NEW YORK STATE INCOME TAX ON INDIVIDUALS For a number of years, the state of New York has depended upon a very unsatisfactory personal property tax for both state and local purposes. This scheme of taxation has been very unpopular, and justly so, with the taxpayers. Various commissions and committees' which have investigated the situation have recommended that the system be abolished and a general income tax substituted. The conclusions set forth in the report of the Joint Legislative Committee on Taxation, filed February 14, 1916, are of interest in regard to both the personal income tax and the franchise tax. The legislature submitted to the committee the question "How can the state most equitably and effectually reach all property which should be subjected to taxation and avoid conflict and duplication of taxation on the same property?" Without passing upon the broad questions of public policy involved in the adoption of a new tax system, which questions should more properly be decided by the legislature as a whole, this committee, in answer to the specific question submitted to it, desires to state that all the evidence presented and all our investigations, the results of which are presented in full in this report, tend to show that the end sought for will be accomplished best by: (1) the abolition of the present tax on personal property; (2) the withdrawal of general business corporations from the provisions of section 182 of the tax law; and (3) the imposition of an income tax on individuals and general business corporations, including manufacturing corporations. On June 14, 1917, a general franchise tax law (Emerson Law) was passed, imposing a tax on manufacturing and mercantile corporations. The tax was computed upon the basis of the net income reported to the federal government and was at the rate of 3 per cent of such income. In 1919 this law 'Final report of the Committee on Taxation of the City of New York (New York, 1916), page 64 et seq. Report of the Joint Legislative Committee on Taxation (in Senate, February 14, 1916), page 206 et seq. was amended to make it more general in its scope and to increase the rate of tax to 42 per cent for the taxable year. It was not until 1919 that the legislature passed the personal income tax act. The law was approved May 14, 1919. and was made effective "for the calendar year nineteen hundred and nineteen, or for any taxable year ending during the year nineteen hundred and nineteen." When a taxpayer had · a taxable year ending in 1919, the tax applied only to the net income arising after January 1, 1919. The author does not discuss herein section 352 of the law which purports to exempt income-paying property from the personal property tax. The city of New York is placing an unreasonable interpretation on this section of the law. The legality of its position is questionable and it is expected that the legislature will amend the law and clarify the situation. The law very closely follows the provisions of the federal Revenue Act of 1918. It is evident that the federal act was used as a model. In effect, the present provisions of the federal act relating to individuals have been revised to accord with the taxing powers of a particular state. Many of the provisions will be found to agree verbatim with those of the federal law and it may be stated, as a general rule, that no change appears in the phraseology of the law except where it was necessary to bring the taxable income within the jurisdiction of the state. Knowing that it was the intention of the legislature so to follow the federal law, it is natural that the forms of returns and the regulations which have been issued recently should be patterned after those which have been issued by the Treasury. The court and Treasury decisions that have been rendered in regard to cases under the federal law will act as valuable precedents. The object of this chapter is to explain in a general way the administrative provisions of the act, and to indicate the 'Section 351. differences between the state and federal laws, so that advantage may be taken of the points of similarity. Rulings and Regulations.—In preparing this chapter The A. B. C. of the Personal Income Tar (Bulletin No. 1), issued May 29, 1919, and the Comptroller's Regulations, issued in January, 1920, have been used. In addition to these sources, the various rulings, issued from time to time by the comptroller, have also been considered. Income and Deductions The differences between the New York law and the federal law relating to income and deductions may best be shown by illustrations which follow. The two illustrations have been designed with the idea of bringing out all possible differences and might appear incongruous if a particular taxpayer were in mind. Resident taxpayer.— FEDERAL ILLUSTRATION COMPARING RETURN ΤΟ *The comptroller has held that when services were rendered prior to January 1, 1919, and collected subsequently the amount collected is not taxable. See ruling dated December 17, 1919, holding that renewal commissions earned by an insurance agent prior to January 1, 1919, are not taxable income when collected in 1919 when the commissions were payable without further effort on the part of the agent. **The federal law provided for such a tax, but the Treasury ruled that it has no authority to collect the tax. (See page 50.) LAW. Section 359. "The term 'gross income': 2. Does not include the following items which shall be exempt from taxation under this article: "g. Income received by any officer of a religious denomination or by any institution, or trust, for moral or mental improvement, religious, bible, tract, charitable, benevolent, fraternal, missionary, hospital, infirmary, educational, scientific, literary, library, patriotic, historical or cemetery purposes, or for the enforcement of laws relating to children or animals, or foi two or more of such purposes, if such income be used exclusively for carrying out one or more of such purposes; but nothing herein shall be construed to exempt the fees, stipends, personal earnings or other private income of such officer or trustee." Profit from sale of land, buildings, stocks, etc.: Stock acquired 1910-Market Sold in 1919 for.... $2,600.00 Under the state law, the date from which to measure gain or loss in such transactions is January 1, 1919, instead of March 1, 1913. REGULATION. "For the purpose of ascertaining the gain or loss from the sale, gift, exchange or other disposition of property the basis is (a) its fair market price or value as of January 1, 1919, if acquired prior thereto, or (b) if acquired on or after that date, its cost or its approved inventory value. In both cases proper adjustment must be made for any depreciation or depletion sustained. . . (Art. 91.) Gifts GIFT TO WIFE OCTOBER 1, 1919 Stock cost $1,000 in 1910; fair market value at date of gift was $15,000; fair mar |