a fiduciary, and in such case the return shall be made as if by the corporation itself. . . . . A receiver in charge of the business of a partnership shall render a return on form 1065 (revised). A receiver of the rents and profits appointed to hold and operate a mortgaged parcel of real estate, but not in control of all the property or business of the mortgagor, and a receiver in partition proceedings, are not required to render returns of income. In general, statutory receivers and common law receivers of all the property or business of an individual or corporation must make returns. . . . (Art. 424.)

Receivers, trustecs in dissolution, trustees in bankruptcy, and assignees, operating the property or business of corporations, must make returns of income for such corporations on form 1120, covering each year or part of a year during which they are in control. Notwithstanding that the powers and functions of a corporation are suspended and that the property and business are for the time being in the custody of the receiver, trustee or assignee, subject to the order of the court, such receiver, trustee or assignee stands in the place of the corporate officers and is required to perform all the duties and assume all the liabilities which would devolve upon the officers of the corporation were they in control. A receiver in charge of only part of the property of a corporation, however, as a receiver in mortgage foreclosure proceedings involving merely a small portion of its property, need not make a return of income. (Art. 622.)

Return for deceased owner of estate.-At the time when an executor or administrator enters upon his duties, he is required to make a return for the decedent up to the date of decedent's death. This is usually for the period from January 1 of the year in which the death occurred, but may be also for the preceding year, as in the case of a man dying in January or February before he had filed his annual return then due. The income tax due from the decedent is a debt against the estate in the hands of the executor or administrator, and the executor or administrator is required to file the return for the decedent in order that the amount due to the government from the decedent's estate may be determined and paid.

This is not an unreasonable requirement and has been upheld by the courts in the following case:

DECISION. Anthony N. Brady died July 22, 1913, and his executors, in accordance with the requirement of the Commissioner of

Internal Revenue, made a return of the income received by him between March 1, when the act went into effect, and July 22, 1913, when he died. The Commissioner assessed a tax of $61,654.72.

The plaintiffs contend that the tax is against persons who are citizens or residents of the United States.

The government contends that the tax is upon the property and not upon the persons, which was the view taken by the trial judge. The plaintiffs argue that as Brady, having died July 22, was neither a citizen nor a resident of the United States October 3, 1913, at the time the act was passed, its language does not authorize collection of any tax upon income received by him. On the other hand, the government says that as the tax is upon the property, it makes no difference whether Brady was living or dead at that time.

In our opinion the tax is against citizens and residents of the United States personally. They are chargeable in respect to income received by them. The statement that the tax is upon this income does not create an obligation in rem. It is only a way of saying that the owner is taxable with reference to the income. Taxable persons are spoken of throughout the act.

The sixteenth amendment, by virtue of which the statute was enacted, was ratified February 28, 1913, and the Supreme Court has for that reason held that Congress had power to make it retroactive to March 1, 1913. (Brushaber v. Union Pacific R. R. Co., 240 U. S. I, 20.)

The effect of making the act retroactive is, in our opinion, to apply it to Brady exactly as if it had been enacted March 1, 1913, and as, by reason of his death, he cannot make a return, his executors, into whose hands his estate has come, must do so. (Nicholas F. Brady et al., Executors, v. Anderson, Collector, United States Circuit Court of Appeals, for the second circuit, 240 Fed. 665; 244 U. S. 654, February 8, 1917.) (Published as T. D. 2494, June 2, 1917.)

In filing a return the executor or administrator reports all items in the manner which the decedent himself would have followed. He may claim, on behalf of the decedent, an exemption of $1,000 or $2,000, no matter how small a portion of the year is covered by the return." And he may again claim the full exemption of $1,000 when he later reports the income of the estate for the remaining portion of a year. If the net

"[Former Procedure] The specific exemption allowed to estates under the acts of 1913 and 1916 was $3.000. In 1917, two specific exemptions, one of $3,000 and one of $1,000, were permitted. Under all acts if the income of the estate or the amount payable to any beneficiary was less than the exemption, no return was required from the fiduciary.

income of the decedent for the part of the year in which he lived is not $1,000 or over, the executor or administrator need not make any return for him, nor is he required to account for such unreported income when he reports for the estate and its beneficiaries. Such income is entirely ignored so far as the income tax is concerned.

REGULATIONS. As soon as possible after his appointment and qualification, without waiting for the close of the taxable year, an executor or administrator shall file a return of income for the decedent. Upon the completion of the administration of an estate and final accounting an executor or administrator shall file a return of income of the estate for the portion of the taxable year in which the administration was closed, attaching to the return a certified copy of the order for his discharge. An ancillary administrator need make no separate return if the domiciliary administrator includes in his return the entire income of the estate. Similarly, upon the termination of any other trust the trustee shall make a return without waiting for the close of the taxable year. In any such case the requirements with respect to the payment of the tax are the same as if the return were for a full taxable year closing at the end of the month during which the decedent dies or the estate is settled or the trust is terminated, as the case may be. The payment of the tax before the end of the taxable year in such circumstances does not relieve the taxpayer from liability for any additional tax which might subsequently be imposed upon income of the taxable year. (Art. 442.)

If an individual dies during the taxable year, his executor or administrator in making a return for him is entitled to claim his full personal exemption according to his status at the time of his death. . . . . If a husband or wife so dies and the joint personal exemption is used by the executor or administrator in making a return for the decedent, an undiminished personal exemption according to the status of the survivor at the end of the taxable year may be claimed in the survivor's return. If a taxpayer makes a return for a period other than a taxable year, the last day of such period shall be treated as the last day of the taxable year for the purpose of this article. . . .. (Art. 305.)

Withholding a tax.18-The duties of a fiduciary as withholding agent are twofold. On payments to non-resident

"[Former Procedure] The previous provisions of law, requiring fiduciaries to withhold the tax at the source, were repealed on October 3, 1917, except as they applied to non-resident aliens,

aliens of rent, salary, interest on debts of the estate and of other fixed or determinable income, he acts in the capacity of a withholding agent and, like any other payer of similar income, he is authorized to accept the same ownership certificates and is required to file the same annual list returns. For a description of his duties in this capacity, see pages 108, 224, 228, 235, 814, dealing with the collection of the tax at the source on miscellaneous income payable to non-resident aliens.

In his capacity as a fiduciary, when he pays the net income or profits of the estate to the non-resident alien beneficiaries he proceeds as indicated on page 838 of Chapter XXXIII, “NonResident Aliens." It is not his duty to deduct the tax on payments to citizens or resident beneficiaries. When the fiduciary pays over any part of the principal or corpus of the estate no tax is due. The tax is deducted only on income payments. Property coming to the estate by gift, bequest, devise or descent may be distributed among the beneficiaries without regard to the tax, since such income is expressly declared to be exempt from the law. Gains or income from such property, however, are taxable.

On payments to non-resident aliens the tax should be deducted regardless of the amount paid, unless a claim for exemption is filed in accordance with section 217. See page 815 for the procedure to be followed by beneficiaries.

REGULATION. When fiduciaries have the control and custody of more than one estate or trust, and such estates and trusts have as assets bonds of corporations and other securities, a certificate of ownership shall be executed for each estate or trust, regardless of the fact that the bonds are of the same issue. When bonds are owned jointly by several persons, a separate ownership certificate must be executed in behalf of each of the owners. (Art. 374.)

Information at the source.-In accordance with the provisions of section 256, fiduciaries are required to make returns of information regarding all payments of interest, rent, salaries, wages, premiums, annuities, compensation, remunerations, emoluments or other fixed or determinable gains, profits

and income (other than payments described in sections 254 and 255) of $1,000 or more in any taxable year.'

19

This obligation is reasonable and can be readily fulfilled by fiduciaries. It is vastly simpler than the cumbersome and annoying system of deduction at the source.

It is incumbent upon fiduciaries not only to furnish the information required but also to assist as far as possible in the securing of returns from beneficiaries, so that no tax shall be lost through the abolition of deduction at the source.

Return forms.-The forms used at present are as follows:

Copies of the above forms will be found in the Appendix.

Returns for beneficiaries.-As a general rule, a fiduciary completes his duty as to reporting when he files form 1041. The beneficiary then files on his own behalf form 1040, including therein, among other items, the amount he has received from the estate. It should be borne in mind that, although the fiduciary may not have been required to file form 1041, because the payment to each beneficiary was less than $1,000, the beneficiary must nevertheless include the amount he receives from the estate, no matter how small, in his own return.

The fiduciary may, of course, file form 1040, for his beneficiary if he has knowledge of all the income of the beneficiary from the estate and other sources, provided he has been appointed as agent or attorney-in-tact by the beneficiary for the purpose. In doing In doing so he acts in an entirely separate capacity, performs no duty as a fiduciary and is not thereby relieved from any responsibility as a fiduciary.

19 See Chapter IX, "Information at the Source," for full text of this section.