State Of New York et al v. Mnuchin et al

Filing 47

DECLARATION of Owen T. Conroy in Support re: 44 CROSS MOTION for Summary Judgment .. Document filed by State Of Connecticut, State Of New York, State of Maryland, State of New Jersey. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30, # 31 Exhibit 31, # 32 Exhibit 32, # 33 Exhibit 33, # 34 Exhibit 34, # 35 Exhibit 35, # 36 Exhibit 36, # 37 Exhibit 37, # 38 Exhibit 38, # 39 Exhibit 39, # 40 Exhibit 40, # 41 Exhibit 41, # 42 Exhibit 42, # 43 Exhibit 43, # 44 Exhibit 44, # 45 Exhibit 45, # 46 Exhibit 46, # 47 Exhibit 47, # 48 Exhibit 48, # 49 Exhibit 49, # 50 Exhibit 50, # 51 Exhibit 51, # 52 Exhibit 52, # 53 Exhibit 53, # 54 Exhibit 54, # 55 Exhibit 55, # 56 Exhibit 56, # 57 Exhibit 57, # 58 Exhibit 58, # 59 Exhibit 59, # 60 Exhibit 60, # 61 Exhibit 61, # 62 Exhibit 62, # 63 Exhibit 63, # 64 Exhibit 64, # 65 Exhibit 65, # 66 Exhibit 66, # 67 Exhibit 67, # 68 Exhibit 68, # 69 Exhibit 69, # 70 Exhibit 70, # 71 Exhibit 71, # 72 Exhibit 72, # 73 Exhibit 73, # 74 Exhibit 74, # 75 Exhibit 75, # 76 Exhibit 76, # 77 Exhibit 77, # 78 Exhibit 78, # 79 Exhibit 79, # 80 Exhibit 80, # 81 Exhibit 81, # 82 Exhibit 82, # 83 Exhibit 83, # 84 Exhibit 84, # 85 Exhibit 85, # 86 Exhibit 86, # 87 Exhibit 87, # 88 Exhibit 88, # 89 Exhibit 89, # 90 Exhibit 90, # 91 Exhibit 91, # 92 Exhibit 92, # 93 Exhibit 93, # 94 Exhibit 94, # 95 Exhibit 95, # 96 Exhibit 96, # 97 Exhibit 97, # 98 Exhibit 98, # 99 Exhibit 99, # 100 Exhibit 100, # 101 Exhibit 101, # 102 Exhibit 102, # 103 Exhibit 103, # 104 Exhibit 104, # 105 Exhibit 105, # 106 Exhibit 106)(Conroy, Owen)

Exhibit 33

"wim

26

SIXTY-NINTH .CONGRESS.

INCOME TAX.

Receipts

of

ship-

owners' mutual associatfons.

Special diviioends to
Chinese reside~ ts from
China trade -orporations

Receipts by citizen,

a nonresident, from

sources outside United
States,

Nonresident aliens.
Gross income of, only
from United States
sources.
Deductions allowed.
Items specified.
Business expenses.

cTravel,
eluded.

etc., ir

Intent on debts.
Rxoption.

Tamespaid.
Exceptions.

Accrual of

et, tao&..

estate,

asness loses.
Losws not connected
with trade or business.

SESS. 1.

CH. 27. 1926.

(12) The receipts of shipowners' mutual protection and indemnity
associations, not organized for profit, and no part of the net earnings of which inures to the benefit of nny private shareholder; but
such
-n
corations shall be subject as other persons to the tax upon
their , income from interest, dividends, and rents;
(13) in the case of a person, amounts distributed as dividends to
or for Nig'benefit by a corporation organized under the China Trade
Act, 1922 'if' at the time of such distribution, he is a resident of
China,' and to equitable right to the income of the shares of stock
of the corporation is in good faith vested in him;
(14)' In the se off an individual citizen of the United States, a
bona fide nonresident of the United States for more than six months
during the taxable year, amounts received from sources without the
United States if guch amounts constitute earned income as defined
in section 209; but such individual shall not be allowed as a deduction
from his gross income any deductions properly allocable to or chargeable against amounts excluded from gross income under this paragraph.
(c) In the case of a nonresident alien individual, gross income
means only the gross income from sources within the United States,
determined under the provisions of section 217.
DEDUCTIONS ALLOWED INDIVIDUALS

SEc. 214. (a) In computing net income there shall be allowed as
deductions:
(1) All the, ordinary and necessary expenses paid or incurred
durmg the taxable year in carrymg on any trade or business,
includig a reasonable allowance for salaries or other compensation
for personal services actually rendered; traveling expenses (including the entire amount expended for meals and lodging) while away
from home 'in the pursuit of a trade or business; and rentals or
other payments required to be made as a condition to the continued
use or possession, or purposes of the trade or business, of property
to which the taxpapr 'has not taken or is not taking title or in
which ha has no eqity;
(2) All inter(: paid or accrued within the taxable year on
indebtedness, except on indebtedness incurred or continued to purchase or carry obligations or securities (other than obligations of
the United States issued after September 24, 1917, and originally
subscribWd for by the taxpayer) the interest upon which is wholly
exempt from taxation under this title;
(3) Taxes paid or accrued within the taxable year except (A)
income, war-profits, and excess-profits taxes imposed by the authority of the united States, (B) so much of the income, war-profits,
and excess-piofits taxes, imposed by the authority of any foreign
country or possession of the United States, as is allowed as a credit
under seetiqn 222, (0) taxes assessed against local benefits of a kind
tending to increase the ralue of the property assessed, and (D)
taxes imposed upon the taxpayer upon his interest as shareholder
of a corporation, which are paid by the corporation without reimbursement frow the taxpayer. For the purpose of this paragraph,
estate, inheritance, legacy, and succession taxes accrue on the due
date thereof except as otbrwise provided by the law of the jurisdiction imposing such taxes;
(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business;
(5) Losses sustained during the taxable year and not compensatkd for by insurance or otherwise, if incurred in any transaction

SIXTY-NINTH CONGRESS.

SESS. 1.

CH. 27.

1926.

27

entered into for profit, though not connected, with the trade or
INCOME TAX.
business; but in the case of a nonresident alien individual only
if the profit, if such transaction had resulted in a profit, would be
taxable under this title. No deduction shall be allowed under this Restriction as to sales
paragraph for any loss claimed to have been sustained in any sale of stock, etc,
or other disposition of shares of stock or securities where it
appears that within thirty days before or after the date of such sale
or other disposition the taxpayer has acquired (otherwise than by
bequestor inheritance) or has entered into a contract or option
to acquire substaiitially identical property, and the property so
acquired is held by the taxpayer.for any period after such sale
or other disposition. If such acquisition or the contract or option Allowane3 for part
to acquire is to the extent of part only of substantially identical of a loss.
property, then only a proportionate part of the loss shall be disallowed;
(6) Losses sustained during the taxable year of property not con- Casualty losses not
nected with the trade or business (but in the case of a nonresident conneted with busialien individual only property within the United States) if arisin ness.
from fires, storms, shipwreck, or other casualty, or from theft, and
if not compensated for by insurance or otherwise. The basis for Basis for determindetermining the amount of the deduction under this paragraph, or Ing.
paragraph (4) or (5), shall be the same as is provided in section Ankep. 26.
204 for determining the gain or loss from the sale or other disposition of property;
('() Debts ascertained to be worthless and charged off within the Worthless debts.
taxable year (or, in the discretion of the Commissioner, a reasonable
addition to a reserve for bad debts); and when satisfied that a debt
is recoverable only in part, the Commissioner may allow such debt to
be charged off in part;
(8) A reasonable allowance for the exhaustion, wear and tear of Exhaustion, etc., of
property used in the trade or business including a reasonable allow- bbusiness property.
ance for obsolescence. In the case oi improved real
Real estate held un.
one person for life with remainder to another person, estate held by der life tenancy.
the deduction
provided for in this paragraph shall be equitably apportioned between the life tenant and the remainderman under rules and regulations prescribed by the Commissioner with the approval of the
Secretary;
.9)In the case of mines, oil and gas wells, other natural deposits Mines, oil and gas
an timber, a reasonable allowance for depletion and for deprecia- Fells, timber, et,.
tion of improvements, according to the peculiar conditions in each
case; such reasonable allowance in all cases to be made under rules Reasonable allowand regulations to be prescribed by
Commissioner, with the ap- nce for depletion, etc.
proval of the Secretary. In the case the leases the deduction allowed
of
by this paragraph shall be equitably apportioned between the lessor
and lessee;
(10) Contributions or gifts made within the taxable year to or Gifts, etc.
for the use of: (A) The United Stattes, any State, Territory, or any For public uses,
political subdivision thereof or
exclusively public Urposes;orcm the District of Columbia, for Corporations, Comm
iuli
rp o
B) any corporation,
unity chest, fun or foundation, organized and or trust, or coM-1unity chts, relig.
oprated exclu-.
lively for religious, charitable, scientific, literary, or educational pur- 1t t15, scientific, etc.,
rganizations.
poses, or for the prevention of cruelty to children or animals, no
part of the net earnings of which inures to the benefit of any private
shareholder or individual; (C) the special fund for vocational
rehabilire- ~Ion.
habilitation authorized by section 7 of the Vocational Rehabilitation toVocational
Act; (D) posts or organizations of war veterans, or auxiliary units iza,Vol. 41, p. 737. organ.
War veterans'
or societies of any such posts or organizations, if such posts, organi- tWow, etc.
zations, units2 or societies are organized in the United States or
of its possessions, and if no part of their net earnings inures to any
the

I-

28
TSCOU TAX.

rat'rnal lodges, etc.
Conditions.

iumit.

Allowance of full
amount in special cases.

By nonresident

slies.

Verification required.

On casal eof real
4ibltieunder
contract, allow .

Nonresident saliens
Allowances connected with income
from United States
sources.

post, P. 30.
Application to citizens from sources in
United States poses-

SIXTY-NINTH CONGRESS.

SEss. I. CH. 27.

1926.

benefit of any private shareholder or individual; or (E) a fraternal
society, order, or association, operating under the lodge system, but
only at such contributions or gifts are to be used exclusively for
religious, charitable, scientific, literary, or educational purposes, Qr
for the prevention of cruelty to children or Lmnimals; to an amount
which in all theabove cases combined does not exceed 15 per centum
of the taxpayer's nst income as computed without the benefit of this
paragraph, except that if in the taxable yar a in each of the ten
preceding taxable years the amount iu all the aboveoases combined
exceeds 90 per centum of the taxpayer's net i cpse jor each such
year, as computed without the benefit of this paragraph, then to the
full amount of such contributions and gifts made withi the taxable
year. In case of a nonresident agjen individual this deduction shall
allowed only as to contributions or gifts made to domestic corporations, or to community chests, funds, or foundations created in
the United States, or to such vocational rehabilitation lund. Such
contributions or gifts shallbe allowable as deductions only if verified
under rules. and regulations prescribed by the Commissioner, with
the approval of .the Secretary;
(11) In the case of a casual sale or other casual disposition of
real property, a reasonable allowance for future expense liabilities,
incurred under the provisions of the contract under which such sale
or other dispositon was made, under such regulations as the Commissioner, with the approval of the Secretary, may prescribe, including the giving of a bond, with such sureties and in such sum (not
less than the estimated tax liability computed without the benefit of
this paragraph) as the Commissioner may require, conditioned upon
the payment. (notwithstanding any statute of limitations) of the tax,
computed without the benefit of this paragraph, in respect of any
amounts allowed as a deduction under this paragraph and not actually expended in carrying out the provisions ofsuch contract.
(b), In the case of a nonresident alien individual, the deductions
allowed in subdivision (a), except those allowed in paragraphs (5),
(6), and (10), shall be allowed .only if and to the extent 4 a they
are connected with income from sources within the United States;
and the proper apportionment and allocation of the deductions with
respect to sources of income within and without the United States
shall be determined as provided in section 217 under rules and regulations prescribed by the Commissioner with the approval of the
Secretary. In the case of a citizen entitled to the beneits of section
262 the deductions shall be the same and shall be determined in thp
same manner as in the case of a nonresident alien individual.

Items not deductible.

Objects specified.
Personal, etc., expenaw,;
Property improvemnents.
Restoring, etc., property.
Life insurance for employees.

ITEMS NOT DEDUCTIBLE

SEc. 215. (a) In computing net income no deduction shall in
any case be allowed in respect of1 Personal, living, or family expenses;
2) Any amount paid out for new buildings or, for permanent
improvements or betterments made to increase the value .! any
property or estate;
(3) Any amount expended in restoring property or in making
good the exhaustion thereof for which an allowance is or has been
made; or
(4) Premiums paid on any life insurance policy covering the life
of any officer or employee, or of any person financially interested
in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy.