Evening star., 1939-07-20
shall be included in gross income.

shall be included in gross income.
Amounts received as an annuity
under an annuity or endowment
contract shall be included in gross
income; except that there shall be
excluded from gross income the eX-
cess of the amount received in the
taxable year over an amount equal
to 3 per centum of the aggregate
premiums or consideration paid for
such annuity whether or not paid
during such year,, until the aggre-
gate amount excluded from gross in
come under this title in respect to
such annuity equals the aggregate
premiums or consideration paid for
such annuity. In the case Of q
transfer for a valuable considera-
ton, by assignment or otherwise,
OF a life insurance. endowment, or
annuity contract, or any interest
therein, only the actual value of
such consideration and the amount
OF the premiums and other sums
subsequently paid by the transferee
shall be exempt from taxation under
paragraph Cd or this paragraph.
5) GIFTS, REQUESTS, AND DE-
VISES-The value of property ac-
qulred by gift, bequest. devise, or
inheritance (but the income from
such property shall be included in
gross income).
"a TAX-FREE INTEREST-In-
terest upon (a) the obligations of
a State. Territory, or any political
subdivision thereof. or the District
OF Columbia. or (b) obligations of
a corporation organized under Act
of Congress, if such corporation is
an lnstrumentality of the United
States: or (c) the obligations of the
United States or its possessions.
f5) COMPENSATION FOR IN
JURIES OR SICKNESS-Amounts
received. through accident or health
insurance or under workmen's COM
pensation acts, as compensation for
personal injuries or sickness. plus
the amount of any damages received,
whether by suit or agreement on
account of such injuries or sickness.
t6) MINISTERS-The rental
value of dwelling house and ap-
purtenances thereof furnished to
minister of the gospel as part of
his COMPENSATION.
~ INCOME EXEMPT UNDER
TREATY-Income of any kind to
the extent required by any treaty
obligation of the United States.
(S) DIVIDENDS FROM CHINA
TRADE ACT CORPORATIONS
In the case of a person. amounts
distributed as dividends to or for his
benefit by a corporation organized
under the China Trade Act. 1922, if,
at the time of such distribution, he
is a resident of China, and the
equitable right to the income OF the
shares of stock of the corporation
is in good faith rested in him.
t9> Income of foreign govern
ments.
Deductions From Gross Income.
SECTION S (a) ITEMS OF DE-
DUCTION-In computing net in
come there shall be allowed as de-
ductions:
~ EXPENSES-All the ordinary
and necessary expenses paid or in
Cured during the taxable year in
carrying on any trade or business.
including a reasonable allowance
for salaries or other compensation
for personal services actually rem
dered; travelling expenses (including
the entire amount expended for
meals and lodging while away from
home in the pursuit of a trade or
business: and rentals or other pay
ments required to be made as a con-
dition to the continued use or pos
session, for purposes of the trade
or business, of property to which the
taxpayer has not taken or is not
taking title or in which he has no
equity.
~ INTEREST-All interest paid
or accrued within the taxable year
on Indebtedness.
~ TAXES-Taxes paid or ac-
crued within the taxable year, ex-
cept-
(d) income taxes;
lb) estate, inheritance, legacy,
succession, ana gilt taxes,
(cJ taxes assessed against local
benefits of a kind tending to in
crease the value of the property as
sessed: but this paragraph shall not
exclude the allowance as a deduc-
ton OF so much of such taxes as is
properly allocable to maintenance or
interest charges; and
(d) taxes paid to any State or
Territory on property, business, or
occupation the income from which
is not taxable under this title.
~ LOSSES IN TRADE OR
BUSINESS-Losses sustained dur
ing the taxable year and not COM
pensated for by insurance or other
wise, if incurred in trade or busi-
ness, the income from which is sub
ject to taxation under this title.
(5 LOSSES IN TRANSACTIONS
FOR PROFIT-Losses sustained
during the taxable year and not
compensated for by insurance or
otherwise, if incurred in%any trans
action entered into for profit would
be subject to taxation under this
title, though not connected with the
trade or business.
(6) INTERCOMPANY DIVI-
DENDS-In the case of a corpora
ton, the amount received as divi-
dends from a corporation which is
subject to taxation under this title
~ BAD DEBTS-Debts ascer-
tanned to be worthless and charged
off within the taxable year or. in
the discretion of the assessor, a rea-
sonable addition to a reserve for
bad debts; and when satisfied that
debt is recoverable only in part, the
assessor may allow such debt, in an
amount not in excess of the part
charged off within the taxable year,
as deduction.
f8j INSURANCE PREMIUMS
All fire, tornado, and casualty insur-
ance premiums paid during the tax
able year in connection with prop
erty held for investment or busi-
ness.
~ DEPRECIATION-A reason
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