Accounts of the Treasury Department performs centralized 

accounting for these payments instead of having it done piecemeal through 

the 64 district offices of the Revenue Service. The Bureau of Accounts 

reports these receipts monthly to the Revenue Service for inclusion in its 

consolidated reports of tax receipts. 

Several economies in the printing and shipping of tax forms and stamps 

were effected. Form 941, the quarterly employer's return, formerly 

inserted and mailed in envelopes, was converted into a form requiring no 

envelope, thereby saving both the cost of the envelopes and of inserting. 

Historic methods of shipping revenue stamps were revised to save substantial amounts of money, usually substituting truck shipments for registered mail handling. 

Substantial savings also were made by eliminating the procedure for 

stamping "received" dates on tax returns which are received within the 

proper time limits. The new plan eliminates date-stamping for many 

millions of returns and confines it only to the relatively small number of 

returns which arrive late. 

The cost of typing agents' reports was reduced by the adoption of modern 

photocopying equipment. 
APPEND! 

STATISTICA 

TABLE 
Note 

In many tables and charts, figures have 

been rounded and therefore will not necessarily add to the printed totals which are 

based on unrounded figures. 

Internal revenue districts are listed in 

this section by the names of headquarters 

cities. Each district is identical with the 

boundaries of the state in which the headquarters city is located except for the 

states and territories recapitulated at the 

bottom of Tables 1 and 11. A map of the 

districts appears on page XIII. 
WERIE

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Sources of revenue 

Grand total, all sources 

Corporation Income and profits taxes as 

Individual income and employment taxes, total 

Income tax not withheld I 

Income tax withheld and old-age Insurance fa 

Railroad retirement I 

Unemployment insurance 

Estate tax 

Gift tax 

Excise taxes, total 

Alcohol taxes, total 

Distilled spirits 

Wines, cordials, etc 

Beer 

Tobacco taxes, total 

Cigarettes 

Cigars a is 

Other 

Stamp taxes on documents, other instruments, and playing 

cards, total 

Issues and transfers of bonds of Indebtedness or 

capital stock, foreign insurance policies, and deeds 

of conveyance: 

Sales by postmasters 

Sales by directors 

Other 1, 

Manufacturers' excise taxes, total 

Gasoline o 

Lubricating oil, etc 

Tires (wholly or in part of rubber), inner tubes, and 

tread rubber 3 

Motor vehicles, chassis, bodies, parts, and accessories ,6 

Radio and television sets, phonographs, components, 

etc 

Refrigerators, freezers, air conditioners, etc.; electric, 

(44, and oil appliances 

Other of 

Footnotes on pp. 101-102. 

94 Commissioner of Internal Revenue Annual Report 

Table 2.-Internal revenue collections by sources and by quotes, fiscal year 1957 

fin thousands f dollars' 

Internal Revenue Collections 95 

Table 2.-Internal revenue collections by sources and by quarters, fiscal year 1957-Con. 

tin thousands of dollars/ 

Quarter endedSept 30, 

1956 

(I) 

Dec. 31, 

1956 

(2) 

Mar. 31, 

1957 

(3) 

June 30, 

1957 

(1) 

16, 088, 591 14, 291, 109 24,107, 590 25, 684, 681 

2, 896, 977 2,655, 932 8, 232, 976 7, 744, 769 

10, 322, 676 8, 577, 140 12, 870,424 14, 840, 054 

2, 346, 050 672,109 3, 818, 971 5, 961, 936 

7, 815, 310 7, 749, 025 8, 577, 337 8, 723, 501 

158, 233 153, 845 153, 822 150, 120 

3, 083 2,161 320, 294 4,496 

296,110 274,399 322,020 360,543 

3, 486 3,123 21, 524 96,495 

2, 542, 036 2, 783,357 2, 661,065 2, 651, 085 

735,412 911,713 613,096 712,974 

489,578 714, 189 434,354 483, 290 

20, 207 26,450 19, 859 22,156 

225, 627 171,074 158, 883 207,528 

411, 769 405, 564 421, 416 435, 301 

396, 861 388, 072 407, 026 418, 948 

10, 272 12, 887 9, 992 11, 708 

4, 635 4, 605 4, 398 4, 645 

24, 090 28, 888 26, 266 28, 302 

5,477 9,536 6,839 9,391 

17, 234 17,399 17, 459 17, 309 

I, 379 1, 953 1, 969 1, 602 

817, 191 915, 881 996 881 1, 031, 972 

283, 803 417,452 396, 450 360, 512 

19, 362 18,287 19,033 16,919 

47, 154 75, 750 60, 360 68, 190 

357, 101 282,596 393,870 467,255 

26, 602 42, 865 45, 250 34, 475 

33, 983 28, 859 24, 795 34, 453 

49,186 50, 072 57, 124 50, 167 

Sources of revenue 

Quarter endedSept 30, 

1956 

(I) 

Dec. 31, 

1956 

(2) 

Mar. 31, 

1957 

(3) 

June 30, 

1957 

(4) 

Excise taxes, total-Continued 

Retailers excise taxes, total 73, 179 70, 296 122, 517 70, 090 

Luggage, etc 13, 472 11, 873 21, 572 10,199 

Jewelry, etc 35, 068 31, 542 59 040 30,954 

Furs 3,691 5,585 12,. 863 7,355 

Toilet preparations 20, 948 21, 296 29, 042 21, 582 

Miscellaneous excise taxes, total 443, 043 417, 158 442,005 416,303 

Admissions: 

Theaters, concerts, athletic contests, etc.if 26,451 26, 005 11, 238 12, 154 

Roof gardens, cabarets, etc 10, 394 11, 209 10, 556 11,081 

Club dues and initiation fees 15, 294 11, 444 11,388 16, 110 

Long-distance telephone, telegraph, cable, radio, 

etc., and leased wires 67, 624 62,506 68, 153 67,903 

Local telephone service 88, 581 79, 315 90,125 88, 704 

Transportation ofOil by pipeline 8, 976 9, 313 9, 616 9,253 

Persons 57,237 61, 525 52, 565 50,832 

Property 118, 567 113, 893 121,763 113,754 

Use of safe deposit boxes 1,461 1, 240 I, 360 1, 766 

Coconut and other vegetable oils processed 15 5, 260 4, 668 4,349 5, 376 

Sugar 21, 842 21, 614 24,868 17,766 

Diesel and special motor fuels 3 7, 031 9, 652 9, 755 13, 017 

Narcotics and marihuana, Including occupational 

taxes 312 170 136 351 

Coin-operated amusement and gaming devices 10, 008 926 478 3, 632 

Bowling alleys, pool tables, etc 2,016 313 112 681 

Wagering taxes; 

Occupational 337 113 112 197 

Wagers 1, 631 I, 737 I, 526 I, 672 

Use tax on certain vehicles 15 I, 513 23, 587 2, 063 

Other ,5 23 2 17 (-12) 

Unclassified excise taxes: 

Unapplied collections 1,700 424 (-135) (-156) 

Undistributed depositary receipts A 35, 652 33, 433 39, 020 (-43, 701) 

Taxes not otherwise classified 51 27, 307 (-3, 141) (-420), (-8, 264) 

Footnotes on pp. 101-102. 
Sources of revenue 

Fiscal year10, 637, 544 

2, 973,195 

5, 479 

81, 949 

1, 126 

118 

267, 037 

1, 754, 687 

24, 384 

94 

6 

28 

13, 069 

1, 272 

6 

1, 654 

5 

96 Commissioner of Internal Revenue Annual Report 

Table 3.-In I revenue collections by sources 

can thousands of dollars] 

Grand total, all sources 

Corporation income and profits taxes, total 

Regular s 

Exempt organization business income tax 

Individual income and employment taxes, total 

Income tax not withheld I 

Income tax withheld and old-age insurance, total 3 

Received with returns 

Undistributed depositary receipts 

Railroad retirement, total 

Railroad employment compensation tax, 12% percent of taxable portion of payrolls: 

Received with returns 

Undistributed depositary receipts 

Railroad employees' representative tax, 121 percent of taxable portion of payrolls 

Unemployment insurance, 3 percent of taxable portion of payrolls 

Estate tax ss 

Gift tax 

1956 

75,112, 649 

21, 298, 522 

21, 297, 167 

1, 355 

42,633, 426 

11,830, 260 

29, 844,187 

1,053,867 

117, 370 

29, 280, 756 

563, 431 

634, 323 

46,610, 293 

11, 799, 067 

32, 865,172 

1957 

80, 171, 971 

21, 530, 653 

Z 622 

21,528, 031 

32, 068, 363 

796, 810 

616, 020 

615, 799 

192 

29 

330, 034 

124,928 

1, 253, 071 

Excise taxes, total 

Alcohol taxes, toal 

Distilled spirits taxes, total 

Imported (collected by Customs), $10.50 per gallon 

Domestic, $10.50 per gallon 

Rectification, 30 cents per proof gallon 

Occupational taxes: 

Nonbeverage manufacturers of spirits, $25, $50, $100 per year 

Rectifiers: 

Less than 500 barrels, $110 per year 

500 barrels or more, $210 per year 

Retail dealers in liquor or medicinal spirits, $50 per year 

Wholesale liquor dealers, $200 per year 

Manufacturers of stills, $55 per year 

Seizures, penalties, etc 

Stills or worms manufactured, $22 each 

Wines, cordials, etc., taxes, total 

Imported (collected by Customs) 

Domestic s 

(Still wines 17 cents, 67 cents, $2.25 per gallon; sparkling wines, $3.40; 

artificially carbonated wines, $2.40; liqueurs, cordials, $1.92.) 

Occupational taxes: 

Retail dealers in wines or in wines and beer, $50 per year 

Wholesale dealers in wines or in wines and beer, $200 per year 

Beer taxes, total 

Domestic, $9 per barrel of 31 gallons 

Occupational taxes: 

Brewers, 500 barrels or more, $110 per year; less than 500 barrels, $55 

per year 

Retail dealers in beer, $22 per year 

Wholesale dealers in beer, $100 per year 

Tobacco taxes, total 

Cigarettes, class A (small) VI per thousand, class B (large) $8.40 per thousand ff. 

Cigars: 

Large cigars classified by intended retail prices: 8 

Class A Retailing at not over 21 cents each), $2.50 per thousand 

Class B Over 24 cents, not over 4 cents each), $3 per thousand 

Class C Over 4 cents, not over 6 cents each), $4 per thousand 

Class D (Over 6 cents, not over 8 cents each), $7 per thousand 

Class E (Over 8 cents, not over 15 cents each), $10 per thousand 

Class F (Over 15 cents, not over 20 cents each), $15 per thousand 

Class G (Over 20 cents each), $20 per thousand 

Small cigars, 75 cents per thousand 

Footnotes on pp. 101-102. 

292, 750 

1, 788, 715 

13, 511 

102 

6 

21 

13,972 

1, 226 

6 

1,098 

5 

10, 001, 195 

2, 920, 574 

2, 06& 242 

758,067 

28 

3, 866 

1,151 

765, 447 

31 

3, 949 

1, 155 

'I, 610, 908 1, 549, 133 

88 88 

614 628 

8, 826 8, 881 

4,020 4, 148 

24, 585 24, 477 

3,015 3, 053 

3,659 3,710 

43 58 

87,751 

5,259 

81,321 

I, 056 

115 

Internal Revenue Collections 97 

Table 3.-Internal revenue collections by sources-Continued 

can thousands of dollars! 

Sources of revenue 

Fiscal year1957 1956 

Excise taxes, total-Continued 

Tobacco taxes, total-Continued 

Manufactured tobacco (chewing, smoking, and snuff), 10 cents per pound 17, 685 18,693 

Cigarette papers and tubes, papers 4 cent per 50; tubes I cent per 50 590 622 

Court fines, penalties, and taxes on leaf tobacco sold or removed in violation of sec. 

5731, Internal Revenue Code of 1954 8 7 

Stamp taxes on documents, other instruments, and playing cards, total 107, 546 114,927 

Issues and transfers of bonds of indebtedness or capital stock, foreign insurance 

policies, and deeds of conveyance: 

Sales by postmasters 31, 243 30,961 

Sales by directors 

Silver bullion transfers, 50 percent of profit 

69, 401 

20 

77,069 

53 

Playing cards, 13 cents per pack 6, 882 6, 843 

Manufacturers' excise taxes, total 3, 761, 925 3, 456, 013 

Gasoline: 

Gasoline, 2 cents per gallon to June 30, 1956, 3 cents thereafter is 1, 455, 952 1, 030, 397 

Floor stocks tax, 1 cent per gallon on tax-paid stocks on hand as of June 30, 

1956 is 2, 265 

Lubricating oil, etc., 6 cents per gallon; cutting oil 6 cents to Sept. 30, 1955, 3 cents 

thereafter 73, 601 74, 584 

Tires (wholly or in part of rubber), inner tubes, and tread rubber: 

Tires, 5 cents per pound; highway type increased to 8 cents, effective July I, 

1956 le 213, 749 159, 733 

Floor stocks tax, 3 cents per pound on tax-paid stocks of highway type tires on 

hand as of June 30, 1956 n 12, 019 

Inner tubes, 9 cents per pound 15, 221 18, 139 

Tread rubber, 3 cents per pound, effective July I, 1956 3 8, 893 

Floor stocks tax, 3 cents per pound on stocks of tread rubber on hand as of 

June 30, 1956 3 I, 572 

Motor vehicles, chassis, bodies, parts, and accessories: 

Passenger automobiles, chassis, bodies, etc., 10 percent 1, 144, 233 I, 376, 372 

Trucks and buses, chassis, bodies, etc., 8 percent to June 30, 1956, 10 percent 

thereafter is 196,002 189, 434 

Floor stocks tax on trucks and buses in dealers' hands as of June 30, 1956, 2 

percent fs 3, 297 

Parts and accessories for automobiles, trucks, etc.. 10 percent 157, 291 145, 797 

Radio and television sets, phonographs, components, etc., 10 percent 149, 192 161, 098 

Refrigerators, freezers, air conditioners, etc.; electric, gas, and oil appliances: 

Refrigerators, freezers, air conditioners, etc., 5 percent except for self-contained 

air-conditioning units which are 10 percent 46,894 19,078 

Electric, gas, and oil appliances, 5 percent 75,1% 71,064 

Pistols and revolvers, 10 percent 1, 417 I, 153 

Phonograph records. 10 percent 16, 450 12, 324 

Musical instruments, 10 percent 14, 781 12, 776 

Sporting goods (other than fishing rods, creels, etc.), 10 percent 9, 897 8, 503 

Fishing rods, creels, etc., 10 percent 4,717 5.150 

Business and store machines, 10 percent 83,175 70, 146 

Cameras, lenses, film, and projectors, 10 percent except projectors which are taxed 

at 5 percent 19, 901 17, 373 

Electric light bulbs and tubes, 10 percent 26,080 12, /54 

Firearms(other than pistols and revolvers), shells, and cartridges, 11 percent 15, 149 14, 302 

Mechanical pencils, pens, and lighters, 10 percent 9,114 9, 576 

Matches, 2 cents per thousand, and fancy wooden or colored stems, 54 cents 5,865 6, 160 

Retailers' ache taxes, total 336, 081 321, 896 

Luggage, etc., 10 percent 57, 116 57, 519 

Jewelry, etc., 10 percent 156, 604 152, 340 

Furs, 10 percent 29, 494 28, 261 

Toilet preparations, 10 percent 92,868 83,776 

Footnotes on pp. 101-102. 
Internal Revenue Collections 99 

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98 Commissioner of Internal Revenue Annual Report 

Table 3.-Internal neyenuettollections by source-Ccntinued 

fin thousands of dollars] 

Fiscal year 

REM EgEgg 

Ring EWE fgEgg Egg 

Sources of revenue 

1957 1956 

Admissions taxes, total 

Theaters, concerts, athletic contests, etc.: 

Admissions, 1 cent for each 10 cents or major fraction thereof of the 74 amount paid 35 , 777 102, 979 

Ticket brokers' sales, 10 percent of amounts In excess of box office 

price 33 

452 082 

Leases of boxes or seats, 10 percent of the amount for which similar 

accommodations are sold 33 526 490 

Admissions sold by proprietors in excess of established price, 50 percent 92 67 

Roof gardens, cabarets, etc., 20 percent of total paid for admissions, services, 

of such excess 

43, 241 42, 255 

etc 

Club dues and initiation fees, 20 percent 54, 236 47,171 

Long-distance telephone, telegraph, cable, radio, etc., 10 percent 244, 251 222, 449 

Leased wires, 10 percent; wire and equipment service, 8 percent 21, 934 19,094 

Local telephone service, 10 percent 347,024 315, 690 

Transportation ofOil by pipeline, 41/2 percent 

37, 159 35, 681 

Persons, 10 percent 

222, 158 214,993 

per ton roperly, 3 percent of amount paid, except coal which Is 4 cents 467, 978 450, 579 

Use 

P 

of sate deposit boxes, 10 percent 5, 826 5, 512 

Coconut and other vegetable oils processed, total 19, 652 18, 535 

Coconut oil from the Philippines, 3 cents per pound 

Coconut oil from Trust Terdtory, 3 cents per pound 

Coconut oil from other United States possessions, 3 cents per pound 

Coconut oil (and combinations containing coconut oil) from other sources, 5 

cents per pound 

Other vegetable oils, 3 cents per pound 

Sugar, approximately 1/2 cent per pound 

diesel and special motor fuels, 2 cents per gallon to 6/30/56, 3 cents thereafter n_ _ 

Narcotics and marihuana, Including occupational taxes, total sr 

Narcotics 

Marihuana 

Coin-operafed amusement and gaming devices, $10 and $250 per device 

Bowling alleys, pool tables, etc., $20 per alley et table 

Wagering taxes: 

Occupational tax, $50 par year 

Wagers, 10 percent of amount wagered 

Use tax on highway motor vehicles weighing over 26,000 pounds, $1.50 per 1,000 

pounds, effective 7/1/56 d Adulterated and process or renovated butter, filled cheese, and imported oleomargarine n 

Firearms transfer and occupational taxes m 

Other receipts (including repealed taxes) 

Unclassified excise taxes: 

Unspoiled collections 

Undistributed depositary receipts' 

Taxes not otherwise classified" 

I, 718, 509 1, 608, 497 

119, 089 146, 272 

18,050 16,542 

35 35 

14 132 

14 32 

1, 539 1, 795 

86, 091 82, 894 

39, 454 24, 464 

972 1, 002 

930 957 

42 45 

15, 044 14,246 

3, 122 2, 955 

759 639 

6, 566 6, 385 

27,163 

12 15 

18 11 

(3) . (

5) 

1, 833 7 

64, 404 (-31, 56 776) 

15,482 5, 269 

Footnotes on pp. 101-102. 

I years 1940 through 1 957 

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Excise taxes. total-Continued 

Retailers' excise taxes, total-Continued 

Miscellaneous excise taxes, total i! 

2 

1! 4.1 V = 

a 

4 

4 

gag 

Footnotesonpp. 10 1- 102. 
Articles taxed Fiscal year1957 1958 

Total 

Distilled spirits 

Distilled spirits, rectification tax 

Wine 

Beer 

Cigars, large: 

Class A 

Class B 

Class C 

Class D 

Class E 

Class F 

Class G 

Cigars, small 

Cigarettes, small 

Chewing and smoking tobacco 

19, 261 18, 204 

16,795 

488 

(C

) 1 

3 

1, 000 

2 

1 

4 

8 

903 

2 

(C) 

3 (C) 2 

511 

17, 726 

(C) 

14 

100 Commissioner of Internal Revenue Annual Report 

Table 5.—Internal revenue tax collected in Puerto Rico on manufactured products coming into the. United States, by objects of taxation 8 

9n thousands of dollar* 

Footnotes on p. 101. 

101 

Footnotes for tables 1-5 

•Less than $500. 

The receipts in the various States do not indicate the Federal tax burden of 

the respective States, since the taxes collected in one State are, in many instances, 

borne by residents of other States. For example, the withholding taxes reported 

by employers situated in metropolitan areas near State boundaries include substantial amounts withheld from salaries of employees who reside in neighboring 

States. 

2 Includes tax on business income of exempt organizations. 

3 The United States total of corporation income and profits taxes collected in 

fiscal year 1957 has been adjusted to exclude $404,000 originally deposited in the 

U. S. Treasury and subsequently transferred to the Government of Guam. 

4 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 1, 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. During fiscal years 1955 and 1956 the 

amounts of depositary receipts issued were classified by internal revenue districts, 

making it possible to compute for each district the amount of undistributed 

depositary receipts (amount of depositary receipts issued, less the amount of depositary receipts received with returns and distributed by classes of tax). Effective Jan. 2, 1957, revised accounting procedures were adopted which provide for 

the central reporting, by the Treasury Bureau of Accounts, of the amounts of 

depositary receipts issued, in national totals only. The Internal Revenue Service 

has continued to include these amounts in its national totals of tax collections 

and to report the amount of undistributed depositary receipts on a national basis, 

but it is not possible, under the new procedures, to show a breakdown of the 

undistributed depositary receipts by internal revenue districts. 

° Beginning with fiscal year 1957, the United States total for individual income 

tax withheld is adjusted to exclude withheld individual income taxes transferred 

to the Government of Guam in accordance with the provisions of Public Law 630, 

approved Aug. I, 1950 (64 Stat. 392). This adjustment amounted to $3,363,000 

for 1957. 

7 Includes railroad employment compensation tax and tax on railroad employee 

representatives. 

8 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 sec. 7652(a)(3) of the Internal Revenue Code of 

1954. Such amounts are included in overall collections results (tables 1 through 4) 

and are shown separately in table 5. Reports prior to 1955 included in the overall results only the amounts of such taxes collected at United States ports of entry. 

° Includes occupational taxes on manufacturers of stills, rectifiers, wholesale 

liquor dealers, retail dealers in liquor or medicinal spirits, and nonbeverage manufacturers of spirits. 

10 Includes seizures, penalties, etc., and tax on stills or worms manufactured. 

II Includes occupational taxes on wholesale and retail dealers in wines or in 

wines and beer. 

' 2 Includes occupational taxes on brewers and wholesale and retail dealers in 

beer. 

13 Includes taxes on large cigars, classes A through G, and on small cigars. 

14 Includes taxes on cigarette papers and tubes, court fines, penalties, and taxes 

on leaf tobacco sold or removed in violation of sec. 5731, Internal Revenue Code 

of 1954. 
102 Commissioner of Internal Revenue Annual Report 

18 Includes taxes on silver bullion transfers and on playing cards. 

" Collections affected by provisions of the Highway Revenue Act of 1956. 

Amounts shown in table 1 are inclusive of floor stocks taxes provided by such act. 

Changes in rates are shown in table 3. 

17 Includes taxes on pistols and revolvers; phonograph records; musical instruments; sporting goods; fishing rods, creels, etc.; business and store machines; 

cameras, lenses, film, and film projectors; electric light bulbs and tubes; firearms, 

shells, and cartridges; mechanical pencils, pens, and lighters; and matches. 

18 Includes taxes on ticket brokers' sales, on leases of boxes or seats, and on 

admissions sold by proprietors in excess of established prices, as well as general 

admissions tax. 

HI Includes taxes on coconut oil from the Philippines, the Trust Territory, and 

United States possessions as well as other coconut and vegetable oils processed. 

20 Includes taxes on adulterated and process or renovated butter, filled cheese, 

and imported oleomargarine; firearms transfer and occupational taxes; and other 

receipts. • 

21 Includes amounts of unidentified and excess collections, depositdry receipts 

outstanding 6 months or more for which no tax accounts were found, and profit 

from sale of acquired property. 

22 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. 

28 Rates of income tax withheld and old-age insurance taxes: 

Income tax withheld: Wages in excess of exemptions taxed at 18 percent. 

Old-age insurance taxes : Employers' tax 2 percent, employees' tax 2 percent, 

both imposed on taxable portion of wages; both increased to 23Q percent 

effective Jan. 1, 1957. 

24 Advance payments of estate and gift taxes in the amount of $19,381,000 

were reported in combined amount for 1956 and are included in estate tax for 

that year. 

28 In the case of certain racetracks the following rates apply: 

Admissions-1 cent for each 5 cents of amount paid. 

Ticket brokers' sales-20 percent. 

Leases of boxes or seats-20 percent. 

" Narcotics, 1 cent per ounce; narcotics order blanks, $1 per hundred. Marihuana, $1 per ounce; marihuana order blanks, 2 cents each. For classes and 

rates of occupational taxes, see table 11. 

27Adulterated butter, 10 cents per pound; process or renovated butter, g cent; 

domestic filled cheese, 1 cent; imported filled cheese, 8 cents; imported oleomargarine, 15 cents. Special occupational taxes are levied on manufacturers or dealers in these products and are included in the amounts shown. 

28 Transfers of machineguns, short-barreled firearms, silencers, etc., $200 each; 

transfers of certain double-barreled guns, $1 each. Special occupational taxes 

are levied on manufacturers, importers, or dealers in firearms and are included 

in the amounts shown. 

22 Beginning January 1951, withheld income taxes and old-age insurance 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. 

NOTE.—Floor stocks taxes are reported separately only during the periods in 

which the collections are of significant amounts. Relatively small amounts collected in subsequent periods are merged with the amounts shown for the related 

class of tax. 

Alcohol and Tobacco Taxes 103 

Table 6a.—Establishments qualified to engage In the production, distribution, storage, 

or use of alcohol and alcoholic liquors 

Class of establishment 

As of June 30— 

1957 1956 

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, rebottlers, Etc., of specially denatured alcohol articles 

Users of tax-free alcohol 

Distilled spirits: 

Fruit distilleries 

Registered distilleries 

Internal revenue bonded warehouses 

Distillery denaturing bonded warehouses 

Taxpaid bottling houses 

Rectifying plants 

Beer: Breweries 

Wines: 

Bonded wine cellars 

Taxpaid wine-bottling houses 

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 

36 

44 

47 

35 

3, 966 

1,240 

7,470 

98 

86 

209 

2 

54 

132 

255 

546 

125 

6 

1,362 

7, 570 

11,393 

275,876 

162,057 

1, 038 

91 

453 

21 

36 

43 

44 

34 

4,020 

1,424 

7,504 

101 

94 

213 

2 

53 

133 

266 

580 

136 

7 

I, 309 

7, 329 

11, 087 

274,877 

168,180 

1, 040 

85 

452 

20 

Table 6b.—Establishments qualified to engage in the production or distribution of 

tobacco products 

Class of establishment 

As of Dec. 31— 

1956 1955 

Manufacturers of tobacco 

Manufacturers of cigars and cigarettes 

Sea stores warehouses 

Export warehouses 

211 

769 

63 

13 

222 

881 

58 

5 
104 Commissioner of Internal Revenue Annual Report 

Table 7.-Permits relating o industrial alcohol, under Chapter 51, Internal Revenue 

Code, 1954 

Industrial 

alcohol 

plants, 

bonded 

Dealers 

in 

Users ofCarriers 

of 

tax-free 

Total ware- specially Specially Specially Tax-free and 

Status houses, 

and denaturing 

plants 

denatured 

alcohol 

denatured 

alcohol 

denatured 

rum 

alcohol specially 

denatured 

alcohol 

(I) (2) (3) (4) (5) (6) (7) 

In effect July I, 1956 12, 081 69 3, 974 

4 

7,504 452 

Issued during year 613 8 318 244 35 

Terminated during year, total 698 4 377 276 34 

Revoked 

Otherwise terminated 698 4 

C

— 

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— 

377 276 34 

In effect June 30, 1957 11, 996 73 3,915 7,472 453 

Renewals approved during year 11, 499 67 3, 831 7,103 417 

Amended during year 1,567 35 919 555 35 

Table 8.-Permits For operations relating to alcoholic beverages, under the Federal 

Alcohol Administration Act 

status 

Total Distillers 

Warehousing 

and 

bottling 

Rectifiers 

Wine 

producers 

and 

blenders 

Wine 

blenders 

Importers Wholesalers 

(1) (2) (3) (4) (5) (6) (7) (8) 

In effect July 1, 1956 15,034 249 289 178 512 63 1,309 12, 434 

Issued during year I, 820 23 28 17 32 16 218 I, 486 

Terminated during year, total 2,117 33 38 20 64 12 165 1,785 

Revoked 14 14 

Otherwise terminated 2,103 33 38 20 64 12 165 I, 771 

In effect June 30, 1957 14, 737 239 279 175 480 67 1,362 12,135 

Amended during year I, 525 35 109 69 63 18 151 1, 080 

Table 9.-Permits relating o tobacco, under Chapter 52, Internal Revenue Code, 1954 

Status 

Total 

Manufacturers ofDealers in 

tobacco 

Cigars and materials 

cigarettes Tobacco 

Cigarette 

papers and 

tubes 

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

In effect July 1, 19% 3,341 817 222 

Cl •—• en 

2,300 

Issued during year 585 43 18 523 

Terminated during year, total 625 153 39 433 

Revoked 

Otherwise terminated 625 153' 39 433 

In effect June 30, 1957 3,301 707 201 2, 390 

Amended during year 267 86 24 157 

Alcohol and Tobacco Taxes 105 

Table 10.-Label activity under Federal Alcohol Administration Act, Fiscal year 1957 

Type of label 

Applications received Applications acted upon 

Certificates issued 

Total For For Total Disapapproval exemption Approvals bernpbons 

proved 

(1) (2) (3) (4) (5) (6) (7) 

Grand total 35, 066 34, 834 232 34, 513 34,051 227 235 

Distilled spirits, total 14, 451 14, 424 27 14, 426 14, 343 24 59 

Domestic 13,194 13, 167 27 13, 226 13, 160 24 42 Imported 1, 257 1, 257 I, 200 1,183 17 

Wines, total 19, 275 19, 070 205 18, 892 18, 534 203 155 

Domestic 7, 895 7,690 205 7,698 7, 426 203 69 Imported 11,380 11,380 11,194 II, 108 86 

Malt beverages, total 1,340 1,340 1,195 1,174 21 

Domestic 1, 071 1, 071 982 970 12 Imported 269 269 213 204 9 

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Amount petitioned (thousand dollars) Number of 

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(3) (4) 

Deficiency 

in tax 

(2) 

Penalty Overassessment 

(3) (4) 

Number of 

cases 

(1) Overassessment 

(4) 

12, 070 

II, 760 

43 

Penalty 

(3) 

Processed during year, total 

Agreed-stipulated 

Dismissed or defaulted 

Tried before the Tax Court on merits I 

Method 

114 Commissioner of Internal Revenue Annual Report 

Table 12.-Appellate Division processing of protested income, profits, estate, and gift 

tax cases prior to inuance of statutory notice of deficiency (pre-90-day cases) 

A. Progress of work 

B. Results obtained in cases processed 

Cases Receiving Appellate Consideration or in Litigation 115 

B. Results obtained in cases processed 

Method 

Processed during year, total 

Agreed 

Defaulted 

Petitioned toneTax Courttransferred to docketed status_ 

Table 14

.-Appellate Division processing of income, profits, estate, and gift tax cases 

petitioned to the Tax Court (docketed cases) 

A. Progress of work 

'Less than $500- 

Table 13.-Appellate Division processing of protested income, profits, estate, and gift 

tax cases in which statutory notices of deficiency were outstanding (90-day cases) 

A. Progress of work 

Pending in 90-day status July I, 1956 

Net receipts during year, total 

By transfer from pre-90-day status I 

Received from District Director in 90-day status 

Processed during year, total 

Agreed 

Defaulted 

Petitioned to the Tax Court-transferred to docketed status_ 

Pending in 90-day status June 30, 1957 

267 

table 16. I Represents amounts petitioned. Results as to decisions rendered by the Tax Court during the year are shown in 

1, 089 41, 873 4, 401 

4, 927 168, 061 17, 952 

3, 945 158, 447 15,390 

982 9, 614 2, 562 

4, 563 123, 941 12, 670 

I, 133 10, 269 212 

1,116 13, 070 1, 435 

2, 314 100, 603 11, 023 

1, 453 85, 993 9, 684 

356 

574 

562 

13 

763 

274 

47 

441 

168 

Status 

435 

242 

234 

3, 494 

3,184 

43 

267 

8, 224 

notices considered by appellate in 90-day status, cases in transit, etc. 

Difference from number of cases shown as 

petitioned in table 13 is caused by excluding District Director's statutory 

B. Results obtained in cases processed 

Pending in docketed status July 1. 1956 Net receipts during year, total 

- 

 Petitions filed in response toDistrict Director's statutory notice 

Appellate Division's statutory notice 1 Cases reconsidered after trial 

Processed during year, total 

Agreed-stipulated 

Dismissed or defaulted 

Tried before the Tax Court on merits 

Pending in docketed status June 30, 1957 

2,613 

2,184 

78 

4,536 

3,496 

190 

850 

8,761 

113,458 

100, 080 

3, 435 

187,788 

138, 985 

2, 875 

45, 928 

542,082 

16, 132 

11,259 

171 

34, 933 

28, 839 

419 

5, 674 

99, 717 

Deficiency 

in tax 

(2) 

108, 636 

59, 836 

2, 872 

45, 928 

18, 802 

12, 713 

414 

5, 674 

Overassessment 

(4) 

12, 607 

149 

1,435 

II, 023 

767 

279 

47 

441 

Number of 

cases 

(1) 

4, 536 

3, 496 

190 

850 

Appellate determination (thousand 

dollars) Number of 

cases 

Appellate determination (thousand 

dollars) 

Deficiency 

in tax 

(1) (2) 

Penalty 

(3) 

107, 088 I 10, 808 

27, 562 910 

8,422 

4,875 

512, 897 

216, 973 

Deficiency 

in tax 

(2) 

Penalty Overassessment 

(1) 

Status 

Status 

Number of 

Uses 

(I) 

Pending in pre-90-day status July I 1956 8, 750 

Net receipts from District Director during year 15, 786 

Processed during year total 13, 413 

Agreed 8, 807 

Unagreed overassessments and claim rejections 693 

Statutory notice issued-transferred to 90-day status 3, 913 

Pending in pre-90-day status June 30, 1957 II, 123 

Amount stated in revenue agent's report 

(thousand dollars) 

Deficiency 

in tax 

(2) 

390, 286 

448,489 

309,190 

166, 093 

92 

140, 005 

532, 585 

154, 121 

127,259 

98, 533 

90, 079 

6, 748 

I, 707 

33,773 

25,497 

24,433 

11,100 

5 

13,328 

34, 837 182, 847 

Penalty 

(3) 

Overassessment 

(4) 

Method 

Processed during year, total 

Agreed 

Unagreed overassessrnents and claim rejections 

Statutory notice issued-transferred to 90-day status 

Number of 

rases 

(1) 

13, 413 

8, 807 

693 

3, 913 

Appellate determination (thousand 

dollars) 

Deficiency 

in tax 

(2) 

254, 078 

96, 555 

112 

157, 411 

Penalty 

(3) 

19, 804 

4

))

,756 

V, 048 

Overassessment 

(4) 

103, 509 

100, 058 

2, 597 

855 

Amount stated in statutory notice 

(thousand dollars) 
Total I 

(1) 

Court of 

Claims 

(2) 

District 

courts 

(3) 

Status 

Pending July 1,1956: 

Cases number_ 

Amount in dispute thousand dollars.. 

Received during year: number Cases 

Amount in dispute thousand dollars. 

Disposed of during year: 

Cases number 

Amount in dispute thousand dollars_ _ 

Refunded during year: 

Amount thousand dollars.. 

Percent of amount disposed of 

Pending June 30, 1957: 

Cases 

Amount in dispute._ 

number__ 

thousand dollars._ 

2,951 

366, 528 

1,152 

152,863 

I, 304 

59, 954 

22,512 

37.55 

2, 799 

459,437 

492 

228, 582 

149 

66, 887 

173 

23,259 

6,727 

28.92 

468 

272, 210 

2,459 

137,946 

1,003 

85, 976 

1,131 

36,695 

15,786 

43.02 

2,331 

187, 227 

116 Commissioner of Internal Revenue Annual Report 

Table 15.-Receipt and disposal of income, profits, estate, and gift tax cases in the 

Tax Court 

Status 

Number of 

cases 

(I) 

Amount in dispute (thousand dollars) 

Deficiency 

in tax 

(2) 

Penalty 

(3) 

Overpayment 

(4) 

Pending July 1, 1956 

Filed or reopened during year 

Disposed of during year 

Pend ing June 30, 1957 I 

9,458 

4,737 

4,513 

9,682 

609, 313 

204, 968 

200, 475 

613, 806 

107, 088 

21, 888 

29, 259 

99, 717 

1, 065,186 

65,164 

137, 378 

992, 971 

I Owing to dfferences in the time at which actions are record d, the invento y figures shown differ from hose reported 

by the Tax Court. Also, the figures exclude renegotiation cases which are incl ded in those reported by the Tao Court. 

Table 16.-Results obtained in income, profits, estate, and gift tax cases disposed of in 

the Tax Court, fiscal year 1957 

Basis of closing 

Number 

(1 ) 

Amount in dispute Amount approved Saved or recovered 

Deficiency 

and 

penalty 

(2) 

Overpayment 

(3) 

Deficiency 

and 

Penalty 

(4) 

Overpayment 

(5) 

Amount 

(6) 

Percent 

of amount 

in dispute 

(7) 

Total 

Dismissed 

Decision on merits 

Agreed settlement 

4, 513 

(Thousand dollars) 

229, 733 137,378 106,227 2, 670 240, 935 65.6 

190 

827 

3,496 

3,294 

58,615 

167,824 

3, 032 

13, 072 

121, 274 

30, 391 

72, 549 

3, 287 

I, 936 

733 

6, 319 

41, 526 

193, 090 

99. 9 

57. 9 

66. 8 

Table 17.-Receipt and dispo al of Tax Court cases in courts of appeals or in 

Supreme Court 

Status 

In courts of appeals In Supreme Court 

Number of 

cases 

(1) 

Amount 

(thousand 

dollars) 

(2) 

Number of 

cases 

(3) 

Amount 

(thousand 

dollars) 

(4) 

Pending July I, 1956, total 

Appealed by Commissioner 

Appealed by taxpayers 

Appealed by both 

4 ppealed during year, total 

By Commissioner 

By taxpayers 

By both 

Disposed of during year, total 

Favorable to Commissioner 

Favorable to taxpayers 

Modified 

Settled 

Dismissed 

Pending June 30 1957, total 

Appealed by Commissioner 

Appealed by taxpayers 

Appealed by both 

440 36, 343 4 977 

t 51 

375 

14 

5,445 

30,326 

571 

2 

2 

178 

799 

340 28, 427 13 1,390 

51 

275 

14 

1, 511 

18, 487 

8, 429 

9 

4 

456 

934 

360 25,507 6 I, 895 

183 

71 

50 

8 

48 

8, 514 

7, 167 

7,251 

1,312 

1,262 

6 I, 895 

420 39,263 11 472 

32 

371 

17 

1, 521 

29, 279 

8,463 

10 

1 

460 

12 

Cases Receiving Appellate Consideration or in Litigation 117 

Table 18.-Receipt and disposal of suits filed by taxpayers in Federal courts 

I4 processing tax cases, $244,162.66 in dispute, were pending July 1,1956; 1 case in String $136 025.83, no rt of which 

was refunded, was disposed of during year; 3 cases, $108,136.83 in dispute, were pe ding July I, 1957. 

Note. Suits filed by taxpayers are primarily suits for refund of taxes or to enjoin the collection of taxes (other than those 

relating to alcohol, tobacco, and firearms taxes). 

Table 19.-Cases involving tax issues decided by Federal civil courts, fiscal year 1957 

Type of court 

Total For the 

Government 

Against the 

Government 

Partly for 

and partly 

against the 

Government 

(1) (2) (3) (4) 

Total 736 320 347 69 

District courts 474 193 62 

3 

Courts of appeals 190 96 

4 

Court of Claims 68 28 

Supreme Court 4 3 

Table 20.-Receipt and disposal of claims pending and suits filed by the United States 

in Federal and State courts 

Status 

Number Amount (thousand 

dollars) Percent 

recovered 

(6) 

Total 

(I) 

In suit 

(2)

Not in suit 

(3)

In dispute 

(4)

Recovered 

(5)

Pending July I, 1956 

Received during year in suit and for institution of 

suit 

Total 

Suits instituted during year 

Total to be accounted for 

Disposed of during year 

Pending June 30, 1957 

602 

44 

518 

29 

84 

15 

22,573 

253 

547 

39 

99 

39 

646 586 60 22, 826 

162 

484 

135 

451 

27 

33 

8,241 

14,585 

1,658 20. 12 

Note.-This table pertains primarily to suits to collect taxes or to reco er erroneous refunds (other than th se relating 

to alcohol, tobacco, and firearms taxes). However, it does not include insolvency and debtor proceedings o lien cases 

in court which are included in tables 21 and 22. 
Cases Receiving Appellate Consideration or in Litigation 119 

Table 23.-Obligations incurred by the Internal Revenue Service, fiscal year 1957 

lIn thousands of dollars/ 

118 Commissioner of Internal Revenue Annual Report 

Table 21.-Receipt and disposal by the Office of the Chief Counsel of insolvency and 

debtor proceedings 

4 

5 

9 

9 

7 

7 

Status 

Total 

Reorganization 

proceedings 2 

Bankruptcy and 

receivership 

proceedings 4 

Miscellaneous 

insolvency 

proceedings 4 

(1) (2) (3) (4) 

Pending July I, 1956 1,620 702 385 533 Received 2, 090 879 624 587 

Total cases 3,710 I, 581 1,009 1, 120 

Disposed of 2,109 829 670 610 

Pending June 30, 1957 1,601 752 339 510 

1 Includes cases handled at national and regional levels. 

2 Proceedings instituted under the following sections o chapters f the Bankrupt y Act: Sections 75 (agricultural 

compositions and extensions) and 77 (railroad reorganizati ns) and ch pters X (corpor to reorganizatio s), Xi (arrangements as to unsecured indebtedness), XII (real property rrangement ), and XIII (wa e earners' plan ) which involve 

tax claims and other rights and interests of the United Stat 5, and also require action b legal personnel 

Bankruptcy liquidation proceedings and federal or State receiver hip proceedings which involve t x claims of the 

United States, and also require action by legal personnel. 

Proceedings relating to corporate dissolutions, insolvent banks, assi nments for the enefit of creditors or administration of estates of decedents, which involve tax claims of the United St tes, and also require action by legal personnel. 

Table 22.-Receipt and disposal by the Office of he Chief Counsel of lien cases and 

noncourt civil advisory cases 

Lien cases Noncourt 

civil 

Total advisory 

Status In courts Not in 

court 0 

cases 4 

(I) (2) (3) (4) 

Pending July 1, 1956 1, 087 548 146 393 

Received 5, 865 I, 954 2, 123 I, 788 

Total cases 6, 952 2, 502 2, 269 2, 181 

Disposed of 5, 662 1, 869 2, 075 I, 718 

Pending June 30, 1957 I, 290 633 194 463 

1 Includes cases handled at national and regional levels. 

a Primarily suits for foreclosure by mortgagees or other secured creditors and uits to quiet title to which the United 

States is made a party. 

Primarily applications for discharge of property from tax liens. 

4 Primarily memorandums on civil advisory matters from Regional Counsel to District Directors which are not related to 

court proceedings or lien cases. 

Internal Revenue office, district, 

or region 

Total 

(1) 

Salaries 

(2) 

Travel 

(3) 

Communication 

services 

(4) 

Rent and 

utility 

services 

(5) 

Supplies 

and 

equipment 

(6) 

Other 

(7) 

A. National office and regional totals 

(including Directors' offices) 

Total, Internal Revenue Service__ 305, 538 270, 853 8,358 5, 879 1, 545 5, 597 13, 306 

National office 30, 797 16, 198 843 3, 506 100 1, 242 8, 908 

Atlanta region 25, 345 22, 915 1, 036 185 129 495 585 

Boston region I 18,688 17, 253 384 170 310 280 291 

Chicago region 31, 991 30,070 616 260 82 462 501 

Cincinnati region 

Dallas region 

New York City region 

32,168 

20,479 

35, 804 

29,783 

18,750 

34,130 

I, 004 

841 

337 

263 

156 

380 

91 

20 

99 

573 

369 

430 

454 

343 

428 

Omaha region 0 28, 290 25, 900 1, 013 196 307 459 415 

Philadelphia region 38,294 36,259 628 330 137 479 461 

San Francisco region a 34, 851 31,986 956 322 219 571 797 

Regional counsel 4, 238 3, 815 107 72 17 169 58 

Regional inspection 3,329 2,725 499 35 14 29 27 

International Operations Division 1,264 1,069 94 4 20 39 38 

B. Regional offices (excluding 

Directors' offices) 

Atlanta region 5, 023 4,193 257 42 60 214 257 

Boston region 3,935 3,326 54 30 270 104 152 

Chicago region 3, 945 3, 615 91 41 1 103 94 

Cincinnati region 6, 237 5, 657 224 34 3 154 165 

Dallas region 2,703 2, 410 133 22 3 70 65 

New York City region 5, 635 5, 274 89 63 2 105 102 

.. Omaha region 6, 772 5,872 197 66 296 151 190 

Philadelphia region 5,620 5,165 165 45 2 118 125 

San Francisco region 5,249 4,433 185 43 107 159 322 

C. District Directors' offices 

Atlanta: 

Atlanta 3,482 3, 146 134 23 59 52 68 

Birmingham 2,642 2,453 97 20 4 35 33 

Columbia 1, 738 1, 618 64 10 26 2( 

Greensboro 3,575 3,276 152 24 6 49 61 

Jackson 1,409 1,285 75 14 22 13 

Jacksonville 4,268 3,950 153 32 55 71 

Nashville 3,208 2,994 104 20 42 41 

Boston: 

Augusta I, 220 1,126 54 12 17 11 

Boston 6,967 6,662 110 74 3 69 41 

Burlington 582 529 29 6 11 

51 Hartford 3,669 3,461 82 23 6 46 

Portsmouth 869 798 38 8 16 

Providence 1, 446 I, 351 18 17 31 17 E 

alicaCTicago : 11, 072 10, 531 78 106 27 147 123 

Detroit 8, 660 8, 165 149 58 50 101 13' 

Milwaukee 4,525 4,276 110 30 1 62 

Springfield 3, 789 3,483 188 25 3 49 

Cincinnati: 

Cincinnati 2, 910 2, 765 65 18 39 

Cleveland 5,675 5,308 93 66 38 103 

Columbus 1, 866 1, 743 51 14 31 

Indianapolis 4,821 4,538 135 32 15 61 

Louisville 2, 920 2,696 116 26 47 

Parkersburg 1,977 1,793 93 16 6 41 

Richmond 3,852 3,521 174 43 60 

Toledo 1, 910 1, 762 53 14 29 37 

Dallas: 

Albuquerque 910 816 37 9 3 26 

Austin 4,944 4,553 200 36 8 78 

Dallas 4,911 4,540 198 38 4 73 

Little Rock 1, 615 1, 438 94 12 34 

New Orleans 

elelelmms fele 

2,866 

2- 530 

2,663 

2.330 

102 

77 

18 

21 

2 44 

44 

See footnotes at end of table. 

447270 0-58---1 
Internal Revenue office, district, 

or region 

Total 

(I) 

Salaries 

(2) 

Travel 

(3) 

Communication 

services 

(4) 

Rent and 

utility 

services 

(5) 

Supplies 

and 

Mirrment 

(6) 

Other 

(7) 

I. District Directors' offices-Continued 

- 

New York City: 

Albany 2,329 2,119 47 23 32 33 

Brooklyn 7, 035 6,774 41 80 74 59 

Buffalo 3,233 3,084 58 23 40 26 

Lower Manhattan 6, 508 6, 271 19 72 62 82 

Syracuse 2,034 1,891 63 18 35 27 

Upper Manhattan 9,030 8,717 20 101 82 99 

Omaha: 

Aberdeen 819 735 58 4 16 6 

Cheyenne 584 517 40 4 16 7 

Denver 2, 331 2, 185 67 22 34 22 

Des Moines 3, 020 2,802 123 17 38 37 

Fargo 811 727 56 5 14 8 

Kansas City 2,245 2, 120 68 10 30 16 

Omaha 1,918 1,789 71 9 30 18 

St. Louis 3, 132 2, 975 69 13 45 30 

St. Paul 3,959 3,685 132 26 53 61 

Wichita 2,699 2,493 132 20 32 20 

Philadelphia: 

Baltimore 6, 801 6,526 80 61 64 65 

Camden 2, 294 2,173 53 13 26 24 

Newark 7,048 6,599 65 89 89 96 

Philadelphia 8,308 7, 944 122 70 86 81 

Pittsburgh 5,329 5,104 83 35 56 46 

Scranton 2,016 1,911 43 13 31 18 

Wilmington 878 837 17 4 9 6 

San Francisco: 

Boise 922 825 45 9 17 21 

Helena 952 860 58 8 14 12 

Honolulu 1, 146 1,045 27 11 10 53 

Los Angeles 10, 354 9, 728 160 104 136 140 

Phoenix I, 178 1, 081 45 13 22 17 

Portland 2,286 2, 100 93 16 33 44 

Reno 686 628 23 5 14 15 

Salt Lake City 1, 075 1, 008 30 7 19 10 

San Francisco 7, 332 6, 905 149 65 95 104 

Seattle 3, 671 3,373 141 41 52 59 

Includes Northeast Service Center. 

a Includes Midwest Service Center. 

a Includes Western Service Center. 

Table 24.-Cost of printing and binding for Internal Revenue Service 

Class of work 

Fiscal year1957 1956 

Quantity 

(thousands) 

Cost (thousand dollars) 

Quantity 

(thousands) 

Cost (thousand dollars) 

(I) (2) (3) (4) 

Total 1, 662, 101 7, 512 I, 422, 171 7, 024 

Tax return forms and other public-use forms and instructions _ 1, 282, 877 3,751 1, 066, 127 3, 687 

Administrative forms and pamphlets 325, 575 1,285 324, 044 935 

All field printing 53, 649 171 32, 000 97 

Excise tax stamps 2,305 2, 305 

120 Commissioner of Internal Revenue Annual Report 

Table 23.-Obligations incurred by the Internal Revenue Service, 

fiscal year 1957-Continued 

[In thousands of dollars] 

INDEX 

A 

Achilli v. U. S Page 

21 

Acts: 

Act of August 9, 1939 19 

Bankruptcy 47 

Excise Tax Technical Changes Act, 1957 55 

Federal Alcohol Administration 39 

Federal Unemployment Tax 4,7 

Highway Revenue Act, 1956 7,42 

Liquor Enforcement 19 

National and Federal Firearms 19 

Railroad Retirement 4 

Social Security, amendments of 56 

Supplemental Appropriation, 1955 58 

Tax Rate Extension, 1957 56 

Technical Amendments, 1957 55 

Adjustments 36 

Administration: 

Civil Service Commission 61 

Personnel 61 

Aids for taxpayers: 

Booklets 49-52 

Films, television 49, 52 

School texts 49, 52 

Telephone 49 

Alcohol: 

Industrial, permits relating to 104 

Operations under Federal Alcohol Administration Act 104 

Alcohol and tobacco tax: 

Administration of 39, 73 

Arrests 18-19 

Authorization of operations 39 

Chemical analyses and research 41 

Detection devices 18 

Enforcement Branch 41 

Inspection of establishments: 

Permittees 40 

Plants 40 

Investigations 19 

Label activity 105 

Offers in compromise 37 

Permits 39 

Public opinion 18 

Raids 18 

121 
122 - Commissioner of Internal Revenue Annual Report 

Alcohol and tobacco tax—Continued Page 

Raw materials 18 

Regulations 42-43 

Seizures 18-19 

Statistics 18-21 

Stills and operators 18 

Sugar, purchases of 18 

Supervision of: 

On-premises 40 

Statistics on 40 

Alcohol taxes: 

Collection of 3,4 

Increase in 4 

Prosecution cases 20-21 

Allen-Bradley Co. v. U. S 29 

Appellate Division: 

Appeals and litigation 25-31,114,115 

Handling of tax cases 25-31 

Statistics on 114,115 

Armed Forces, assistance to 53 

Assessments, additional. (See Taxes.) 

Assistance. (See Taxpayer assistance.) 

Audits, prerefund: 

Tax increase because of 33-34 

Austria 54 

Automobile Club of Michigan v. Commissioner 31 

B 

Balboa 53 

Beer. (See Alcohol and tobacco tax program.) 

Benefits: 

Fringe 30 

Southern Bell Telephone and Telegraph Co 30 

Berra case 21 

"Blue Ribbon" program 13,61,62,72 

Bolich case 21 

Bulletin, Internal Revenue 45 

Bureau of Accounts 73 

Bureau of Narcotics 41 

Business Indicator data 70 

C 

Canada 54 

Carryback applications, statistics on 36 

Chart of Internal Revenue Service organization xry 

Chemical analyses and research 41 

Chief Counsel, office of 20,38 

Analysis of cases flowing through 20 

Disposal of cases by 20,118 

In cases involving criminal prosecution 20 

Index 123 

Civil Advisory Legal Services: Page 

Bankruptcy Act, proceedings in 47 

Increased need for 47 

Civil litigation 25 

Civil Service Commission 61 

Claims. (See specific item.) 

Closing agreement cases 28,47 

Statistics on 28,47 

Collateral agreement 37 

Collections: 

Alcohol and tobacco tax 4 

Comparison by categories 3 

Corporation income tax 4,33-35,94-99 

Employment tax 3,4,7,8 

Estate and gift tax 3,4,8 

Excise tax 3-8 

General 3-8 

Increase in, reasons for 4 

Individual income tax 4-8 

Occupational stamps 106-113 

Principal sources: 

1940 through 1957 99 

1956 96-99 

1957 78-99 

By quarters, 1957 94-95 

By regions, districts, States and Territories, 1957 78-93 

Commerce, Department of 70 

Commissioner, The: 

Acquiescences of adverse decisions 31 

Agreement with Governor of Minnesota 72-73 

Nonacquiescences of adverse decisions 31 

Summary and transmittal letter HI 

Compromise cases 28,37 

Computers, electronic 70 

Conference coordinator 13 

Corporation income taxes: 

Characteristics of 4,33,37,70 

Collection of 4,33-34 

Increase in 4 

Returns 8-15,33-34 

Total 4 

Council of Economic Advisers 70 

Coun(s): 

Federal, disposal of suits 117 

Of Claims 28-29 

Other 28 

Supreme 21,28,29 

The Tax 25-31 
124 Commissioner of Internal Revenue Annual Report 

Court(s)—Continued 

U. S. Court of Appeals: Page 

Stern v. Commissioner 48 

U. S. v. Bess 47,48 

U. S. v. Nelle A. Hoper, et al 47 

U. S. District 28 

Credits, statistics on 34-37 

Criminal prosecution: 

Analysis of cases in 20-21 

Of tax cases 20-21 

D 

Delinquent accounts: 

Collection of 22-23 

Statistics on 22-23 

Delinquent returns: 

Collection of 23 

Increase in 23 

Kinds of 23 

Role of regional and district offices in 23 

Determination letters. 44 

Analysis of program 44 

E 

Employment taxes: 

Appeals policy 26-27 

Collections 4,7 

Increase in 4 

Total 4 

Enforcement program: 

Alcohol and Tobacco Tax Division 18,39-41 

Audit of returns techniques 14 

Auditors 14 

Conference coordinator 13 

General 13,33,49 

Informal conference procedures, revision of 13 

Local agencies 17 

Promotional policies 13 

Results due to 33-34 

Enforcement Technical School. 58 

Estate taxes 4,8 

Estimated tax: 

Declarations of 8 

Overpayments of 35 

Excess profits tax: 

Collections of 27,35-37 

Council 27 

Reduction in 27 

Relief from 27 

Statistics on 25-27 

Index 125 

Page 

Exchange Stabilization Fund 58 

Excise taxes: 

Appeals policy 26 

Audit program, expansion of 13 

Collections 3-4 

Delinquent returns 23 

Increase in 3-4,34 

Prosecution cases 20-21 

Returns filed 7-8 

Executive Development Course 64 

Executive orders 42 

Exempt organizations, determination letter program in 44-45 

F 

"Farmers' Tax Guide" 51 

Federal Alcohol Administration Act 39 

"Federal Gas Tax Refund for Nonhighway and Transit Users" 51 

"Federal Use Tax on Highway Motor Vehicles" 51 

Fiduciary taxes 8 

Films 14,49,64 

Firearms: 

National and Federal Firearms Act 19 

Registrations, increase in... 19 

Taxes 20 

Fiscal management: 

Appropriations, utilization of 67 

Expenditures, statistics on 68 

Techniques in: 

Electronic 68 

Mechanical 68 

Floor stocks taxes 7 

Forms: 

Coordination of 65 

Guides 65 

Printing of 73,120 

Self-mailers 65 

Shipping of 73 

Standardization of 65 

Statistics on 65 

Uniformity in 65 

France 53,54 

Frankfurt 53 

Fraud: 

Investigations of 15 

Prosecutions recommended 17 

Funds, utilization of 67 

G 

Gasoline tax, refunds of 34 

Germany 53 

Gift taxes 3-4,8 

Grunewald case 21 
126 Commissioner of Internal Revenue Annual Report 

H 

Page 

Haynes v. U. S 30 

Honduras 53 

H. R. 7125 39,55,73 

7225 56 

8309 73 

8381 55 

8602 73 

12298 55 

Income tax(es): 

Corporation: 

Increase in 3-4 

Total 4 

Individual: 

Characteristics of returns 71-72 

Collections 3-4 

Increase in 4,7,8 

Prosecution cases 20-21 

Total 3-4,8-11,71-72 

Withheld 3 

Regulations 46 

Information program: 

Magazines 52 

Other communication media 52 

Press 52 

Radio 52 

Taxpayer Assistance Kit 52 

Television 52 

Information returns: 

Checking of 12 

Total received 12 

W-2's 12 

Informers, rewards to 19 

Inspection Service 57-59 

Instructor kit 64 

Interest 34-35 

Internal controls: 

Audit, statistics on 57-58 

Management 72-73 

Security 58 

Internal Revenue Service, obligations incurred 119-120 

Internal Security Division 58 

International activities: 

Balboa 53 

Frankfurt 53 

Manila 53 

Ottawa 53 

Paris 53 

San Juan 53 

Index 127 

Investigations: 

International tax conventions: 

Japan 

Pakistan 

Honduras 

Italy 

France 

Austria 

Canada 

Page 

54 

54 

54 

53 

54 

54 

54 

Alcohol and tobacco tax program 18 Allegations: 

Screening of 

15 Selectivity of 

17 Decrease in, reasons for 

15 Fraud, prosecutions recommended 17 Numbered 

17 Personnel 

 58-59 Police check 

59 Summary of 

17 Tort claim 

59 Unnumbered 

17 Italy 

54 

.1 

Japan 

54 

Joint Committee on Internal Revenue Taxation 37,71 

IC 

Kit, instructor's 

64 

L. 

Label activity under Federal Alcohol Administration Act, 1957 105 Label approval: 

Administration regulations 39 Exemption from 

105 Statistics on 

105 Laboratories, National Office 

41 Law Enforcement School 

58 Legislation enactments 

56 Letters: 

Confidential Defense Clearance 

58 Determination 

44 Libson Shops, Inc. v. Koehler 

29 Liquor: 

Code provisions for production of 39 Establishments qualified to handle 40,103 Import of, into Oklahoma 

19 Litigation, appeals and civil 

25-31 

M 

Management, improvements in 72 Manila 

53 

Manufacturers' and retailers' excise taxes 3,13,20-21,23,25,34 

Map of Internal Revenue Regions and Districts 

XIII 
128 Commissioner of Internal Revenue Annual Report 

Mathematical verification: 

Error cases, increase in 

Results of 

"Methods of Analysis for Alkaloids, Opiates and Synthetic Drugs" 

Military. (See Armed Forces.) 

Minnesota, Governor of: 

Agreement with Commissioner 

N 

National Association of Credit Men 

National Lead Co v Commissioner 

National Office laboratory 

Northeast Service Center: 

Pilot payroll installation 

0 

Obligations incurred by Internal Revenue Service, 1957 

Occupational tax stamps issued, 1957 

Offers in compromise 14, 

Collateral agreement functions 

Delinquency penalty 

Specific penalty 

Summary 

Tax offers 

Ohio Power Co. v. U. S 

Oklahoma, import of liquor into 

Operating Facilities: 

Accident rates 

Forms 

Records administration 

Records centers 

Safety awards 

Space and equipment 

Organization chart of Internal Revenue Service 

Ottawa, Canada 

Overassessments, review of 

Overpayments 

Page 

12 

11, 12, 33 

41 

73 

64 

30 

41 

68 

119 

8, 106 

15, 37-38, 47 

37 

38 

38 

38 

38 

29 

19 

65 

65 

65 

67 

65 

64 

my 

53 

34-35, 37 

34-37 

Index 

Prepayments: 

Excessive individual income tax 

Statistics on 

Printing and binding, cost of, for Internal Revenue Service 

Profits taxes 

Programs: 

Aids for taxpayers 

Alcohol and tobacco tax 

"Blue Ribbon" 

Determination letters 

Enforcement 

Enrollment 

Firearms 

Fiscal 

Incentive awards 

Information 

Office Collection Force 

Prerefund 

Promotion 

Raw materials preventive 

Regulations 

School 

Taxpayer assistance, cost of 

Tax return forms, changes in 

Technical publication 

Training: 

Audit technicians 

Gift tax agents 

Income tax agents 

Office auditors 

Wagering tax. 

Promotional policies 

Property, depreciable, study of 

Protest cases 

Publications: 

Increase in 

Internal Revenue Bulletin 

Miscellaneous 

Technical 

Public Laws: 

466 

767 

784 

796 

1010 

Puerto Rico, tax on products from 

Putnam v. Commissioner 

13, 

129 

Pape 

35 

36 

120 

27, 37 

49 

18, 64 

61, 62, 72 

44 

13, 18 

18 

19 

67 

62 

52 

72 

33 

13 

18 

42 

52 

49 

43 

45 

14 

14 

14 

14 

17 

13 

46 

25 

45 

45 

51, 65 

45-46 

34 

7 

56 

56 

56 

100 

30 

Pakistan 

Paris 

Personal taxes. (See Taxes, individual income.) 

Personnel: 

Executive Development Course 

Statistics on 

Pilot payroll installation 

Police checks 

Policy changes 

Practitioner: 

Applications, processing of 

Disbarment cases 

Enrollment of, statistics on 

53, 

54 

54 

64 

62 

68 

59 

72 

18 

69 

68 
130 Commissioner of Internal Revenue Annual Report 

R 

Records: Page 

Centers 67 

Disposal of 67 

Statistics on 67 

Refunds: 

Average amounts of 35 

Claims for 36 

Increase in 34-35 

Statistics on 34-37 

Regions: 

Omaha 11 

San Francisco 11 

Regulations: 

Income tax 46 

Under Internal Revenue Code, 1954 42 

Repayments, increase in 34 

Returns (see also Income taxes; taxes): 

Audit of 7-12,14 

Comparison, 1957 with 1956 7-12 

Corporation 8,33-34 

Date-stamping 73 

Delinquent 23,33 

Electronic computation of 70 

Employment tax 8 

Examined 12 

Excise tax 7 

Fiduciary 8 

Filed 8 

Floor stocks 7 

Increase in: 

Form 1040 7 

Form 1040A 7 

Individual, characteristics of 8,71 

Information 12 

Occupational tax, 7-8 

Other 8 

Processing of 7 

Receipt of 7 

Tobacco tax 7 

Use tax 7 

Revenue Proceedings: 

56-33 45 

57-5 45 

Comparison of 46 

Revenue Rulings: 

56-334 45 

56-671 45 

57-2 45 

57-76 45 

57-163 45 

Comparison of 46 

Index 

Rewards: 

Disallowed claims 

Statistics on 

To informers 

Total payments 

S 

San Juan 

Security control 

Service Centers: 

Functions of 

Midwest 

Northeast 

Western 

Snuff. (See Alcohol and tobacco tax program.) 

Social Security Administration 

"Social Security Information for Crew Leaders and Farmers" 

Southern Bell Telephone and Telegraph Co 

Stamps, occupational tax, issued 1957 

"Statistics of Income" 

"Statistics Relating to the Alcohol and Tobacco Industries" 

Stern v. Commissioner 

Subcommittee on Internal Revenue Taxation 

Supreme Court (see also Courts; Appellate Division; Chief Counsel, office of) 

Supreme Court cases: 

Achilli v. U. S 

Allen-Bradley Co. v. U. S 

Automobile Club of Michigan v. Commissioner 

Berra 

Bolich 

Grunwald 

Haynes v. U. S 

Libson Shops Inc. v. Koehler 

National Lead Co v. Commissioner 

Ohio Power Co. v. U. S 

Putnam v. Commissioner 

U. S. v. Calamaro 

U. S. v. Korpan 

T 

Tax analysis series . 

Tax Court, The (see also Appellate Division): 

Adverse decisions of 

Disposal of tax cases by 

Taxes (see also Collections): 

Additional 

Alcohol 

Corporation 

Employment 

Estate 

Estimated 

Excess profits 

Excise 

11 

11 

21 

33 

3-4,20 

131 

Page 

19 

19 

19 

19 

53 

58 

11 

11 

73 

51 

30 

106 

69 

39 

48 

55 

21,28-30 

21 

29 

31 

21 

21 

30 

29 

30 

29 

30 

21 

21 

71 

31 

116 

4,8,37 

4,26 

3,8,25 

8 

27,37 

3,8,26 
132 Commis'sioner of Internal Revenue Annual Report 

Taxes-Continued 

Federal old-age insurance 

Fiduciary 

Firearms 

Floor stocks 

Gasoline 

Gift 

Individual income 

Manufacturers' and retailers' excise 

Occupational 

Personal. (See Individual.) 

Tobacco 

Unemployment 

Use 

Wagering 

Withholding 

"Tax Guide for Small Business" 

Tax liability, changes in 

Taxpayer assistance: 

Cost of 

Decrease in 

Kits 

Publications for 

Self-help methods 

Statistics on 

Tax return forms program 

Changes in 

Tax rulings 

Analysis of cases 

Division action on 

Tax stamps issued, 1957 

Technical Services 

Tobacco: 

Establishments qualified to produce or distribute 

Permits relating to Internal Revenue Code, 1954 

3, 13, 

Page 

4 

8 

20 

7 

11, 34 

8, 25 

3, 4, 7, 8, 70, 71 

20-21, 23, 25, 34 

7, 8 

3, 4, 7, 43 

4, 7, 8 

7 

20 

3, 4 

51 

33 

49 

49 

52 

51 

49-51 

49 

43 

43 

44 

44 

47 

106 

42 

103 

104 

Tobacco tax. (See Alcohol and tobacco tax program; Taxes.) 

Training courses: 

Accounting 

Correspondence 

Executive Development 

In-Service 

Inspections 

Law 

Law-enforcement officer 

Training films 

Training instructor kit 

Training program 

14, 

64, 

49, 

68 

65 

64 

64 

64 

64 

64 

64 

64 

14 

Index 

Treasury Decisions: 

133 

Page 

6182 46 

6203 42, 46 

6204 43 

6206 42,46 

6211 42, 46 

6213 44 

6216 43, 46 

6217 42 

6221 43 

6224 43 

6226 42 

6241 43 

Unemployment tax 

U. S. v. Bess 

U. S. v. Calamaro 

U. S. v. Korpan 

U. S. v. Nelle A. Hoper, et al 

Use taxes 

V 

Verification, mathematical 

Visitors, foreign 

w 

Wagering taxes 

War Production Board 

Wines. (See Alcohol and tobacco tax program.) 

Withholding taxes 

Y 

"Your Federal Income Tax" 

11, 

4, 7, 8 

47, 48 

21 

21 

47 

7 

12, 33 

54 

20 

30 

3, 4 

51 

U. S. GOVERNMENT PRINTING OFFICE: 1958 G-447270