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 37

688

78d CONGRESS.

SESS. II. CH. 277. MAY 10, 1984.

()

INCOME TAX.
COM PUTATIO Nhosana"- MINITs.-The rental
OF NET INOOMRtenances thereof furnished to

Contd.hs

value of a dwelling house and appura minister of the gospel as part of

Minister's dwelling.
iseanus uems.

his compensation;

Podo P. 712,

provided in section 116:
Earned income from sources without the United States;
Salaries of certain Territorial employees;
The income of foreign governments;
Income of States, municipalities, and other political subdivisions;
Receipts of shipowners' mutual protection and indemnity
associations;
Dividends from China Trade Act corporations.

mine

oi,

(7) MISCELLANEOUS ITEMs.-The following items, to the extent

to deter*

C) INVENTORIE.-Whenever

in the opinion of the Commissioner

the use of inventories is necessary in order clearly to determine the
income of any taxpayer inventories shall be taken by such taxpayer
upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as conforming as nearly as may be to the best
accounting practice in the trade or business and as most clearly
reflecting the income.
Distributions by cor*
(d) IISTIBUTIONS BY ConronATIos.-Distributions by corporaMAI,
p.m711.
tons shall be taxable to the shareholders as provided in section 115.
Determinationof
(e) DmrmINArow or GAN OR Loss.-In the case of a sale or

Prar los i
odip. 7W.

other disposition of property, the gain or loss shall be computed as
provided in section 111.

woatrunithin and
Pot, p. 718.
Deductions
gross income.

from

Business expenses.

Traveling included.

Interest on debts.
Exceptions.

Taxes generaly.
Exceptions.

(f) GRoss

INCOME FROM SOURCEs3WIHIN AND WITHOUT UNITED

STATES.-FOr computation of gross income from sources within and
without the United States, see section 119.
SEC. 23. DEDUCTIONS FROM GROSS INCOME.

In computing net income there shall be allowed as deductions:
(a) ExPEN8Es.-All the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or business,

including 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, for purposes of the trade or business, of property to
which the taxpayer has not taken or is not taking title or in which
he has no equity.
(b) INTEREST.-All interest paid or accrued within the taxable
year on indebtedness, except on indebtedness incurred or continued
to purchase or carry obligations (other than obligations of the
United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest upon which is wholly exempt
from the taxes imposed by this title.
(c) TAXEs GEMERAuY.-Taxes paid or accrued within the taxable
year, except---

)Federal income, war-profits, and excess-profits taxes*
) income, war-profits, and excess-profits taxes imposed iy the
authority of any foreign country or possession of the United States;
but this deduction shall be allowed in the case of a taxpayer who
does not signify in his return his desire to have to any extent the
benefits of section 181 (relating to credit for taxes of foreign countries and possessions of the Uited States);
(8) estate, inheritance, legacy, succession, and gift taxes; and

78d CONGRESS.

SESS. II.

CH. 277.

689

MAY 10, 1984.

(4) taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall
not exclude the allowance as a deduction of so much of such taxes
as isyproperly allocable to maintenance or interest charges.
(d)'TAxES OF SiAREHOLDER PAID BY CoRPORATION.-The deduction

INCOME TAX.

COMPUTATION
OF NET INCOMEContd.

Taxes of shareholder
paid by corporation.

for taxes allowed by subsection (c) shall be allowed to a corporation
in the case of taxes imposed upon a shareholder of the corporation
upon his interest as shareholder which are paid by the corporation
without reimbursement from the shareholder, but in such cases no
deduction shall be allowed the shareholder for the amount of such
taxes.
(e) LoSSEs BY INDIVIDuAL.-In the case of an individual, losses Losses by individsustained during the taxable year and not compensated for by insur- uals.
ance or otherwiseBusiness.
(1) if incurred in trade or business; or
Not
2)if incurred in any transaction entered into for profit, though trade orconnected with
business.
not connected with the trade or business; or
(8) of property not connected with the trade or business if the Casualty losses, not
ness.
loss arises from fires, storms, shipwreck, or other casualty, or connected with busifrom theft. No loss shall be allowed as a deduction under this edDisallowed,if deductfor
paragraph if at the time of the filing of the return such loss has poses. etate tax pur.
been claimed as a deduction for estate tax purposes in the estate
tax return.
(f) LossEs BY CORPORATION&-In the case of a corporation, losses Losses by corporasustained during the taxable year and not compensated for by insur- tions
ance or otherwise.
(g) WAGERING LOSSEs.-Losses from wagering transactions shall Wagering losses.
be allowed only to the extent of the gains from such transactions.
(h) BASIS For DErERMINING Loss.-The basis for determining Basis for determining
the amount of deduction for losses sustained, to be allowed under loss. p. 79.
POO,
subsection (e) or (f), shall be the adjusted basis provided in section
113(b) for determining the loss from the sale or other disposition of
property.
(i) Loss on WASH SALES OF ST'OOK OR SECURTlE8.-FOr disallow- Disallowance of loss
on
ance of loss deduction in the case of sales of stock or securities where etc.wash sales of stock,
within thirty days before or after the date of the sale the taxpayer post, P. 71-5.
has acquired substantially identical property, see section 118.
(j) CArrAL LOSSEs.-Losses from sales or exchanges of capital Capital losses.
assets shall be allowed only to the extent provided in section 117(d). Pot P. 715.
(k) BAD DEBTs.-Debts ascertained to be worthless and charged Bad debts.
off within the 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 in an amount not in excess of the part charged off within
the taxable year, as a deduction.
(1) DEPRECIATION.-A reasonable allowance for the exhaustion, Exhaustion, etc., of
wear and tear of property used in the trade or business, including a business property.
reasonable allowance for obsolescence. In the case of property held Life estates.
by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner
of the property and shall be allowed to the life tenant. In the case Property in trust.
of property held in trust the allowable deduction shall be apportioned
between the income beneficiaries and the trustee in accordance with
the pertinent provisions of the instrument creating the trust, or in
the absence of such provisions, on the basis of the trust income allocable to each.
(m) DEPISTiON.-In the case of mines, oil and gas wells, other

natural deposits, and timber, a reasonable allowance for depletion
and for depreciation of improvements, according to the peculiar'con86687*-34---44

Mines, oil and gas
wells, timber eto.
easonabfe allow.
ance for depletion, ete.

,

.-

690

73d CONGRESS.

4r

, Ap - , t
,

SESS. II.

t , . '- - -,,zy +

",

CH. 277. MAY 10, 1934.

INCOME ITAX
COMPUTEAT16N
OF NET INO OMEContd.
Jev4ion of es stimates
allowed.

ditions in each case; such reasonable allowance in all cases to be made
under rules and regulations to be prescribed by the Commissioner,
with the approval of the Secretary. In any case in which it is ascertained as a result of operations or of development work that the
recoverable units are greater or less than the prior estimate thereof,
then such prior estimate (but not the basis for depletion) shall be
revised and the allowance under this subsection for subsequent taxLeases.
able years shall be based upon such revised estimate. In the ease
of leases the deductions shall be equitably apportioned between the
Ire estates.
lessor and lessee. In the case of property held by one person for
life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property
Property In trust.
and shall be allowed to the life tenant. In the case of property held
in trust the allowable deduction shall be apportioned between the
income beneficiaries and the trustee in accordance with the ertinent
provisions of the instrument creating the trust, or, in the absence of
such provisions, on the basis of the trust income allocable to each.
Post, p.710.
(For ercentage depletion allowable under this subsection, see section
114 b, (3) and (4.)
Basis for de'pletion,
(n) BASIS FOR DEPREcIAIO AND DEPLETIN.-The basis upon
etc.
which depletion, exhaustion, wear and tear and obsolescence are to
POst, P. 710.
be allowed in respect of any property shall be as provided in section
114.
Charitable, et contC.,
(0) CHARITABLE AND OTHER CONTRIBUTIONS.-In the case of an
oufs.
individual, contributions or gifts made within the taxable year to or
for the use of :
Publicuses.
(1) the United States, any State, Territory, or any political
subdivision thereof, or the District of Columbia, for exclusively
public purposes;
religious, solentific,
(2) a corporation, or trust, or community chest fund, or foundaetc., organizati
tion, organized and operated exclusively for religious, charitable,
scientific, literary, or educational purposes, 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, and no substantial part of the activities of which is
carrying on propaganda, or otherwise attempting, to influence
legislation;
Vocational rehabill(3) the special fund for vocational rehabilitation authorized
tation.
Vol.43, p. 611 .
WVar vetorsi s'
gnnitations, etc.

or-

by section 12 of the World War Veterans' Act, 1924;

(4) posts or organizations of war veterans, or auxiliary units

or societies of any such posts or organizations, if such costs,
organizations, units, or societies are organized in the United States
or any of its possessions, and if no part of their net earnings
inures to the benefit of any private shareholder or individual; or
FraternAl sod ety.
(5) a fraternal society, order, or association, operating under
the lodge system but only if such contributions or gifts are to
be used exclusively for religious, charitable, scientific, literary, 6r
educational purposes, or for the prevention of cruelty to children
or animals;
Limit.
to an amount which in all the above cases combined does not exceed
15 per centum of the taxpayer's net income as computed without
Unlimited.
deduct. the benefit of this subsection. Such contributions or gifts shall be
tion.
allowable as deductions only if verified under rules and regulations
Post, p.m718.
prescribed by the Commissioner, with the approval of the Secretary.
(For unlisted deduction if contributions and gifts exceed 90 per
centum of the net income, see section 120.)
Dvidends r eceired
(p) DIVIDENDS RECEIVED BY CoRPoRATIONs.-In the case of a
by corpoatons
)OMestle.

corporation, the amount received as dividends from a domestic
corporation which is subject to taxation under this title. The dedue

4

?d CONGRESS.

SESS. II. CH. 277.

-~

-4

691

MAY 10, 1984.

tion allowed by this subsection shall not be allowed in respect of mOa rFAX.
dividends received from a corporation organized under the China ooNETUNCOf
Trade Act 1922, or from a corporation which under section 251 is cond.
taxable only on its gross income from sources within the United choration.
States by reason of its receiving a large percentage of its gross p0k,' **
income from sources within a possession of the United States.
(q) PaHNsion Tost.-An employer establishing or maintaining Maintenance or pen.
a pension trust to provide for the payment of reasonable pensions Wion 1ruts.
to his employees (if such trust is exempt from tax under section

165 relating to trusts created for the exclusive benefit of employees)
shall be allowed as a deduction (in addition to the contributions
to such trust during the taxable year to cover the pension liability
accruing during the year, allowed as a deduction under subsection
(a) of this section) a reasonable amount transferred or paid into
such trust during the taxable year in excess of such contributions,
but only if such amount (1) has not theretofore been allowable as
a deduction, and (2) is apportioned in equal parts over a period
of ten consecutive years beginning with the year in which the
transfer or payment is made. Any deduction allowable under
section 23(q) of the Revenue Act of 1928 or the Revenue Act of
1932 which under such section was apportioned to any taxable year

Pot, p.
72'J.

Allowance under pre-

vious

beginning after December 81, 1938, shall be allowed as a deductionin the years to which. so apportioned to the extent allowable under

laws.

47,

182.
p.

such section if it had remained in force with respect to such year.
SEC. 24. ITEMS NOT DEDUCTIBLE.

(a) GENERAL RULE.-In computing not income no deduction shall
in an case be allowed in respect ofPersonal, living, or family expenses;
2Any amount paid out for new buildings or for permanent
improvements or betterments made to increase the value of 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;
(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

Items notdeductible.
Personal,

etc., ex-

Mrnrty

improve-

ments.
Rtestoring property.

LINe insurance pro-

miums for employees.

police

5 'An amount otherwise allowable as a deduction which
is allocable to one or more classes of income other than interest

to

Deductions allocable

tax-exempt Incomes.

(whether or not any amount of income of that class or classes
is received or accrued) wholly exempt from the taxes imposed
by this title; or

(6) Loss from sales or exchanges of property directly or Property losses from
indirectly, (A) between members of a family, or (b) except in Eheenges between
the case of distributions in liquidation, between an individual and anor
a corporation in which such individual owns, directly or indirectly, poration.
more than 50 Per centuni in value of the outstanding stock. For
the purpose of this paragraph-(C) an individual shall be con- Denuions.
sidered as owning the stock owned, directly or indirectly, by his
family; and (D? the family of an individual shall include only
his brothers an sisters (whether by the whole or half blood),
s ouse ancestors, and lineal descendants.

(b)ioLERS OF LiFE OR TEiiINABILE INTEIREST.-Amounts paid Holder. of life
under the laws of any State, Territory, District of Columbia, pos. terminable Interest.
]Deductions on
a
thecome
session of the United States, or foreign country as income to the tc.
holder of a life or torminable interest acquired by gift, bequest, or

or

In-

acquired by gift,