offered centralized management and diversity of investments. If its predominant purpose is to hold, invest or reinvest in, stock or securities, and if substantially all of its business consists of holding, investing or reinvesting in, such stock or securities, the existence or exercise of incidental powers to engage in other business will not deprive a corporation of classification as a mutual investment company. A finance company, or a company engaged in the business of a dealer in stock or securities, or of a trader in stock or securities for its own account, is not a mutual investment company. (b) The Act provides that at least 95 percent of the company's gross income for the taxable year must be derived from dividends, interest, and gains from sales or other disposition of stock or securities, and that less than 30 percent of the company's gross income for the taxable year must have been derived from the sale or other disposition of stock or securities held for less than 6 months. (See section 48 (e) (1) (B) and (C) of the Act.) In determining the percentage of the company's gross income which has been derived from such sources a loss from the sale or other disposition of stock or securities does not enter into the computation. The determination of the period for which stock or securities have been held shall be governed by the provisions of section 117 (c) of the Act in so far as applicable. (c) The Act provides that an amount not less than 90 percent of the company's net income for the taxable year must have been distributed to its shareholders as taxable dividends during the taxable year. The term "taxable dividends" means dividends (as defined in section 115 of the Act) which are taxable in the hands of such shareholders as are subject to taxation under Title I of the Act, and includes the proportionate share of the net earnings of the current year to the date of redemption distributed to the shareholder upon redemption. A taxable dividend is not distributed to its shareholders during the taxable year within the meaning of section 48 (e) (1) (D) of the Act, unless the dividend is received by the shareholders during the taxable year of the company. See § 3.27 (a)-1, relating to the dividends paid credit allowed corporations. (d) The Act requires that shareholders must, upon reasonable notice, be entitled at all times during the taxable year to redemption or purchase of their stock for their proportionate interests in the corporation's properties, or the cash equivalent thereof, less a discount not in excess of 3 percent thereof. Redemption within 60 days of written notice is redemption upon reasonable notice, even though subject to exception in case of extraordinary crises. (e) Corporations are given 30 days after June 22, 1936, the date of the enactment of the Act, within which to comply with the provisions of section 48 (e) (2) of the Act. Although a corporation may be otherwise classified as a mutual investment company, it will not be considered such for any taxable year if at any time (after July 22, 1936) during the taxable year it failed to comply with section 48 (e) (2) of the Act.*+ 3.48 (e)-4 Records to be kept for purpose of ascertaining actual ownership of outstanding stock of mutual investment Page 206 **For statutory and source citations, see note to § 3.1-1. companies. Every mutual investment company shall maintain in the collection district in which it is required to file its income tax return permanent records showing the information relative to the actual owners of its stock contained in the written statements required by the regulations in this part to be demanded from the shareholders. The term "actual owner of stock," as used in the regulations in this part, includes the person who is required to include in gross income in his return the dividends received on the stock. All such records shall be open for inspection, by any duly authorized officer or employee of the Bureau of Internal Revenue, for a period of 4 years from the end of the taxable year of the company to which they relate. A mutual investment company shall demand of each of its shareholders (or in the case of a company all or substantially all of the capital stock of which is held by trustees for the purpose of exercising voting rights, such company shall demand of each of the registered holders of certificates of beneficial interest in the company) on or before the payment of any dividend made after 30 days from August 18, 1936, a written statement giving (a) the name and address of the actual owner, as of the date the shareholder becomes entitled to the dividend, whether payable then or later, of the stock with respect to which the dividend is payable, (b) the name and address of the person who executes the statement, and (c) the number of shares to which the statement pertains, or if the statement is made by the actual owner, the total number of shares actually owned by such person. At the time the first demand is made after the expiration of 30 days from August 18, 1936, a like statement shall be demanded with respect to any prior dividends paid within the taxable year.*† 3.48 (e)-5 Records kept to determine whether a company claiming to be a mutual investment company is a personal holding company. For the purpose of determining whether a company claiming to be a mutual investment company is a personal holding company as defined in section 351 of the Act, prior to the amendment of title IA of the Act by the Revenue Act of 1937, the permanent records of the company shall show the additional information required by the regulations in this part disclosing the maximum number of shares actually owned by each person at any time during the last half of the company's taxable year. In the case of an individual actual owner, the information shall give, to the best of the knowledge and belief of such owner, the names and addresses of, and the maximum number of shares actually owned by, each member of his family (as defined in section 351 (b) (1) of the Act prior to the amendment of title IA by the Revenue Act of 1937) at any time during the last half of the company's taxable year. In case the actual owner is a corporation, partnership, estate, or trust, the information shall also give the names and addresses and the proportionate interests of such share. holders, partners, or beneficiaries, who had beneficial interests to the extent of at least 10 percent at any time during the last half of the mutual investment company's taxable year. For the purpose of determining whether a foreign corporation claiming to be a mutual in **For statutory and source citations, see note to § 3.1-1. Page 207 vestment company with respect to a taxable year ending after August 26, 1937, is a foreign personal holding company as defined in section 331 of the Act, the permanent records of the foreign corporation with respect to taxable years ending after August 26, 1937, shall show, to the best of the knowledge and belief of the actual owners of its stock, the maximum number of shares of the corporation (including the number and face value of securities convertible into stock of the corporation) to be considered as constructively owned by each of the actual owners of any of its stock at any time during the corporation's taxable year, as provided in section 333 of the Act and §§ 3.333 (a)-1 to 3.337 (a)-7, § 3.333 (b)-1. For the purpose of determining whether a corporation claiming to be a mutual investment company with respect to a taxable year beginning after December 31, 1936, is a personal holding company as defined in section 352 of title IA of the Act, as amended by the Revenue Act of 1937, the permanent records of the corporation with respect to taxable years beginning after December 31, 1936, shall show, to the best of the knowledge and belief of the actual owners of its stock, the maximum number of shares of the corporation (including the number and face value of securities convertible into stock of the corporation) to be considered as constructively owned by each of the actual owners of any of its stock at any time during the last half of the corporation's taxable year as provided in section 354 of title IA of the Act, as amended by the Revenue Act of 1937, and §§ 3.354 (a)-1 to 3.354 (a)-7, § 3.354 (b)-1. Statements giving such additional information shall be demanded not later than 30 days after the close of the company's taxable year, as follows: (a) In the case of a company having 2,000 or more actual owners of its stock on any dividend payment date, as disclosed by statements received in response to demands made by the company as provided in § 3.48 (e)-4, from each person so disclosed or known to the company as the actual owner of 5 percent or more of its stock; or (b) in the case of a company having less than 2,000 and more than 200 actual owners of its stock as so disclosed, from each person so disclosed or known to the company as actually owning 1 percent or more of its stock; or (c) in the case of a company having 200 or less actual owners of its stock, from each person who is the actual owner of one-half of 1 percent or more of its stock. The provisions of the first paragraph of this section requiring statements to be demanded not later than 30 days after the close of the company's taxable year, in so far as such statements relate to the maximum number of shares of stock of the company to be considered as constructively owned by an individual at any time during the fiscal year of the company ending after August 26, 1937, and on or before November 30, 1937, shall be considered as having been complied with if such statements are demanded not later than January 31, 1938.*† [As amended by T.D. 4791, Jan. 14, 1938, 3 F.R. 103] 3.48 (e)-6 Additional information required in returns of shareholders. (a) Any person who fails or refuses to comply with the demand of a mutual investment company for the written statements which §§ 3.48 (e)-4, 3.48 (e)-5 require the company to demand Page 208 **For statutory and source citations, see note to § 3.1-1. from its shareholders shall submit as a part of the income tax return required by the Act of such person a statement showing, to the best of his knowledge and belief (1) The number of shares actually owned by him at any and all times during the period for which the return is filed in any company claiming to be a mutual investment company; (2) The dates of acquisition of any such stock during such period and the names and addresses of persons from whom it was acquired; (3) The dates of disposition of any such stock during such period and the names and addresses of the transferees thereof; (4) The names and addresses of the members of his family, as defined in section 351 of the Act prior to the amendment of title IA by the Revenue Act of 1937, relating to personal holding companies; and the maximum number of shares, if any, actually owned by each in any company claiming to be a mutual investment company, at any time during the last half of the taxable year of such company; (5) The names and addresses of any corporation, partnership, association, or trust in which he had a beneficial interest to the extent of at least 10 percent at any time during the period for which such return is made, and the number of shares of any company claiming to be a mutual investment company actually owned by each; (6) The amount and date of receipt of each dividend received during such period from every company claiming to be a mutual investment company; (7) For taxable years ending after August 26, 1937, the maximum number of shares (including the number and face value of securities convertible into stock of the company) in any foreign corporation claiming to be a mutual investment company to be considered as constructively owned by such individual at any time during the company's taxable year as provided in section 333 of the Act and §§ 3.333 (a)-1 to 3.333 (a)-7, 3.333 (b)-1; and (8) For taxable years beginning after December 31, 1936, the maximum number of shares (including the number and face value of securities convertible into stock of the corporation) in any domestic corporation claiming to be a mutual investment company to be considered as constructively owned by such individual at any time during the last half of the corporation's taxable year, as provided in section 354 of title IA of the Act, as amended, and §§ 3.354 (a)-1 to 3.354 (a)-7, 3.354 (b)-1. (b) When making demand for the written statements required of each shareholder under the regulations in this part, the company shall inform each of the shareholders of his duty to submit as a part of his income tax return the statements which are required by this section if he fails or refuses to comply with such demand. A list of the persons failing or refusing to comply in whole or in part with a company's demand shall be maintained as a part of its records required by the regulations in this part. A company which fails to keep such records to show the actual ownership of its outstanding stock as are required by the regulations in this part, or which may be required from time to time by any rule or regulation prescribed by the Commissioner, with the approval of the Secretary, Page 209 for such purpose, shall not be taxable as a mutual investment company. (c) Nothing in the regulations in this part shall be construed to relieve mutual investment companies or their shareholders from the duty of filing information returns required by regulations prescribed under sections 147 and 148 of the Act.*t [As amended by T.D. 4791, Jan. 14, 1938, 3 F.R. 103] SUBPART H-RETURNS AND PAYMENT OF TAX CROSS REFERENCES Additional exclusions from gross income: See §§ 3.116-1 to 3.116-3. Foreign corporations: See §§ 3.231-1 to 3.236-1. Gross income; net income: See §§ 3.21-1 to 3.22 (c)−8. Interest and additions to tax: See § 3.291-1. Nonresident aliens: See §§ 3.211-1 to 3.219-1. Returns and payment of tax: See 88 3.141-1 to 3.150-1. Surtax on personal holding companies: See 88 3.351-1 to 3.358-2. PART V-RETURNS AND PAYMENT OF TAX SEC. 51. INDIVIDUAL RETURNS. (a) Requirement. The following individuals shall each make under oath a return stating specifically the items of his gross income and the deductions and credits allowed under this title and such other information for the purpose of carrying out the provisions of this title as the Commissioner with the approval of the Secretary may by regulations prescribe (1) Every individual having a net income for the taxable year of $1,000 or over, if single, or if married and not living with husband or wife; (2) Every individual having a net income for the taxable year of $2,500 or over, if married and living with husband or wife; and (3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income. (b) Husband and wife. If a husband and wife living together have an aggregate net income for the taxable year of $2,500 or over, or an aggregate gross income for such year of $5,000 or over (1) Each shall make such a return, or (2) The income of each shall be included in a single joint return, in which case the tax shall be computed on the aggregate income. (c) Persons under disability. If the taxpayer is unable to make his own return, the return shall be made by a duly authorized agent or by the guardian or other person charged with the care of the person or property of such taxpayer. (d) Fiduciaries. For returns to be made by fiduciaries, see section 142. 3.51-1 Individual returns. For each taxable year every single person and every married person not living with husband or wife for any part of the taxable year, whose gross income as defined in sections 22 and 116 of the Act is $5,000 or over, or whose net income as defined in section 21 is $1,000 or over, must make a return of income. Every married person living with husband or wife for any part of the taxable year, but not at the close of the taxable year, must make a return if his gross income for the taxable year is $5,000 or more, or his net income is equal to, or in excess of, the credit allowed him by section 25 (b) (1) and (3) of the Act (computed without regard to his status as the head of a family). (See §3.25-7.) A Page 210 *For statutory and source citations, see note to § 3.1-1. |