1918, unless of a kind plainly and properly chargeable against income taxable at the rates for the calendar year 1917. The proportionate share of a stockholder of any excess profits tax imposed upon the corporation under the Revenue Act of 1917 with respect to that part of the fiscal year falling within the calendar year 1917 is plainly and properly chargeable against income taxable at the rates for that year and shall be credited against such income of the stockholder. In determining the rates of tax applicable to the amounts of the distributive shares of the stockholders attributable to the calendar years 1917 and 1918, respectively, the amounts subject to the rates for the calendar year 1918 shall be placed in the lower brackets of the rate schedule provided in the present statute and the amounts attributable to the calendar year 1917 in the next higher brackets of the rate schedule applicable to that year. See section 206 of the statute and article 1641, and also section 1 of Title I of the Revenue Act of 1916 and sections 1 and 2 of Title I of the Revenue Act of 1917.

ART. 334. Taxation of stockholders of personal service corporation with fiscal year ending in 1919.-Such part of a stockholder's distributive share of the net income of a personal service corporation for its fiscal year ending in 1919 as is attributable to the calendar year 1919 is taxable at the rates for such calendar year, and such part of such distributive share as is attributable to the calendar year 1918 is taxable at the rates for such calendar year. The part of a stockholder's distributive share of the net income of a corporation for its fiscal year attributable to the calendar year 1919 is found by determining his distributive share of the net income of the corporation for its fiscal year, whether distributed or not, in the same manner as if the fiscal year were the calendar year 1919, and then taking the proportion thereof which the part of such fiscal year falling within such calendar year bears to the full fiscal year. The part of a stockholder's distributive share of the net income of a corporation for its fiscal year attributable to the calendar year 1918 is found by determining his distributive share of the net income of the corporation for its fiscal year, whether distributed or not, in the same manner as if the fiscal year were the calendar year 1918, and then taking the proportion thereof which the part of such fiscal year falling within such calendar year bears to the full fiscal year. The stockholder is also liable to tax on dividends received out of earnings or profits accumulated since February 28, 1913, and before January 1, 1918. See sections 201 and 205 (c) of the statute and articles 1541-1543 and 1621.

ART. 335. Application of different tax rates in the case of fiscal year of personal service corporation ending in 1919.-Any deductions, exemp

ons or credits to which the stockholder of a personal service cororation with a fiscal year ending in 1919 is entitled shall first be pplied against his income subject to the rates for the calendar year 919, unless of a kind plainly and properly chargeable against income xable at the rates for the calendar year 1918. In determining the ates of tax applicable to the amounts of the distributive shares of he stockholders attributable to the calendar years 1918 and 1919, espectively, the amounts subject to the rates for the calendar year 919 shall be placed in the lower brackets of the rate schedule proided in the statute and the amounts attributable to the calendar year 918 in the next higher brackets of the rate schedule applicable to hat year. See section 206 of the statute and article 1641.

ESTATES AND TRUSTS.

SEC. 219. (a) That the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including

(1) Income received by estates of deceased persons during the period of administration or settlement of the estate;

(2) Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests;

(3) Income held for future distribution under the terms of the will or trust; and

(4) Income which is to be distributed to the beneficiaries periodically, whether or not at regular intervals, and the income collected by a guardian of an infant to be held or distributed as the court may direct.

(b) The fiduciary shall be responsible for making the return of income for the estate or trust for which he acts. The net income of the estate or trust shall be computed in the same manner and on the same basis as provided in section 212, except that there shall also be allowed as a deduction (in lieu of the deduction authorized by paragraph (11) of subdivision (a) of section 214) any part of the gross income which, pursuant to the terms of the will or deed creating the trust, is during the taxable year paid to or permanently set aside for the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, or any corporation organized and operated exclusively for religious, charitable, scientific, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual; and in cases under paragraph (4) of subdivision (a) of this section the fiduciary shall include in the return a statement of each beneficiary's distributive share of such net income, whether or not distributed before the close of the taxable year for which the return is made.

(c) In cases under paragraph (1), (2), or (3) of subdivision (a) the tax shall be imposed upon the net income of the estate or trust and shall be paid by the fiduciary, except that in determining the net income of the estate of any deceased person during the period of administration or settlement there may be deducted the amount of any income properly paid or credited to any legatee, heir or other bene

ficiary. In such cases the estate or trust shall, for the purpose of the normal tax, be allowed the same credits as are allowed to single persons under section 216.

(d) In cases under paragraph (4) of subdivision (a), and in the case of any income of an estate during the period of administration or settlement permitted by subdivision (c) to be deducted from the net income upon which tax is to be paid by the fiduciary, the tax shall not be paid by the fiduciary, but there shall be included in computing the net income of each beneficiary his distributive share, whether distributed or not, of the net income of the estate or trust for the taxable year, or, if his net income for such taxable year is computed upon the basis of a period different from that upon the basis of which the net income of the estate or trust is computed, then his distributive share of the net income of the estate or trust for any accounting period of such estate or trust ending within the fiscal or calendar year upon the basis of which such beneficiary's net income is computed. In such cases the beneficiary shall, for the purpose of the normal tax. be allowed as credits in addition to the credits allowed to him under section 216, his proportionate share of such amounts specified in subdivisions (a) and (b) of section 216 as are received by the estate or trust.

ART. 341. Estates and trusts.-While certain estates and trusts r subject to tax as such and others are not, the fiduciary in every c is required to make a return of income. See section 225 of t statute and articles 421-425. The net income of an estate or tr shall be computed in the same manner and on the same basis as t net income of an individual, except that in place of the deducti allowed individuals of certain gifts or contributions there may deducted from the gross income any part of it which during t taxable year is pursuant to the will or trust deed paid to or per nently set aside for the United States, a State, a Territory, or 1 political subdivision thereof, the District of Columbia, or any c poration or association of the kind described in section 231 (6) the statute and article 517. See section 212 and articles 21-26. T income of a revocable trust must be included in the gross income the grantor.

ART. 342. Estates and trusts taxed to fiduciary.-In the case of estates of decedents before final settlement and of (b) trusts, whet created by will or deed, for accumulation of income, whether for ascertained persons or persons with contingent interests or otherw the income is taxed to the fiduciary as to any single individual, exe that from the income of a decedent's estate there may first be ducted any amount of income properly paid or credited to a be ficiary. See section 200 of the statute and articles 1521 and 15 Where under the terms of the will or deed the trustee may in discretion distribute the income or accumulate it, the income is taxto the trustee, irrespective of the exercise of his discretion. T

aposition of the tax is not affected by the fact that an ultimate eneficiary may be a person exempt from tax. A statutory allowance aid a widow out of the corpus of the estate is not deductible from ross income. As an intestate's real estate does not pass to his admintrator, upon a sale by the heirs, whether before or after settlement f the estate, each heir is taxed individually on any profit derived. ART. 343. Decedent's estate during administration.-The "period of dministration or settlement of the estate" is the period required by he executor or administrator to perform the ordinary duties perining to administration, in particular the collection of assets and he payment of debts and legacies. It is the time actually required or this purpose, whether longer or shorter than the period specified 1 the local statute for the settlement of estates. Where an executor, ho is also named as trustee, fails to obtain his discharge as executor, he period of administration continues up to the time when the duties f administration are complete and he actually assumes his duties s trustee, whether pursuant to an order of the court or not. No axable income is realized from the passage of property to the xecutor or administrator on the death of the decedent, even though may have appreciated in value since the decedent acquired it. In he event of delivery of property in kind to a legatee or distributee, o income is realized. Where, however, the executor sells property f the estate for more than its value at the death of the decedent, he excess is income taxable to the estate. See article 1562.

ART. 344. Incidence of tax on estate or trust.-Liability for payment f the tax attaches to the person of an executor or administrator up to nd after his discharge, where prior to distribution and discharge he ad notice of his tax obligations or failed to exercise due diligence in etermining whether or not such obligations existed. Liability for he tax also follows the estate itself, and when by reason of the disribution of the estate and the discharge of the executor or adminisrator it appears that collection of the tax can not be made from the xecutor or administrator, the legatees or distributees must account or their proportionate share of the tax due and unpaid. The same onsiderations apply to other trusts. Where the tax has been paid on he net income of an estate or trust by the fiduciary, such income is ree from tax when distributed to the beneficiaries.

ART. 345. Estates and trusts taxed to beneficiaries.-In the case of (a)) trust the income of which is distributable periodically, (b) an ordiary guardianship of a minor, and (c) an estate of a decedent before nal settlement as to any income properly paid or credited as such to beneficiary, the income is taxable directly to the beneficiary or beneiciaries. Each beneficiary must include in his return his distribuive share of the net income, even though not yet paid him, but if the axable year on the basis of which he makes his returns fails to coin

cide with the annual accounting period of the estate or trust, then he need only include in his return his distributive share for such accounting period ending within his taxable year. The regulations governing partnerships are generally applicable to such an estate or trust. See articles 321-327.

ART. 346. Credits to trust or beneficiary.—(a) In the case of an estate or trust taxed to the fiduciary it is allowed the same credits against net income as a single person, including a personal exemption of $1,000, but no credit for dependents. (b) In the case of an estate or trust taxed to the beneficiaries each beneficiary is allowed for the purpose of the normal tax, in addition to his individual credits, his proportionate share of such dividends from domestic and resident foreign corporations and of such interest not entirely exempt from tax upon obligations of the United States and bonds of the War Finance Corporation as are received by the estate or trust. Each beneficiary is entitled to but one personal exemption, no matter from how many trusts he may receive income. See section 216 of the stat ute and articles 301-307.

PROFITS OF CORPORATIONS TAXABLE TO STOCKHOLDERS.

SEC. 220. That if any corporation, however created or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its stockholders or members through the medium of permitting its gains and profits to accumulate instead of being divided or distributed, such corporation shall not be subject to the tax imposed by section 230, but the stockholders or members thereof shall be subject to taxation under this title in the same manner as provided in subdivision (e) of section 218 in the case of stockholders of a personal service corporation, except that the tax imposed by Title III shall be deducted from the net income of the corporation before the computation of the proportionate share of each stockholder or member. The fact that any corporation is a mere holding company, or that the gains and profits are permitted to accumulate beyond the reasonable needs of the business, shall be prima facie evidence of a purpose to escape the surtax; but the fact that the gains and profits are in any case permitted to accumulate and become surplus shall not be construed as evidence of a purpose to escape the tax in such case unless the Commissioner certifies that in his opinion such accumulation is unreasonable for the purposes of the business. When requested by the Commissioner, or any collector, every corporation shall forward to him a correct statement of such gains and profits and the names and addresses of the individuals or shareholders who would be entitled to the same if divided or distributed, and of the amounts that would be payable to each.

ART. 351. Profits of corporation taxable to stockholders.-Where a domestic or foreign corporation permits its gains and profits to accumulate for the purpose of preventing the imposition of the surtax upon such income if distributed to its stockholders, it shall not