Page:United States Statutes at Large Volume 49 Part 1.djvu/1707

 1662 Div ide nds of certain banking corporations. Post, p.1696. Itemsnot deductible. Personal, etc ., ex- penses . Property improve- ments, etc. Restoring property. Life insurance premi- ums foremployees. Dedu cti ons allo cab le to tax-exempt incomes. Prop ert y lo sses fr om sales,etc., between members of family shar ehold er and cor - poration. Definitions. Holde rs of life or terminable interest. Deductions on in- c ome acquired by gift, e tc. Ante, p. 1660. Tax withheld on ta x- free covenant bonds. Post, p. 1701. Credits allowed in- dividuals. Normal tax only. Interest on Federal obligations. Ante, p. 1657. Interest on obliga- tions of Federal instru- mentalities. 74TH C ONGRESS. SESS. II. CH. 690 . JUNE 22, 1936 . (r) For deduction of dividends paid by certain banking corpora- tions, see se cti on 121. SEC. 24. ITE MS NOT DEDUCTIBLE. (a) G ENER AL RULE .-I n computing net incom e no deduct ion shall in an( case be allowed in respect of ) Per sonal , li ving, or famil y expenses ; (2) Any amount pa id out for new buildings or for permanent improvements or bet te rme nts m ade to increase the value of any pr opert y or esta te ; (3) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has be en made ; ) Prem iums pai d on any life ins uran ce p olicy cov erin g the life (40 f any officer or employee, or of any per son financial ly inter- ested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under suc h policy ; (5) Any amo unt otherwise allowable as a deduction wh ich is alloc able to one or more c lasses of income othe r than int erest (whether or not any amount of income of that class or classes is received or accrued) wholly exempt fr om the taxes imposed by this title ; or (6) Loss from sales or exchanges of property, directly or in dire ctly , (A) bet ween mem bers of a fam ily, or (B) exce pt in the ca se of distrib utions in liq uidation, bet ween an indiv idual and a corporation in which such individual owns, directly or indirectly, more than 50 per centum in value of the outstanding stock. For the pur po se of th is pa rag ra ph- (C) an individual sha ll be con- sidered as owning the stock owned, directly or indirectly, by his family ; and (D) the family of an individual shall include * only his b rothers and sisters ( whether by the whole or half bl ood), spouse, an cestors, and lineal descen dants. (b) HOLDE RS OF L IFE OR T ERMI NAB LE I NTER EST. ---A moun ts pa id under the laws of any State, Territory, District of Columbia, pos- session of the United States, or foreign country as income to the ho lder of a life or termi nabl e int eres t acq uire d by gift , beq uest , or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction allowed by this Act (except the deductions provided for in subsections (1) and (m) of s ect ion 23) for the pur pos e of com put ing the net income of an estate or trust but not allowed under the laws of such State, Territory, District of Columbia, possession of the United States, or foreign country for the purpose of computing the income to which such holder is entitled. (c) TAX WITHHELD ON TAX-FREE COVENANT BONDS .-For nonde- ductibility of tax withheld on tax-free covenant bonds, see section 143 (a) (3) . SEC. 25. CREDITS OF INDIVIDUAL AGAINST NET INCOME. (a) CR EDITS FOR NORM AL TAX ONLY .-There shall be allowed for the purpose of the normal tax, but not for the s urt ax, the fol low ing credits again st the net in come (1) INTEREST ON UNI TED STATE S OBLIGA TIONS .-Th e amoun t received as interest upon obligations of the United States which is i nclu ded in gr oss income und er s ectio n 22. (2) INTEREST ON OBLIGATIONS OF INSTRIIMENTALITIES OF THE UNIT ED STATES .-The amount received as interest on obligations of a corp orat ion orga nize d und er Act of Co ngre ss, if (A) such