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BOOK III. —THE INCOME TAX.
2. Income from United States securities,
3. Tax payer may make oath as to amount of income. CHAPTER III. PAYMENT OF THE Tax. ARTICLE 1. When to be paid.
2. Returns to be rendered. CHAPTER IV. PROCEEDINGS ON DEFAULT ÎN PAYMENT.
THE TAX. Sections 89 to 93, inclusive, embrace the provisions relating to the income tax. All previous enactments on the subject are repealed. (8 89.)
The operation of the present income tax is limited in its duration—it beginning January 1, 1862, and ceasing absolutely December 31, 1866. ($ 92.)
The rate of duty upon incomes is as follows:
over $600, and not over $10,000..3 per cent.
“ $10,000 (excepting $600)...5 per cent. Non-resident citizens, who receive income derived from property in the United States, where such citizens are not in the Government employ, must pay 5 per cent duty thereon, with the same limitations as residents are entitled to. (8 90.)
HOW AND UPON WHAT ESTIMATED. ARTICLE 1. Local and other taxes to be deducted.
2. Income from United States securities.
3. Tax payer may make oath as to amount of income. ARTICLE 1.-LOCAL AND OTHER TAXES TO BE DEDUCTED.
The commissioner, in his instructions to the assessors, directs that, in estimating the annual income of any person, the following deductions are to be made from the aggregate income, and the tax assessed upon the remainder:
1. State and local taxes, assessed in the calendar year preceding the assessment, to wit, from the 1st of January to the 31st of December, inclusive, next preceding.
2. Salaries of officers, or payments to persons in the service of the United States, from which 3 per cent has been deducted by the paymaster or disbursing officer.
3. Interest or dividends on stock, capital, or deposits in any bank, trust company, or savings institution, insurance, bridge, express, telegraph, steamboat, ferry-boat, or railroad company or corporation, or on any bonds or other evidences of indebtedness thereof, on which duties have been already paid.
4. Keceipts derived from advertisements upon which duties have been paid.
5. The rent actually paid for the dwelling-house or estate which is the residence of the person assessed.
6. The amount paid by any farmer or planter for hired labor and necessary repairs upon his farm or plantation, including the subsistence of the laborers.
7. Also the sum of $600, except in those cases in which the whole or any part of said $600 has been deducted from salaries of officers or persons in the employ of the United States.
Incomes over $10,000.- Whenever the total income of any person exceeds $10,000, and deductions are made therefrom upon the ground that a portion of such income has been subject to a 3 per cent duty upon dividends or interest paid by companies, corporations, or associations, as before enumerated, such person will be subject to a tax of 2 per cent additional upon so much of bis income as may have been previously subjected to the 3 per cent duty before named. Guardians and trustees, whether such trustees are so by virtue of their office as executors, administrators, or other fiduciary capacity, are required to make a return of the income belonging to minor or other persons, which may be held in trust as aforesaid, and the income tax will be assessed upon the amount returned, after deducting such sums as are exempted from the income tax as aforesaid. The exemption of $600, under section 90 of the excise law, is not, however, allowed on account of any minor or other beneficiary of a trust, except upon the state
ment of the guardian or trustee, made under oath, that the minor or beneficiary bas no other income from which that amount may be deducted.
Persons receiving rent may deduct therefrom the amount paid for necessary repairs, insurance, and interest on incumbrances upon the property rented. The cost of new structures or improvements to buildings cannot be deducted from the income.
Income prior to Sept. 1, '62.—The tax must be levied upon all dividends declared prior to September, 1862, and upon the entire salaries of officers or payments to persons in the civil, military, naval, or other service of the United States for services rendered prior to the said date, without allowing the $600 off, as such dividends and proportions of salaries were not subject to deduction or assessment.
Interest received or due from trust companies, savings institutions, insurance, bridge, express, steamboat, ferry-boat, and railroad companies, corporations or associations, prior to the same date, must also be taxed.
Interest paid by the assessed person on incumbrances upon the dwelling-house or estate in which he resides may be deducted from income; also his payments for necessary repairs.
Farm produce wbich the producer bas on hand on the 31st day of December, 1863, must be appraised at its marketable value on that day.
Every farmer or planter will be required to make returns of the value of the produce of his farm plantation without deduction for the labor or services of himself and family, or of any portion of such produce consumed by himself and family.
Manufacturers' profits are to be included in the income subject to duty, notwithstanding duties have already been paid on the articles manufactured, the exemption being removed by the act of March 3, 1863 (see § 91, p. 276). Copartners return their share, or interest, in the copartnership income. Corporators pay on the amount of profits, whether in the form of dividends or otherwise.
Timber.—The commissioner, in answer to inquiries, says that the fact that the law regards timber standing as part of the realty cannot be urged as a sufficient reason for exemption from taxation of the income received from the sale of such timber. For, although timber, while standing, forms a part of the realty,
yet, when sawed or cut down, it becomes personal property, and the receipts of the owner from such sales go to increase bis annual income, and, therefore, is just as much liable to the income tax as the income received from the sale of other products of the soil or mines. The farmer who keeps woodland for the express purpose of cutting and selling firewood, in greater or less quantities every year, would be requested to estimate his receipts from that source, as a part of his income, and the case is not different with the proprietor who sells to others the privilege of cutting and appropriating the timber on his land. The amount thus received for “ stampage” must be treated as the income of the proprietor. ARTICLE 2.--INCOME FROM UNITED STATES SECURITIES.
Such portion of annual incomes as is derived from interest upon United States securities of any kind is dutiable at one and one half of one per cent only. (S 91.)
By an act of congress, entitled “An act to authorize the issue of United States notes,” &c., passed February 25, 1862 (U. S. Stat. at Large, 1862, p. 345), all stocks, bonds, and other securities of the United States, held by individuals or corporations, are exempted from State taxation.
The U. S. Supreme Court has decided that a bank is not liable to State taxation in respect to that portion of its capital which consists of the securities of the Federal Government issued either before or after the exemption act of February 25, 1862; reversing People v. Comm’rs of Taxes, 23 N. Y. 92. But they are liable to a Federal taxation, under this act, of one and one half per cent on incomes from such securities.
ARTICLE 3.-TAX PAYER MAY MAKE OATH AS TO AMOUNT
OF INCOME. | A party is permitted to swear as to the amount of his income liable to assessment, and the amount thus sworn to is received as the sum upon which the duties are to be assessed and collected.
Oath of no income. It is specially provided that a party, in his own behalf or as guardian or trustee, may be permitted to declare, under oath or affirmation, that he is not possessed of an income of $600 liable to assessment, or that he has been assessed elsewhere, the same year, for an income duty under
United States authority. He is then exempt (93). Of course, this does not preclude the assistant assessor from investigating into the truth of such an affidavit.
PAYMENT OF THE TAX. ARTICLE 1. When to be paid.
2. Returns to be rendered.
ARTICLE 1.—WHEN TO BE PAID. The income duty is to be assessed and collected on the 1st day of May of each year, for the year ending December 31st next preceding (§ 91). The duty must be paid on or before the 30th day of June of each year; and when not paid for thirty days after that day, and for ten days after demand thereof by the collector, five per cent on the amount of unpaid duties is levied, in addition, as a penalty (8 92), except in the case of estates of deceased and insolvent persons.
ARTICLE 2.—RETURNS TO BE RENDERED. All persons must make returns of their yearly profits, or income, as the case may be, by the 1st of May of each year.
It does not seem that these returns need to be verified.
Where the income is received by guardians, or trustees, whether executors, administrators, or others acting in a fiduciary capacity, returns are to be rendered by them.
Guardians and trustees, including executors, administrators, and all others acting in a fiduciary capacity, are required to pay the tax for those in whose behalf they act. The commissioner holds that, although the law is silent, there is no reason why trustees may not divide the income arithmetically among the beneficiaries, and return to the assessor the amount held for each, in place of a separate return by each beneficiary for himself. (See Decision No. 88, p. 309, infra.)
· The assistant assessor may increase the amount stated in the return, if satisfied that the same is understated (S 93). The remedy of the tax payer is by appeal. See APPEALS, pp. 18, 23, ante. In case of neglect or refusal to make the return, the assessor, or assistant assessor, is to assess the amount, and proceed to collect the duty thereon, as provided for in the general provisions of the act. (8 93.)