Page:United States Statutes at Large Volume 53 Part 1.djvu/60

 48 CODIFICATION OF INTERNAL REVENUE LAWS (g) REDEMPTION OF STOCK. -I f a corporation cancels or redeems its stock (whether or not such stock was issued as a stock dividend) at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock, to the extent that it repre- sents a distribution of earnings or profits accumulated after Feb- ruary 28, 1913, shall be treated as a taxable dividend. (h) EFFECT ON EARNINGS AND PROFITS OF DISTRIBUTIONS OF STOCK.- The distribution (whether before January 1, 1939, or on or after such date) to a distributee by or on behalf of a corporation of its stock or securities, of stock or securities in another corporation, or of prop- erty or money, shall not be considered a distribution of earnings or profits of any corporation- (1) if no gain to such distributee from the receipt of such stock or securities, property or money, was recognized by law, or (2) if the distribution was not subject to tax in the hands of such distributee because it did not constitute income to him within the meaning of the Sixteenth Amendment to the Constitution or because exempt to him under section 115 (f) of the Revenue Act of 1934, 48 Stat. 712, or a corresponding provision of a prior Revenue Act. As used in this subsection the term "stock or securities" includes rights to acquire stock or securities. (i) DEFINITION OF PARTIAL LIQUIDATION. -As used in this section the term "amounts distributed in partial liquidation" means a dis- tribution by a corporation in complete cancellation or redemption of a part of its stock, or one of a series of distributions in complete cancellation or redemption of all or a portion of its stock. (j) VALUATION OF DIVIDEND.-If the whole or any part of a divi- dend is paid to a shareholder in any medium other than money the property received other than money shall be included in gross income at its fair market value at the time as of which it becomes income to the shareholder. (k) CONSENT DISTRIBUTIONS. - For taxability as dividends of amounts agreed to be included in gross income by shareholders' consents, see section 28. SEC. 116. EXCLUSIONS FROM GROSS INCOME. In addition to the items specified in section 22 (b), the following items shall not be included in gross income and shall be exempt from taxation under this chapter: (a) EARNED INCOME FROM SOURCES WITHOUT UNITED STATES. -In the case of an individual citizen of the United States, a bona fide nonresident of the United States for more than six months during the taxable year, amounts received from sources without the United States (except amounts paid by the United States or any agency thereof) if such amounts would constitute earned income as defined in section 25 (a) if received from sources within the United States; but such individual shall not be allowed as a deduction from his gross income any deductions properly allocable to or chargeable against amounts excluded from gross income under this subsection. (b) TEACHERS IN ALASIK AND HAWAII. - In the case of an indi- vidual employed by Alaska or Hawaii or any political subdivision thereof as a teacher in any educational institution, the compensation received as such. This subsection shall not exempt compensation paid directly or indirectly by the Government of the United States. (c) INCOME OF FOREIGN GOVERNMENTS.- The income of foreign governments received from investments in the United States in stocks, bonds, or other domestic securities, owned by such foreign governments, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments, or from any other source within the United States.

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