The domiciliary representative is required to include in the return rendered by him as such domiciliary representative the entire income of the estate. Consequently the only return required to be filed by the ancillary representative is on Form 1041, which shall be filed with the collector for his district and shall show the name and address of the domiciliary representative, the amount of gross income received by the ancilliary representative, and the deductions to be claimed against such income, including any amount of income properly paid or credited by the ancillary representative to any legatee, heir, or other beneficiary. If the ancillary representative for the estate of a nonresident alien is a citizen or resident of the United States, and the domiciliary representative is a nonresident alien, such ancillary representative is required to render the return otherwise required of the domiciliary representative.

SEC. 143. WITHHOLDING OF TAX AT SOURCE. (a) Tax-free covenant bonds.

(1) REQUIREMENT OF WITHHOLDING.—In any case where bonds, mortgages, or deeds of trust, or other similar obligations of a corporation contain a contract or provision by which the obligor agrees to pay any portion of the tax imposed by this title upon the obligee, or to reimburse the obligee for any portion of the tax, or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon, or to retain therefrom under any law of the United States, the obligor shall deduct and withhold a tax equal to 2 per centum of the interest upon such bonds, mortgages, deeds of trust, or other obligations, whether such interest is payable annually or at shorter or longer periods, if payable to an individual, a partnership, or a foreign corporation not engaged in trade or business within the United States and not having any office or place of business therein: Provided, That if the liability assumed by the obligor does not exceed 2 per centum of the interest, then the deduction and withholding shall be at the following rates: (A) 8 per centum in the case of a nonresident alien individual, or of any partnership not engaged in trade or business within the United States and not having any office or place of business therein and composed in whole or in part of nonresident aliens, (B) 13 per centum in the case of such a foreign corporation, and (C) 2 per centum in the case of other individuals and partnerships: Provided further, That if the owners of such obligations are not known to the withholding agent the Commissioner may authorize such deduction and withholding to be at the rate of 2 per centum, or, if the liability assumed by the obligor does not exceed 2 per centum of the interest, then at the rate of 8 per centum.

(2) BENEFIT OF CREDITS AGAINST NET INCOME.-Such deduction and withholding shall not be required in the case of a citizen or resident entitled to receive such interest, if he files with the with

holding agent on or before February 1 a signed notice in writing claiming the benefit of the credits provided in section 25 (c) and (d); nor in the case of a nonresident alien individual if so provided for in regulations prescribed by the Commissioner under section 215.

(3) INCOME OF OBLIGOR AND OBLIGEE.-The obligor shall not be allowed a deduction for the payment of the tax imposed by this title, or any other tax paid pursuant to the tax-free covenant clause, nor shall such tax be included in the gross income of the obligee.

(b) Nonresident aliens.-All persons, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, employers, and all officers and employees of the United States, having the control, receipt, custody, disposal, or payment of interest (except interest on deposits with persons carrying on the banking business paid to persons not engaged in business in the United States and not having an office or place of business therein), rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, of any nonresident alien individual, or of any partnership not engaged in trade or business within the United States and not having any office or place of business therein and composed in whole or in part of nonresident aliens, (other than income received as dividends of the class allowed as a credit by section 25(a)) shall (except in the cases provided for in subsection (a) of this section and except as otherwise provided in regulations prescribed by the Commissioner under section 215) deduct and withhold from such annual or periodical gains, profits, and income a tax equal to 8 per centum thereof: Provided, That the Commissioner may authorize such tax to be deducted and withheld from the interest upon any securities the owners of which are not known to the withholding agent.

(c) Return and payment.-Every person required to deduct and withnold any tax under this section shall make return thereof on or before March 15 of each year and shall on or before June 15, in lieu of the time prescribed in section 56, pay the tax to the official of the United States Government authorized to receive it. Every such person is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the provisions of this section.

(d) Income of recipient.-Income upon which any tax is required to be withheld at the source under this section shall be included in the return of the recipient of such income, but any amount of tax so withheld shall be credited against the amount of income tax as computed in such return.

(e) Tax paid by recipient. If any tax required under this section to be deducted and withheld is paid by the recipient of the income, it shall not be re-collected from the withholding agent; nor in cases in which the tax is so paid shall any penalty be imposed upon or collected from the recipient of the income or the withholding agent for failure to return or pay the same, unless such failure was fraudulent and for the purpose of evading payment.

(f) Refunds and credits.—Where there has been an overpayment of tax under this section any refund or credit made under the provisions of section 322 shall be made to the withholding agent unless the amount of such tax was actually withheld by the withholding agent.

(g) Notwithstanding the provisions of subsections (a) and (b), the deduction and withholding for any period prior to the date of the enactment of this Act shall be at the rates of 12 per centum and 5 per centum in lieu of the rates of 13 per centum and 8 per centum prescribed in such subsections.

ART. 761. Withholding tax at source.-Withholding of a tax of 8 per cent is required in the case of fixed or determinable annual or periodical income paid to a nonresident alien or to a nonresident partnership (see article 1318) composed in whole or in part of nonresident alien individuals, except (1) income from sources without the United States, including interest on deposits with persons carrying on the banking business paid to persons not engaged in business in the United States and not having any office or place of business therein, (2) dividends of a class allowed as a credit by section 25 (a), and (3) interest upon bonds or other obligations of a corporation containing a tax-free covenant. A tax of 8 per cent must be withheld from interest on bonds or securities not containing a tax-free covenant where the owner is unknown to the withholding agent, except where such interest represents income from sources without the United States. For witholding purposes the benefit of the reduced rates of normal tax imposed by section 211 (b) upon the compensation of nonresident aliens who are residents of Canada or Mexico may be procured only by filing claim therefor on Form 1115 as provided in article 1072. (See sections 119, 147, 212, 215, 231, 233, 251 (f), and 1111 (a) (7) and articles 671-684, 811-818, 1041, 1042, 1071, 1072, 1101, 1102, and 1134.)

A tax of 1334 per cent is required to be withheld in the case of fixed or determinable annual or periodical income (with the exceptions stated in the first paragraph of this article) paid to a nonresident foreign corporation (see article 1318). (See also section 144 and article 781.)

For withholding in the case of dividends distributed by a corporation organized under the China Trade Act, 1922, see articles 763 and 1154.

Withholding of a tax of 2 per cent is required in the case of interest paid to an individual or a partnership, whether resident or nonresident (see article 1318), or to a nonresident foreign corporation upon bonds or other obligations of domestic corporations or resident foreign corporations (see article 1318) containing a tax-free covenant, except that if the liability assumed by the obligor in connection with

such a covenant does not exceed 2 per cent of the interest, withholding is required at the rate of 8 per cent in the case of a nonresident alien or a nonresident partnership composed in whole or in part of nonresident alien individuals, and at the rate of 1334 per cent in the case of a nonresident foreign corporation. However, withholding is not required in the case of interest payments on such bonds or obligations of a domestic or resident foreign corporation qualifying under section 119 (a) (1) (B), if made to a nonresident alien, to a partnership composed in whole of nonresident aliens, or to a nonresident foreign corporation. A nonresident foreign corporation having a fiscal or paying agent in the United States is required to withhold a tax of 2 per cent upon the interest on its tax-free covenant bonds paid to a citizen or resident of the United States or a partnership any member of which is a citizen or resident. If the owner of bonds or other obligations of a corporation containing a tax-free covenant is unknown to the withholding agent a tax of 2 per cent must be withheld from interest thereon unless the liability assumed by the obligor does not exceed 2 per cent of the interest, in which case withholding must be at the rate of 8 per cent.

Withholding of the tax in the case of income paid prior to the enactment of the Revenue Act of 1932 (5 p. m., eastern standard time, June 6, 1932) shall be at the rates of 5 per cent and 12 per cent in lieu of the rates of 8 per cent and 1334 per cent provided in this article.

Bonds issued under a trust deed containing a tax-free covenant are treated as if they contained such a covenant. Where neither the bonds nor the trust deeds given by the obligor to secure them contain a tax-free covenant, supplemental agreements executed by the obligor corporation and the trustee containing a tax-free covenant which modify the original trust deeds to that extent are of the same effect from the date of their proper execution as if they had been part of the original deeds of trust, and the bonds from such date are subject to the provisions of section 143 (a), provided appropriate authority exists for the modification of the trust deeds in this manner. The authority must be contained in the original trust deeds or actually secured from the bondholders.

A debtor corporation having an issue of bonds or other similar obligations which appoints a duly authorized agent to act in its behalf under the withholding provisions of the Act, is required to file notice of such appointment with the Commissioner of Internal Revenue, Sorting Section, Washington, D. C., giving the name and address of the agent.

Where in connection with the sale of its property, payment of the bonds or other obligations of a corporation is assumed by the assignee, such assignee, whether an individual, partnership, or corporation, must deduct and withhold such taxes as would be required to be withheld by the assignor had no such sale or transfer been made.

A fiduciary is not required to withhold tax and render a withholding return with respect to income of a nonresident alien beneficiary, as a complete return thereof will be included in Form 1040 B. (See articles 745 and 768.)

In the case of corporate bonds or other obligations containing a tax-free covenant, the corporation paying a Federal tax, or any part of it, for some one else pursuant to its agreement is not entitled to deduct such payment from gross income on any ground, nor shall the tax so paid be included in the gross income of the bondholder. The amount of the tax may nevertheless be claimed by the bondholder as a credit against the total amount of tax due in accordance with section 143 (d). In the case, however, of corporate bonds or obligations containing an appropriate tax-free covenant, the corporation paying for some one else, pursuant to its agreement, a State tax or any tax other than a Federal tax may deduct such payment as interest paid on indebtedness.

ART. 762. Fixed or determinable annual or periodical income.—Only fixed or determinable annual or periodical income is subject to withholding. The Act specifically includes in such income, interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, and emoluments. But other kinds of income are included, as, for instance, royalties.

Income is fixed when it is to be paid in amounts definitely predetermined. Income is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained. The income need not be paid annually if it is paid periodically; that is to say, from time to time, whether or not at regular intervals. That the length of time during which the payments are to be made may be increased or diminished in accordance with some one's will or with the happening of an event does not make the payments any the less determinable or periodical. A salesman working by the month for a commission on sales which is paid or credited monthly receives. determinable periodical income. The income derived from the sale in the United States of property, whether real or personal, is not fixed or determinable annual or periodical income.

ART. 763. Exemption from withholding.-Withholding from interest on corporate bonds or other obligations containing a tax-free