the scope of the volume's usefulness in the manner described in the preceding paragraph. This compromise suggests itself-namely: that if individual. members of the Board wish further light on the application of any of the principles underlying the rules, regulations and decisions contained in this volume, or perhaps even purposely omitted therefrom, they may call upon the Executive Secretary of the Board, who will endeavor, within reasonable limits, to be of as great assistance and help as is feasible and practical. This offer is made with confidence that the membership will not interpret the same as implying that the Board's offices may be invoked to go into specific facts or assist in the preparation of individual returns. Nevertheless, if a tax problem arises, it is desired that the entire membership know that the Committee is desirous of cooperating. Besides the necessity of keeping this volume within its present limited space, another consideration for limiting its size is based upon the desirability of placing this study in the hands of the Members of the Board before the end of the present year. It is realized how necessary it is to have before each tax-payer, the law and regulations so that he may be in possession of all necessary information before closing his books of account for the taxable year. Instances are known where the premature and ill-advised closing of books has resulted in unnecessary embarrass LETTER OF TRANSMİTTAL FRÒM COUNSEL Gentlemen: TO COMMITTEE. New York, December 24, 1920. Pursuant to your request, we have compiled official documents relating to real estate problems arising under the present Federal Income Tax Law. We submit same herewith, together with certain explanatory comments. This report has two main divisions. On the one hand, the official rules, regulations, decisions, opinions and orders of various Government officials or Boards (See Part V), and on the other hand, unofficial explanatory comment on this official data (See Parts I to IV). The statute provides that "the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, may make all needful regulations for the enforcement of the provisions" of the statute. Such regulations naturally express the best judgment of the Department officials, and they are entitled to and receive respectful consideration by the courts. However, while each taxpayer should recognize that these regulations are the sincere and painstaking efforts of trained authorities, caution must be exercised in applying any general regulations to a specific state of facts. What often appears to the tax-payer as an insignificant detail, may be the determining factor in the application of the statute, or the rulings thereunder, to the facts at issue. We have collated in this volume substantially all of the official data on the specific problems affecting real estate. It would have been comparatively an easy task to have prepared a volume of five hundred pages. An almost insurmountable difficulty arose out of the necessity for condensing this study within its present page limitation. Accordingly, much that might have been said and per haps much that should have been said in order to meet the requirements of all members of the Board was necessarily omitted, and emphasis only has been placed upon those provisions of the law which were of greatest importance or on which regulations and decisions were in a rather complicated or confused condition. It has therefore been decided, although reluctantly, to omit matters of paramount importance perhaps to some individual member of the Board merely because the particular problem presumably did not affect many of the members of the Board. Part V of this compilation consists of a reprint of those sections of the law which are fundamental to the problem or indicate the basis for the subsequent regulations and opinions. The formal interpretation of the present Revenue Act of 1918, by the Commissioner of Internal Revenue, is found in the volume known as Regulations Number 45. The pertinent Articles of these Regulations will be found in Part V. A few excerpts from the earlier volume of Regulations (Number 33) still applicable to or throwing light upon the present statute have also been inserted. From time to time the Commissioner adds to, amends or modifies the formal regulations. These later pronouncements are in the form of Treasury Decisions and of these the pertinent ones have been incorporated. Where no identification mark appears, the insertion is from the law itself. In Part V, the following index will serve to indicate the source and character of the various pronouncements. T. D..... Op. A. G.. O. or L. O. Sol. Op.. S T. B. R.. T. B. M. Treasury decision. .Opinion of Attorney General. .Solicitor's memorandum. ..Advisory Tax Board recommendation. A. R. R.. A. R. M... O. D. .Committee on Appeals and Review recom- . Committee on Appeals and Review mem- Two other sources have been employed:-a publication known as the Income Tax Primer for Farmers has been referred to under the initials "F. B." and a special bulletin published by the Department on the questions arising out of depreciation and obsolescence has been referred to as "F," its official designation. A word of caution appears essential in connection with all of the matter contained in Part V except the excerpts from the law itself. First, any ruling or decision of the Department or of any of its bureaus may be revised without notice. Secondly, while the decisions of the Commissioner are entitled to great respect, and in the absence of court rulings the decisions are binding, it must not be lost sight of that in the final analysis, under our Constitution, the court and not the Commissioner or the Secretary of the Treasury decides on the meaning of laws and their application. Accordingly, it is of paramount importance that sooner or later (and this on patriotic as well as on material grounds) many mooted matters should be submitted to the courts for adjudication. As a general principle of interpretation of tax legislation, comment should be made that all tax laws are interpreted in favor of the tax-payer, and ambiguous and inconsistent interpretations are strictly resolved against the taxing body. The comment which has been added in this volume is prompted by a desire to explain in layman's language, certain of the more important regulations, to translate such regulations into bookkeeping terms and to stimulate, if possible, a more scientific, but still no less equitable tax thinking on the part of the tax-payers. In the preparation of this volume, due thanks must be extended to those officers of the Treasury Department who painstakingly, though informally, have examined, in our behalf, the rulings quoted herein. In addition, we must express our appreciation to Mr. Walsh, of the Prentice-Hall Company, for the work performed by his organization in the tabulation of the Department's publications. Dr. Joseph J. Klein, C. P. A., of the accounting firm of Klein, Hinds & Finke, has conferred with your counsel on all matters relating to accounting problems discussed in this report. His organization has been of great assistance. Very truly yours, GREENBAUM, WOLFF & ERNST, |