FIRST PERIOD

RECEIVED ON U. S. LIBERTY BONDS, VICTORY NOTES AND CERTIFICATES.

SECOND PERIOD

xx

xx

Interest Received in First Six Months, as shown above.
Interest Received in Second Six Months, as shown above

Interest Received on 34% First Liberty Loan Bonds (Dated June 15, 1917, Redemption and Maturity 1932-1947, Interest Dates June 15 and December 15) Not Taxable-From Table II.

Interest Received on 34% Victory Notes (Dated May 20, 1919, Redeemable 1922, Maturity 1923, Interest Dates Dec. 15, 1919 and June 15 and December 15 thereafter) Not Taxable-From Table II

Interest Received on 44% Victory Notes (Dated May 20, 1919, Redeemable 1922, Maturity 1923, Interest Dates Dec. 15, 1919, and June 15 and December 15 thereafter) No Exemption-From Table II

Totals for Tax Return (interest received should agree with Item (h) Summary, Table II)..

(k) This amount is not necessarily taxable, but when combined with other items of taxable income, less allowable deductions, it may be subject to surtax and excess profita and war profits taxes.

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TABLE !!

SUGGESTED FORM FOR TABULATION OF INTEREST RECEIVED ON THE SEVERAL ISSUES OF LIBERTY BONDS, VICTORY NOTES AND CERTIFICATES

Analyse the hooks and records for interest on the issues agrned below is Com 1 to 13 inchaive and belenta of principal and interest in the spaces provided shares. Note special directions which fol-
low, according as the books are kept on the cash or accrual basis. If interest received by the taxpayer on bonds bought and carried for employer was paid to employees, such interest is not income of the taxpayer and
should not be included in the calculation of tande interest
Cash Basia

Eater in the column for the inaus on which the interest in reczsved, amounts of coupons dated January to Juan and July to December, whether deposited for collection or not, also accrued interest, feceived upon much
coupons attached to bonds sold. If any compons me but not collected have not been entered on the books, enter the amounts of such coupons both in Colums 13 and in the column for the ear on which the interest is payable.
Eater accrand interest paid an bonds purchased in red, unmediately below the iteen of interest received which the interest paid reduces, if interest was received or because dae un taxable year, if not, enter amount paid
in Colun 14, if charged to Profit and Loss.
If accrued interest paid and not collected in prior year was charged to Profit and Loss, such interest should be entered in red in the column for the appropriate meat imodiately below the Rea of interest recived
which the interest paid reduces, and in Colama 16 al

Enter in Coleman 16 any interest des in prior year but credited in the amounts of the taxable year Under the regulations of the Treasury Department interest upon bonds is income of the year in which it becomes
dat, regardless of the year in which collected.

If no interest, or only a negligible amount, was received for loss than the full term of six months, add amounts of principal and of interest in each half year for each wese, figure ratio (carned to hundredths of a percent) of total principal to total interest and enter in colaan hended ratio. If more than negligible amount of interest for less than full term was morived, follow directions m paragraph 14 of instructions on page 2.

What constitutes "the date of his tax return"?-The $45,ooo exemption is made conditional by the following language of the Supplement to Second Liberty Bond Act of September 24, 1918:

Provided, however, That no owner of such bonds shall be entitled to such exemption in respect to the interest on an aggregate principal amount of such bonds exceeding one and one-half times the principal amount of bonds of the Fourth Liberty Loan originally subscribed for by such owner and still owned by him at the date of his tax return;

The $20,000 exemption under the Victory Liberty Loan Act of March 3, 1919, is conditioned as follows:

Provided, That no owner of such bonds shall be entitled to such exemption in respect to the interest on an aggregate principal amount of such bonds exceeding three times the principal amount of notes of the Victory Liberty Loan originally subscribed for by such owner and still owned by him at the date of his tax return.

What constitutes "the date of his tax return?" This question becomes of importance because the bonds described above must still be owned by the taxpayer "at the date of his tax return" in order to obtain the exemptions of $45,000 and $20,000, respectively.

RULING. Reference is made to your letter of July 24, 1919, regarding the exemption on interest from a principal amount of certain issues of Liberty bonds not in excess of $45,000, contingent upon the amount of bonds of the Fourth Liberty Loan originally subscribed for and held by the taxpayer at the date of his return.

You inquire whether or not a taxpayer who receives an extension of time in which to make his return and who sells his Fourth Liberty Loan bonds after the general due date of the return, but prior to the extended due date, is entitled to the contingent exemption on the prior loans.

In reply you are advised that the contingent exemption provided by the amendment to the Second Liberty Loan Act is depende t upon the ownership of bonds of the Fourth Liberty Loan on the date the taxpayer actually files his return and not the original due date of such return. (Letter to Prentice-Hall, signed by C. R. Trowbridge, Acting Head of Division.)

In the ruling quoted above, it is to be noted that if the date of filing the return is to be considered as the date of the return, this date in case of extensions of time is the date on which the taxpayer "actually files his return."

In another ruling, the Department held:

RULING. If the individual in question held at the date of filing his return for 1918 the $30,000 Fourth Liberty Loan 44 per cent bonds originally subscribed for by him, he will be entitled to exemption from surtax upon the interest received on one and onehalf (1) times this amount, or $45,000, which may be applied against his holdings of First Liberty Loan 31⁄2 per cent bonds converted into 44 per cent bonds, and the Third Liberty Loan 44 per cent bonds. . . . . (Letter to The Corporation Trust Company, signed by Commissioner Daniel C. Roper, and dated March 20, 1919.)

The Treasury in the rulings quoted above holds that the "date of his tax return" is the date of filing, but the author does not agree that Congress intended to fix such a flexible date. It is more logical to assume that Congress intended that the "date of his tax return" is the last day of the fiscal period covered by the return, which in the case of the calendar year 1919 would be December 31, 1919.

Exemptions not limited as to time.-It will be noted that the partial exemptions which are unlimited as to the time they remain in force are only of interest on $5,000 of the Second, Third and Fourth Liberty Loans and on $5,000 of bonds of the War Finance Corporation. These two exemptions are entirely separate and a single taxpayer may have the benefit of both.

$35,000 unconditionally exempt in 1919.-For the whole of the calendar year 1919 and thereafter until five years after the termination of the war with Germany any taxpayer who holds $35,000, or less of any of the Liberty Loan issues, except the 434 Victory notes, is wholly exempt from tax on

"The $5,000 exemption applies also to certificates of indebtedness and War Savings and Treasury Savings certificates.