extension should be made to the Commissioner through the collector of internal revenue for the district in which the taxpayer's return was filed, who will make proper record thereof and forward it immediately to the Commissioner. The application should set forth under oath the specific reasons for desiring an extension and should clearly indicate what hardship, if any, would result if the extension were not granted. The amount for which the extension is desired should also be stated. The Commissioner will not consider an application for an extension of time unless such application is made on or before the due date of the tax or installment thereof for which the extension is desired. As a condition to the granting of such an extension, the Commissioner may require the taxpayer to furnish a bond on Form 1130 in an amount not exceeding double the amount of the tax or installment thereof. If a bond is required it must be filed with the collector within 10 days after notification by the Commissioner that such bond is required. It shall be conditioned upon the payment of the tax and interest assessed in connection therewith in accordance with the terms of the extension granted, and shall be executed by a surety company holding a certificate of authority from the Secretary of the Treasury as an acceptable surety on Federal bonds, and shall be subject to the approval of the Commissioner. In lieu of such a bond, the taxpayer may file a bond secured by deposit of Liberty bonds or other bonds or notes of the United States equal in their total par value to an amount not exceeding double the amount of the tax or installment thereof. A request by the taxpayer for an extension of time for payment of one installment does not operate to procure an extension of time for payment of subsequent installments. Nor does an extension of time for filing a return operate to extend the time for payment of the tax or any part thereof, unless so specified in the extension. If an extension of time for payment of the tax or any installment is granted, the amount, time for payment of which is so extended, shall be paid on or before the expiration of the period of the extension, together with interest at the rate of 6 per cent per annum on such amount from the date when the payment should have been made if no extension had been granted until the expiration of the period of the extension. (See section 295.)

ART. 433. When fractional part of cent may be disregarded. In the payment of taxes a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent. Fractional parts of a cent should not be disregarded in the computation of taxes.

ART. 434. Receipts for tax payments. Upon request a collector will give a receipt for each tax payment. In the case of payments made

by check or money order the canceled check or the money order receipt is usually a sufficient receipt. In the case of payments in cash, however, the taxpayer should in every instance require and the collector should furnish a receipt.

SEC. 57. EXAMINATION OF RETURN AND DETERMINATION OF TAX.

As soon as practicable after the return is filed the Commissioner shall examine it and shall determine the correct amount of the tax.

ART. 451. Examination of return and determination of tax by the Commissioner. As soon as practicable after returns are filed, they will be examined and the correct amount of the tax determined under such procedure as may be prescribed from time to time by the Commissioner. (See sections 57 and 272 and article 1171.)

SEC. 58. ADDITIONS TO TAX AND PENALTIES.

(a) For additions to the tax in case of negligence or fraud in the nonpayment of tax or failure to file return therefor, see Supplement M. (b) For criminal penalties for nonpayment of tax or failure to file return therefor, see section 145.

SEC. 59. ADMINISTRATIVE PROCEEDINGS.

For administrative proceedings in respect of the nonpayment or overpayment of a tax imposed by this title, see as follows:

(a) Supplement L, relating to assessment and collection of deficiencies.

(b) Supplement M, relating to interest and additions to tax. (c) Supplement N, relating to claims against transferees and fiduciaries.

(d) Supplement O, relating to overpayments.

PART VI-MISCELLANEOUS PROVISIONS

SEC. 61. LAWS MADE APPLICABLE.

All administrative, special, or stamp provisions of law, including the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this title.

SEC. 62. RULES AND REGULATIONS.

The Commissioner, with the approval of the Secretary, shall prescribe and publish all needful rules and regulations for the enforcement of this title.

SEC. 63. TAXES IN LIEU OF TAXES UNDER 1928 ACT.

The taxes imposed by this title shall be in lieu of the corresponding taxes imposed by the sections of the Revenue Act of 1928 bearing the same numbers.

SEC. 64. SHORT TITLE.

This title may be cited as the "Income Tax Act of 1932."

SEC. 65. EFFECTIVE DATE OF TITLE.

This title shall take effect as of January 1, 1932, except that sections 145 and 150, and this section, shall take effect on the enactment of this Act.

DIVISION III.-SUPPLEMENTAL PROVISIONS

SUBTITLE C-SUPPLEMENTAL PROVISIONS

SUPPLEMENT A-RATES OF TAX

[Supplementary to Subtitle B, Part I]

SEC. 101. CAPITAL NET GAINS AND LOSSES.

(a) Tax in case of capital net gain. In the case of any taxpayer, other than a corporation, who for any taxable year derives a capital net gain (as hereinafter defined in this section), there shall, at the election of the taxpayer, be levied, collected, and paid, in lieu of all other taxes imposed by this title, a tax determined as follows: A partial tax shall first be computed upon the basis of the ordinary net income at the rates and in the manner as if this section had not been enacted and the total tax shall be this amount plus 122 per centum of the capital net gain.

(b) Tax in case of capital net loss.-In the case of any taxpayer, other than a corporation, who for any taxable year sustains a capital net loss (as hereinafter defined in this section), there shall be levied, collected, and paid, in lieu of all other taxes imposed by this title, a tax determined as follows: a partial tax shall first be computed upon the basis of the ordinary net income at the rates and in the manner as if this section had not been enacted, and the total tax shall be this amount minus 121⁄2 per centum of the capital net loss; but in no case shall the tax of a taxpayer who has sustained a capital net loss be less than the tax computed without regard to the provisions of this section.

(c) Definitions. For the purposes of this title

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(1) Capital gain" means taxable gain from the sale or exchange of capital assets consummated after December 31, 1921. (2) "Capital loss" means deductible loss resulting from the sale or exchange of capital assets.

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(3) Capital deductions means such deductions as are allowed by section 23 for the purpose of computing net income, and are properly allocable to or chargeable against capital assets sold or exchanged during the taxable year.

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(4) Ordinary deductions" means the deductions allowed by section 23 other than capital losses and capital deductions.

(5) "Capital net gain means the excess of the total amount of capital gain over the sum of (A) the capital deductions and capital losses, plus (B) the amount, if any, by which the ordinary deductions exceed the gross income computed without including capital gains.

(6) "Capital net loss" means the excess of the sum of the capital lcsses plus the capital deductions over the total amount of capital gain.

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(7) "Ordinary net income" means the net income, computed in accordance with the provisions of this title, after excluding all items of capital gain, capital loss, and capital deductions.

(8) "Capital assets" means property held by the taxpayer for more than two years (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale in the course of his trade or business. For the purposes of this definition

(A) In determining the period for which the taxpayer has held property received on an exchange there shall be included the period for which he held the property exchanged, if under the provisions of section 113, the property received has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as the property exchanged.

(B) In determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person, if under the provisions of section 113, such property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of such other person.

(C) In determining the period for which the taxpayer has held stock or securities received upon a distribution where no gain is recognized to the distributee under the provisions of section 112 (g) of this Act or the Revenue Act of 1928, there shall be included the period for which he held the stock or securities in the distributing corporation prior to the receipt of the stock or securities upon such distribution.

(D) In determining the period for which the taxpayer has held stock or securities the acquisition of which (or the contract or option to acquire which) resulted in the nondeductibility (under section 118 of this Act or the Revenue Act of 1928, relating to wash sales) of the loss from the sale or other disposition of substantially identical stock or securities, there shall be included the period for which he held the stock or securities the loss from the sale or other disposition of which was not deductible.

(d) Collection and payment of tax.-The total tax determined under subsection (a) or (b) shall be collected and paid in the same manner, at the same time, and subject to the same provisions of law, including penalties, as other taxes under this title.

ART. 501. Definition and illustration of capital net gain.-Section 101, which applies to sales and exchanges of capital assets consummated after December 31, 1921, provides that any taxpayer other than a corporation may, if he so desires, state separately in his return his net gain on sales or exchanges of capital assets, and pay on such capital net gain (as defined and limited in the section) a tax of 121⁄2

per cent of the capital net gain in lieu of the tax he would otherwise pay on such income under sections 11, 12, 102, and 211. The tax upon his net income from other sources, termed "ordinary net income,” is to be computed at the rates and in the manner provided in sections 11, 12, 102, and 211. The total tax will be the sum of the tax upon the ordinary net income plus 122 per cent of the capital net gain.

The term "capital assets" is defined to mean property held by the taxpayer for more than two years, whether or not connected with his trade or business, but not including stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale in the course of his trade or business. See articles 101-108 with reference to inventories. A dealer in securities is not entitled to the benefits of section 101 with reference to gain from the sale of securities. The specific property sold or exchanged must in general have been held for more than two years. However, in determining the period for which the taxpayer has held stock or securities received upon a distribution in connection with a reorganization where no gain is recognized to the distributee under the provisions of section 112 (g) of the Revenue Act of 1928 and section 112 (g) of the Revenue Act of 1932 (see article 576), there shall be included the period for which the taxpayer held the stock or securities in the distributing corporation prior to the receipt of the stock or securities upon such distribution. If the taxpayer has held for more than two years stock upon which a stock dividend has been declared, both the original and dividend shares are considered to be capital assets. If under the provisions of section 113 property received in an exchange has for the purpose of determining gain or loss the same basis in whole or in part in the taxpayer's hands as the property exchanged therefor, the property received in exchange is considered to be capital assets if the total period during which such property and the original property have been held is more than two years. If property is acquired from any person, and under the provisions of section 113 has the same basis in whole or in part for the purpose of determining gain or loss as it would have in the hands of the person from whom acquired, there shall be included in determining the period for which the taxpayer has held such property the period for which it was held by such person. For instance, in the case of property acquired after December 31, 1920, either by gift or by transfer in trust, the period for which the property was held by the donor shall be added to the period for which the property was held by the donee in determining whether the property was held for more than