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actual and necessary expenses incurred in such proceeding out of any inheritance tax moneys in the hands of the county treasurer on order of the Superior Court.

$ 20. Treasurer Shall Pay State Treasurer-Report.-The treasurer of each county shall collect and pay the State treasurer all taxes that may be due and payable under this act, who shall give him a receipt therefor; of which collection and payment he shall make a report, under oath, to the controller, between the first and fifteenth days of May and December of each year, stating for what estate paid, and in such form and containing such particulars as the controller may prescribe; and for all such taxes collected by him and not paid. to the State treasurer by the first day of June and January of each year he shall pay interest at the rate of ten per centum per annum.

§ 21. Fees. The treasurer of each county shall be allowed to retain, on all taxes paid and accounted for by him each year under this act, in addition to his salary or fees now allowed by law, three per centum of the first $50,000 so paid and accounted for by him, one and one-half per centum on the next $50,000 so paid and accounted for by him, and one-half of one per centum on all additional sums so paid and accounted for by him; provided, that no county treasurer shall be entitled to retain to his own use more than the sum of $200 out of the inheritance taxes paid on account of any transfer or transfers made by, or resulting from the death of, any one decedent, nor more than $3,000 out of the total inheritance taxes accounted for in any one year.

§ 22. Special Counsel.-The State controller, whenever he shall be cited as a party in any proceeding or action to determine any tax under this act provided, or whenever he shall deem it necessary for the better enforcement of this act to make any special employment to secure evidence of evasion of said tax, or to commence or appear in any proceeding or action to determine any tax hereunder, may, by and with the consent and approval of the Attorney General, make such special employment or designate and employ counsel or attorney in or out of this State to represent him on behalf of the State, and, by and with such consent of the Attorney General, he is hereby authorized to incur the necessary expense for such employment and any reasonable and necessary expense incident thereto. And the county treasurer is hereby authorized and directed to pay out of any funds which may be in his hands on account of this tax, on presentation of a sworn itemized account and on certificate of the State controller and Attorney General, all expenses incurred as in this section above provided, but no expense for such special employment or legal services, up to and including the entry of the order of the court fixing the tax and the same becoming final, shall exceed ten per centum of the tax and penalties collected; provided, that all reasonable and necessary expenses incurred, in any legal action or proceeding in any court of this State or on any appeal therefrom, other than attorney's fees, including expense of serving processes and printing and preparing of necessary legal papers, may be allowed and paid in the

manner above provided, even though no tax be recovered in such action or proceeding, and the limitations herein made shall not apply thereto.

§ 23. Taxes Paid into State School Fund and General Fund.—All taxes levied and collected under this act, up to the amount of $250,000 annually, shall be paid into the treasury of the State, for the uses of the State school fund, and all taxes levied and collected in excess of $250,000 annually shall be paid into the State treasury to the credit of the general fund thereof.

§ 24. Officer Who Fails to Perform Duty Shall Forfeit $1,000.— Every officer who fails or refuses to perform, within a reasonable time, any and every duty required by the provisions of this act, or who fails or refuses to make and deliver within a reasonable time any statement or record required by this act, shall forfeit to the State of California the sum of $1,000, to be recovered in an action brought by the Attorney General in the name of the people of the State on the relation of the controller.

§ 25. Construction.-If any section, subsection, sentence, clause or phrase of this act is for any reason held to be unconstitutional, such decision shall not affect the validity of the remaining portions of this act. The legislature hereby declares that it would have passed this act, and each section, subsection, sentence, clause and phrase thereof, irrespective of the fact that any one or more other sections, subsections, sentences, clauses or phrases be declared unconstitutional.

§ 26. Repealing Clause.-An act entitled "An act to establish a tax on gifts, legacies, inheritances, bequests, devises, successions and transfers; to provide for its collection, and to direct the disposition of its proceeds; to provide for the enforcement of liens created by this act and for suits to quiet title against claims of lien arising hereunder; to repeal an act entitled 'An act to establish a tax on gifts, legacies, inheritances, bequests, devises, successions and transfers; to provide for its collection, and to direct the disposition of its proceeds; to provide for the enforcement of liens created by this act and for suits to quiet title against claims of lien arising hereunder; to repeal an act entitled "An act to establish a tax on collateral inheritances, bequests and devises; to provide for the collection, and to direct the disposition of its proceeds," approved March 23, 1893, and all amendments thereto, and to repeal all acts and parts of acts in conflict with this act,' approved March 20, 1905, and all amendments thereto and all acts and parts of acts in conflict with this act," approved April 7, 1911, and all amendments thereto, and all acts and parts of acts in conflict with this act are hereby expressly repealed; provided, however, that such repeal shall in nowise affect any suit, prosecution or court proceeding pending at the time this act shall take effect, or any right which the State of California may have at the time of the taking effect of this act, to claim a tax upon any property under the provisions of the act or acts hereby repealed, for which no proceeding has been commenced; nor affect any appeal, right of appeal in any suit pending, or orders fixing tax, existing in this State at the time of the taking effect of this act.

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RATES OF INHERITANCE TAXES AND
EXEMPTIONS.

(From Bancroft's Inheritance Taxes for Investors.)

Direct Inheritances.

Collateral Inheritances.

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1 1/2-15%

500-2000

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10000

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Delaware

Not taxed

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*Exemption in the states marked with an asterisk has been construed to apply to the estate as a whole rather than to individual shares.

(a)

state.

(b)

(e)

(d)

(6)

Connecticut. For nonresidents exemption varies according to portion of estate within the

Iowa taxes nonresident aliens 10-20%

Louisiana exempts property that bore its just proportion of taxes during owner's life.
North Carolina exempts husband or wife.

Oklahoma.-The tax increases progressively, so a literal construction would result in con

fiscation of all in excess of certain amounts in large estates.

(f)

(g)

Oregon exempts entire estate if less than 10,000, direct; 500-5,000, collateral.
Washington.-25% tax on nonresident a liens held invalid.

FEDERAL INCOME TAX-SCOPE AND

OPERATION.

By JOSEPH J. Scott, U. S. Collector of Internal Revenue.

In any consideration of the new Federal Income Tax thought should be given to the two distinct divisions of the tax, viz., the normal tax of one per cent on all net incomes in excess of the specified exemptions and the additional, or graduated tax on incomes above $20,000 a year at increasing percentages. The normal tax is assessable against both individuals and corporations; the additional tax against only individuals. In the abstract of the new law herewith given this distinction is drawn, and should be kept in mind. For convenience the term "Persons" is employed to designate individuals as contrasted with corporate taxpayers. The latter are assembled under the term "Corporations,' but in their number are included all corporations, joint-stock companies or associations, as well as insurance companies. Thus, the general reference to "persons" and "corporations" may be understood.

Persons Affected.-1. Every citizen of the United States, whether residing at home or abroad.

2. Every resident of the United States, though not a citizen.

3. Every resident of a foreign country deriving income from the United States.

Rates.-1. Normal tax of one per cent on all incomes in excess of $3,000 a year.

2. Additional tax according to the following scale:

(a) One per cent upon the amount by which net income exceeds $20,000 but does not exceed $50,000.

(b) Two per cent upon the amount by which net income exceeds $50,000 but does not exceed $75,000.

(c) Three per cent upon the amount by which net income exceeds $75,000 but does not exceed $100,000.

(d) Four per cent upon the amount by which net income exceeds $100,000 but does not exceed $250,000.

(e) Five per cent upon the amount by which net income exceeds $250,000 but does not exceed $500,000.

(f) Six per cent upon the amount by which net income exceeds $500,000.

What is Income?-In general the law takes cognizance of the following as constituting the income of persons:

1. Gains, profits and income derived from salaries, wage, or compensation for personal services of any kind.

2. From professions, vocations, businesses, trade and dealings in real and personal property.

3. From interest, rent, dividends, or securities, and the income from, but not the value of, property acquired by gift, bequest or descent.

Income not Taxable.-Proceeds of life insurance policies received by the beneficiary upon the death of the insured, or payments made to the insured on endowment or annuity contracts are not taxable.

Deductions for Persons.-Net income of persons for the purpose of the normal tax will be computed by deducting from gross income the following items:

1. Necessary and actual expenses of carrying on business (not including personal living or family expenses).

2. All interest paid during the year on indebtedness.

3. All national, state, county, school and municipal taxes. (Not including taxes assessed against local benefits.)

4. Losses in trade or by fire, storm or shipwreck, not compensated for by insurance or otherwise.

5. Worthless accounts actually charged off during the year.

6. Reasonable allowance for exhaustion, wear and tear of property through use. In the case of mines the allowance for depletion of ores and other natural deposits shall not exceed five per cent of the value at the mine of the output for the year. This provision also covers oil wells. Under no circumstances is a deduction allowed for any amount paid out for new buildings or permanent improvements.

7. Dividends on stock or from the net earnings of any corporation taxable on its net income. The personal return must, however, include such dividends in order that they may be considered in the computation of the additional tax for individuals. As far as the normal tax for individuals is concerned such dividends are not considered a part of personal incomes, being taxed to that extent by direct assessment against the corporations.

8. Amount of income upon which the tax has been paid or withheld for payment at the source.

9. General exemption of $3,000. Then $1,000 extra if the person making the return have a wife living with him, or a husband living with her. However, should both husband and wife have taxable incomes and be living together, the total exemption is $4,000.

Collection at Source. The general provision is that the normal tax of one per cent shall be withheld by all persons, firms, copartnerships, companies, corporations, joint-stock companies or associations, and insurance companies, in whatever capacity acting. This also applies to lessees or mortgagors of real or personal property, to trustees, executors, administrators, agents, receivers, conservators and employees, having the control, receipt, custody, disposal or payment of interest, rent, salaries, wages, premiums, annuities, or other fixed or determinable annual income of another person exceeding $3,000 for the taxable year. Must Claim Deductions.-The person whose income tax is thus withheld must, in order to receive the benefit of the exemption of $3,000 (plus $1,000 for a wife or husband) file with the withholding power a claim in writing at least thirty days before the return is due. This means thirty days prior to March 1st.

As to the privilege of the person affected by the withholding provision to avail himself of the other detailed deductions, the law provides that a statement in writing shall be filed with the withholding power setting forth the person's income from all other sources and specifying the deductions asked for. The statement will then become a

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