1.451-4

Accounting for redemption of trading stamps and coupons.

1.481-1

1.453

Statutory provisions; installment

1.481-2

method.

1.481-3

1.458-1

1.458-2

Installment method of reporting income.

Special rules applicable to dealers in personal property.

1.453-3 Special rules applicable to casual sales or casual dispositions of personal property.

1.453-4 1.453-5 1.453-6

1.453-7 1.453-8 1.453-9 1.453-10 1.454 1.454-1

Sale of real property involving deferred periodic payments. Sale of real property treated on installment method. Deferred-payment property not method.

sale of real on installment

Change from accrual to installment method by dealers. Requirements for adoption of or change to installment method. Gain or loss on disposition of installment obligations.

Effective date.

Statutory provisions; obligations
issued at discount.
Obligations issued at discount.

TAXABLE YEAR FOR WHICH REDUCTIONS TAKEN 1.461 Statutory provisions; general rule for taxable year of deduction. General rule for taxable year of deduction.

1.461-1

Adjustments in general.
Limitation on tax.

Adjustments attributable to I 1954 Code years where cha was not initiated by taxpaye 1.481-4 Adjustments attributable to 1954 Code years where change initiated by taxpayer. 1.481-5 Adjustments taken into acco with consent.

1.481-6 Election to return to former met of accounting.

AUTHORITY: §§ 1.01 to 1.481-6 issued u sec. 7805, 68 Stat. 917; 26 U.S.C. 7805. Sta tory provisions interpreted or applied cited to text.

§ 1.01 Internal Revenue Code of 1 and regulations-(a) Enactment of The Internal Revenue Code of 1954 wh became law upon enactment of Pu Law 591, 83d Congress, approved Aug 16, 1954, provides in part as follows:

Be it enacted by the Senate and Hous Representatives of the United States of A ica in Congress assembled, That (a) Cita (1) The provisions of this Act set f under the heading "Internal Revenue T may be cited as the "Internal Revenue of 1954".

(2) The Internal Revenue Code enacte February 10, 1939, as amended, may be as the "Internal Revenue Code of 1939 (b) Publication. This Act shall be lished as volume 68A of the United S Statutes at Large, with a comprehe table of contents and an appendix; without an index or marginal refere The date of enactment, bill number, p law number, and chapter number, sha printed as a headnote.

(c) Cross reference. For saving provis effective date provisions, and other re provisions, see chapter 80 (sec. 7801 and lowing) of the Internal Revenue Cod 1954.

(d) Enactment of Internal Revenue into law. The Internal Revenue Titl ferred to in subsection (a) (1) is as foll

If the taxable income is:

Over $20,000 but not over $22,000__
Over $22,000 but not over $24,000.
Over $24,000 but not over $28,000---
Over $28,000 but not over $32,000.
Over $32,000 but not over $38,000..
Over $38,000 but not over $44,000__.
Over $44,000 but not over $50,000__.
Over $50,000 but not over $60,000_.
Over $60,000 but not over $70,000.
Over $70,000 but not over $80,000_.
Over $80,000 but not over $90,000__.
Over $90,000 but not over $100,000..
Over $100,000 but not over $150,000..
Over $150,000 but not over $200,000.
Over $200,000 but not over $300,000....
Over $300,000___

(2) Definition of head of household. For purposes of this subtitle, an individual shall be considered a head of a household if, and only if, such individual is not married at the close of his taxable year, is not a surviving spouse (as defined in section 2 (b)), and either

(A) Maintains as his home a household which constitutes for such taxable year the principal place of abode, as a member of such household, of—

(1) A son, stepson, daughter, or stepdaughter of the taxpayer, or a descendant of a son or daughter of the taxpayer, but if such son, stepson, daughter, stepdaughter, or descendant is married at the close of the taxpayer's taxable year, only if the taxpayer is entitled to a deduction for the taxable year for such person under section 151, or (11) Any other person who is a dependent of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such person under section 151, or

(B) Maintains a household which constitutes for such taxable year the principal place of abode of the father or mother of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such father or mother under section 151.

For purposes of this paragraph and of section 2 (b) (1) (B), an individual shall be considered as maintaining a household only if over half of the cost of maintaining the household during the taxable year is furnished by such individual.

(3) Determination of status. For purposes of this subsection

(A) A legally adopted child of a person shall be considered a child of such person by blood;

(B) An individual who is legally separated from his spouse under a decree of divorce or of separate maintenance shall not be considered as married;

(C) A taxpayer shall be considered as not married at the close of his taxable year if at any time during the taxable year his spouse is a nonresident alien; and

(D) A taxpayer shall be considered as married at the close of his taxable year if his spouse (other than a spouse described

The tax is:

$6,260, plus 47% of excess over $20,00 $7,200, plus 49% of excess over $22,00 $8,180, plus 52% of excess over $24,00 $10,260, plus 54% of excess over $28,0 $12,420, plus 58% of excess over $32,0 $15,900, plus 62% of excess over $38,0 $19,620, plus 66% of excess over $44,0 $23,580, plus 68% of excess over $50,0 $30,380, plus 71% of excess over $60,0 $37,480, plus 74% of excess over $70,0 $44,880, plus 76% of excess over $80,0 $52,480, plus 80% of excess over $90,C $60,480, plus 83% of excess over $100 $101,980, plus 87% of excess over $15 $145,480, plus 90% of excess over $20 $235,480, plus 91% of excess over $30

in subparagraph (C)) died during the -able year.

(4) Limitations. Notwithstanding graph (2), for purposes of this subt taxpayer shall not be considered to head of a household

(A) If at any time during the ta year he is a nonresident alien; or

(B) By reason of an individual who not be a dependent for the taxable but for

(1) Paragraph (9) of section 152 (a) (11) Paragraph (10) of section 152 (iii) Subsection (c) of section 152. (c) Special rules. The tax impose subsection (a), and the tax impose paragraph (1) of subsection (b), co of

(1) A normal tax of 3 percent of the able income, and

(2) A surtax equal to (A) the an determined in accordance with the in subsection (a) or paragraph (1) of section (b), minus (B) the normal ta The tax shall in no event exceed 87 pe of the taxable income for the taxable

(d) Cross reference. For definitio taxable income, see section 63. [T. D. 6161, 21 F. R. 789, Feb. 4, 1956]

§ 1.1-1 Income tax on individu (a) General rule. (1) Section 1 (= the Internal Revenue Code of 1954 poses an income tax on every indivi resident or nonresident, other th head of a household to whom subse (b) applies or a nonresident alien vidual subject to the tax imposed by tion 871 (a). This tax consists See se normal tax and a surtax.

1 (c). For optional tax in the ca taxpayers with adjusted gross inc of less than $5,000, see section 3. tax imposed by section 1 (a) is taxable income (determined by subt ing the allowable deductions from gross income). The tax is determ in accordance with the table conta in section 1 (a). In certain cases cr

are allowed against the amount of the tax. See part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1954 (section 31 and following sections). In general, the tax is payable upon the basis of returns rendered by persons liable therefor (subchapter A of chapter 61 of the Internal Revenue Code of 1954 (sections 6001-6091, inclusive)) or at the source of the income. For computation of tax in the case of a joint return of husband and wife, or a return of a surviving spouse, see section 2. For other rates of tax on individuals, see section 5 (a). See part III of subchapter G of chapter 1 of the Internal Revenue Code of 1954 (sections 551-557, inclusive) as to shareholders of foreign personal holding companies. See subchapter P of chapter 1 of the Internal Revenue Code of 1954 (sections 1201-1241, inclusive) as to the treatment of capital gains and losses.

(2) The income tax imposed by section 1 (a) upon any amount of taxable income is computed by adding to the income tax for the bracket in which that amount falls in the table in section 1 (a) the income tax upon the excess of that amount over the bottom of the bracket at the rate indicated in the table. Accordingly, the income tax for a taxable year beginning after December 31, 1953, upon a taxable income of $16,480 would be $5,440, computed as follows:

Tax on $16,000 (from table).

Tax on $480 (at 50 percent as determined by the table).

Total tax on $16.480---

$5, 200

240

5, 440

(b) Citizens or residents of the United States liable to tax. In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Internal Revenue Code of 1954 whether the income is received from Sources within or without the United States. A nonresident alien individual who is a bona fide resident of Puerto Rico during the entire taxable year is, in general, subject to taxation in the same manner as a resident alien individual. See section 876, relating to alien residents of Puerto Rico. As to tax on nonresident alien individuals, see section 871.

(c) Who is a citizen. Every person born or naturalized in the United States and subject to its jurisdiction is a citizen. For rules governing loss of citizenship, see sections 349 to 357, inclusive, of the

Immigration and Nationality Act, 195 (8 U. S. C. 1481-1489), A foreigner whe has filed his declaration of intention of becoming a citizen but who has no yet been admitted to citizenship by a final order of a naturalization court i an alien.

[T. D. 6161, 21 F. R. 790, Feb. 4, 1956]

§1.1-2 Rates of tax on heads of house holds-(a) General rule. An individua who is the head of a household unde the rules prescribed in section 1 (b) i subject to the income tax imposed b that section instead of the income ta imposed by section 1 (a).

(b) Definition of head of household (1) For the purpose of section 1 (b), th taxpayer shall be considered the head o a household if, and only if, he is no married at the close of his taxable year is not a surviving spouse (as defined i section 2 (b)), and (i) maintains as hi home a household which constitutes fo such taxable year the principal place o abode, as a member of such household of at least one of the individuals de scribed in section 1 (b) (2) (A), or (ii maintains (whether or not as his home a household which constitutes for suc taxable year the principal place of abod of one of the individuals described i section 1 (b) (2) (B).

(2) Under no circumstances shall th same person be used to qualify more tha one taxpayer as the head of a househol for the same taxable year.

(3) Subparagraph (A) of section 1 (b (2) provides that any of the following persons may qualify the taxpayer as head of a household:

(i) A son, stepson, daughter, or step daughter of the taxpayer, or a descend ant of a son or daughter of the taxpayer For the purpose of determining whethe any of the stated relationships exist, a legally adopted child of a person is con sidered a child of such person by blood If any such person is not married at th close of the taxable year of the taxpayer the taxpayer may qualify as the head of a household by reason of such person even though the taxpayer may not clain a deduction for such person under sec tion 151, for example, because the tax payer does not furnish more than hal of the support of such person. How ever, if any such person is married a the close of the taxable year of the tax payer, the taxpayer may qualify as the head of a household by reason of such person only if the taxpayer is entitled

to a deduction for such person under section 151 and the regulations thereunder. In applying the preceding sentence there shall be disregarded any such person for whom a deduction is allowed under section 151 only by reason of section 152 (c) (relating to persons covered by a multiple support agreement).

(ii) Any other person who is a dependent of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such person under section 151 and the regulations thereunder. Under section 151 the taxpayer may be entitled to a deduction for any of the following persons:

(a) His brother, sister, stepbrother, or stepsister;

(b) His father or mother, or an ancestor of either;

(c) His stepfather or stepmother;

(d) A son or a daughter of his brother or sister;

(e) A brother or sister of his father or mother; or

(f) His son-in-law, daughter-in-law, father-in-law, mother-in-law, brotherin-law or sister-in-law;

if such person has a gross income of less than $600 for the calendar year in which the taxable year of the taxpayer begins, if the taxpayer supplies more than one-half of the support of such person for such calendar year and if such person does not make a joint return with his spouse for the taxable year beginning in such calendar year. The taxpayer may not be considered to be a head of a household by reason of any person for whom a deduction is allowed under section 151 only by reason of section 152 (a) (9), 152 (a) (10), or 152 (c) (relating to persons not related to the taxpayer, persons receiving institutional care, and persons covered by multiple support agreements).

(4) Subparagraph (B) of section 1 (b) (2) provides that the father or mother of the taxpayer may qualify the taxpayer as a head of a household, but only if the taxpayer is entitled to a deduction for the taxable year for such father or mother under section 151 (determined without regard to section 152 (c)). For example, an unmarried taxpayer who maintains a home for his widowed mother may not qualify as the head of a household by reason of his maintenance of a home for his mother if his mother has gross income of $600 or

more in the calendar year in which taxable year begins, or if he does furnish more than one-half of the s port of his mother for such caler year. For purposes of subparagr (B) of section 1 (b) (2), a pe who legally adopted the taxpaye considered the father or mother of taxpayer.

(5) For the purpose of section 1 the status of the taxpayer shall be de mined as of the close of the taxpay taxable year. A taxpayer shall be sidered as not married if at the clos his taxable year he is legally separ from his spouse under a decree of div or separate maintenance, or if at time during the taxable year the sp to whom the taxpayer is married at close of his taxable year was a non dent alien. A taxpayer shall be sidered married at the close of his tax year if his spouse (other than a sp who is a nonresident alien) dies du such year.

(6) If the taxpayer is a nonresi alien during any part of the taxable he may not qualify as a head of a ho hold even though he may comply the other provisions of section 1 See the regulations prescribed u section 871 for a definition of non dent alien.

(c) Household. (1) In order for taxpayer to be considered a head household by reason of any indivi described in subparagraph (A) of sec 1 (b) (2), the household must actu constitute the home of the taxpayer his taxable year. A physical chang the location of such home will not vent a taxpayer from qualifying head of a household. Such home also constitute the principal plac abode of at least one of the persons S fied in such subparagraph (A). It is sufficient that the taxpayer maintain household without being its occup The taxpayer and such other person occupy the household for the entire able year of the taxpayer. However fact that such other person is bor dies within the taxable year will prevent the taxpayer from qualif as a head of household if the house constitutes the principal place of a of such other person for the remai or preceding part of such taxable y The taxpayer and such other person be considered as occupying the ho hold for such entire taxable year withstanding temporary absences