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APPENDIX B -- PROPOSED SCHEDULES AND EXAMPLES

Schedule C

Statement of Gains, Where There Are No Losses, from Sale (or
Exchange) of Assets (In cases where there are losses and no gains
from sale (or Exchange) of assets, this form may be used by treating
losses as gains after inserting a minus sign before each loss)

1. DESCRIPTION OF        2. DATE ACQUIRED      3. DATE SOLD
    PROPERTY AND                               OR EXCHANGED
    PERIOD HELD

                       4. GROSS SALES PRICE    5. COST OR MARCH 1,
                          (Contract price)        1913, VALUE IF
                                                  ACQUIRED BEFORE
                                                    THAT DATE.
                                              (Indicate basis) /**/

                       6. COST OF IMPROVEMENTS     7. DEPRECIATION
                             SUBSEQUENT TO             ALLOWED
                            ACQUISITION OR          (OR ALLOWABLE)
                             MARCH 1, 1913        SINCE ACQUISITION
                                                   OR MARCH 1, 1913
                                                  (Furnish details)

                     8. Gain   9. No. of years   10. Weighted gains
                                   held /*/       (Col. 8 X Col. 9)

Partnerships &
fiduciaries

1. Total                                                  XXXXXX

2. Average investment period for gains /*/
   (Line 1, Col. 10 divided by Col. 8)

3. Average annual gain
   (Line 1, Col. 8 divided by line 2)

4. Surtax net income
   (From item 24 page 1 of return; if none, enter a zero)

5. Surtax net income plus net average annual gain
   (Line 3 plus line 4)

6. Tentative tax on line 5 (Use rate schedule below)

7. Tentative tax on line 4 (Use rate schedule below)

8. Tax on average annual gain (Line 6 minus line 7)

9. Total tax on capital gains (Line 8 multiplied by line 2)

                          FOOTNOTE TO TABLE

     /*/ Disregard fractional parts of a year unless they amount to
one-half or more, in which case, count them as a full year.

                           END OF FOOTNOTE

Schedule C - Part 1

Statement of Gains and Losses from Sale (or Exchange) of Assets

1. DESCRIPTION OF        2. DATE ACQUIRED      3. DATE SOLD
    PROPERTY AND                               OR EXCHANGED
    PERIOD HELD

                       4. GROSS SALES PRICE    5. COST OR MARCH 1,
                          (Contract price)        1913, VALUE IF
                                                  ACQUIRED BEFORE
                                                    THAT DATE.
                                              (Indicate basis) /**/

                       6. COST OF IMPROVEMENTS     7. DEPRECIATION
                             SUBSEQUENT TO             ALLOWED
                            ACQUISITION OR          (OR ALLOWABLE)
                             MARCH 1, 1913        SINCE ACQUISITION
                                                   OR MARCH 1, 1913
                                                  (Furnish details)

                         8. Gain      9. Loss      10. No. of years
                                                        held /*/

                         11. Weighted gains     12. Weighted losses
                         (Col. 8 X Col. 10)      (Col. 9 X Col. 10)

Partnerships &
fiduciaries

1. Total                                                  XXXXXX

2. Average Investment period for gains /*/
   (Line 1, Col. 11 divided by Col. 8)

3. Average investment period for losses /*/
   (Line 1, Col. 12 divided by Col. 9)

4. Average annual gain (Line 1, Col. 8 divided by line 2)

5. Average annual loss (Line 1, Col. 9 divided by line 3)

6. Net average annual gain or loss (Line 4 minus line 5;
   if line 5 exceeds line 4, indicate net average annual
   loss by using minus sign)

7. Average annual gain or loss for longer investment
   period (Enter line 4 if line 2 is greater than line 3;
   otherwise enter line 5, preceded by a minus sign)

                          FOOTNOTE TO TABLE

     /*/ Disregard fractional parts of a year unless they amount to
one-half or more, in which case, count them as a full year

                           END OF FOOTNOTE

Schedule C -- Part 2 /*/

Computation of Tax or Tax Credit on Capital Gains and Losses

8. Surtax net income (From item 24 page 1 of return;
   if none, enter a zero)

9. Surtax net income adjusted for net average annual
   gain or loss (Line 6 plus line 8)

10. Tentative tax on line 9 (Use rate schedule below)

11. Surtax net income adjusted for average annual gain
    or loss for longer average investment period
    (Line 7 plus line 8)

12. Tentative tax on line 11 (Use rate schedule below)

13. Tentative tax on line 8 (Use rate schedule below)

14. Annual tax or tax credit with respect to shorter
    average investment period (Line 10 minus line 12)

15. Total tax or tax credit with respect to shorter
    average investment period (Line 14 multiplied by
    line 2 or line 3, whichever is smaller)

16. Annual tax or tax credit with respect to longer
    average investment period (Line 12 minus line 13)

17. Total tax or tax credit with respect to longer
    average investment period (Line 16 multiplied by
    line 2 or line 3, whichever is greater)

18. Aggregate tax or tax credit on capital gains and
    losses (Line 15 plus line 17)

                          FOOTNOTE TO TABLE

     /*/ For a discussion of the tax computation procedure followed
in this schedule, see page 69.

                           END OF FOOTNOTE

Combined normal tax and surtax rates /*/


   Amount of                           Rate           Total normal
surtax net income                    (percent)       tax and surtax

0 -- 4,000                                4                  $160
14,000 -- 6,000                           8                   320
6,000 -- 8,000                            9                   500
8,000 -- 10,000                          10                   700
10,000 -- 12,000                         11                   920
12,000 -- 14,000                         12                 1,160
14,000 -- 16,000                         13                 1,420
16,000 -- 18,000                         15                 1,720
18,000 -- 20,000                         17                 2,060
20,000 -- 22,000                         19                 2,440
22,000 -- 26,000                         21                 3,280
26,000 -- 32,000                         23                 4,660
32,000 -- 38,000                         25                 6,160
38,000 -- 44,000                         28                 7,840
44,000 -- 50,000                         31                 9,700
50,000 -- 56,000                         35                11,800
56,000 -- 62,000                         39                14,140
62,000 -- 68,000                         43                16,720
68,000 -- 74,000                         47                19,540
74,000 -- 80,000                         51                22,600
80,000 -- 90,000                         55                28,100
90,000 -- 100,000                        59                34,000
100,000 -- 150,000                       62                65,000
150,000 -- 200,000                       64                97,000
200,000 -- 250,000                       66               130,000
250,000 -- 300,000                       68               164,000
300,000 -- 400,000                       70               234,000
400,000 -- 500,000                       72               306,000
500,000 -- 750,000                       74               491,000
750,000 -- 1,000,000                     76               681,000
1,000,000 -- 2,000,000                   77             1,451,000
2,000,000 -- 5,000,000                   78             3,791,000
5,000,000 and over                       79

                          FOOTNOTE TO TABLE

     Note: Where the amount to be subjected to tax is preceded by a
minus sign, compute the tax disregarding the minus sign, then insert
a minus sign before the resulting tax to indicate a tax credit.

     /*/ In order to simplify as much as possible the actual tax
computation for the taxpayer, it is advisable to print in the
capital gains schedule a table showing the combined normal and
surtax rates. It is possible to combine the two rates because the
recommended treatment disallows, in computing the tax or tax credit
on capital gains and losses, any portions of the personal exemption
and credit for dependents, and the minimum earned income credit,
which are not utilized in computing the tax on ordinary income.

                           END OF FOOTNOTE

Note On Tax Computation Procedure Used In Part 2 Of Proposed Schedule

The tax computation procedure described in the recommended plan may be shown symbolically as follows:


     Let T = total tax on capital gains.

     Let S = number of years in shorter average investment period.

     Let L = number of years in longer average investment period.

     Let O = total tax on surtax net income.

     Let A = total tax on sum of surtax net income, average annual
             gain, and average annual loss.

     Let B = total tax on sum of surtax net income and average
             annual gain or average annual loss, whichever accrued
             for the longer average investment period.

     Then, T= S(A -- O) + (L -- S)(B -- O)

     or, T = SA -- OS + LB -- SB + OS -- OL

     from which, T = SA + LB -- SB -- OL

     or, T = S(A -- B) + L(B -- O)

This latter tax procedure has been adopted in the proposed schedule (Schedule C, Part 2; see page 67) because it produces identical results with the tax procedure under the recommended plan while substituting simpler computations.

Illustrative Examples

For purposes of illustrating the operation of the recommended plan for the tax treatment of the capital gains and losses of individuals, twelve cases, with varying assumptions respecting surtax net income and capital gains and losses, have been chosen. These cases, which follow immediately, are reported in the same form as the proposed schedules for capital gains. The assumptions for each case appear in the respective schedules.

It will be noted that Cases I and II have capital gains and no capital losses; Cases III and IV, capital losses and no capital gains; and Cases V through X both capital gains and capital losses. Cases I, III, V, and VIII have no surtax net income, while the remaining cases have surtax net incomes of varying amounts.

Cases I and II Schedule C

Statement of Gains, Where There Are No Losses, From Sale (or Exchange) of Assets

(In cases where there are losses and no gains from sale (or exchange) of assets, this form may be used by treating losses as gains after inserting a minus sign before each loss)


                                g. Gain       9.           10.
                                            No. of       Weighted
                                             years      gains (Col.
                                           held /*/     8 x Col. 9)

                                - 2,000          1          - 2,000
                                - 3,000          2          - 6,000
                                - 4,000          3         - 12,000
                                - 5,000          4         - 20,000
                                - 1,000          5          - 5,000
                                - 5,000          6         - 30,000
                               - 70,000          7        - 490,000
                               - 10,000          8         - 80,000
                                - 5,000          9         - 45,000
                                - 5,000         10         - 50,000
1. Total                        110,000     XXXXXX          740,000

                                            Case I          Case II

2. Average investment period for                 7                7
   gains /*/ (Line 1, Col. 10
   divided by Col. 8)

3. Average annual gain (Line 1,             15,714           15,714
   Col. 8 divided byline 2)

4. Surtax net income (From item 24               0           10,000
   page 1 of return; if none,
   enter a zero)

5. Surtax net income plus net               15,714            5,714
   average annual gain (Line 3
   plus line 4)

6. Tentative tax on line 5                   1,383            3,220
   (Use rate schedule below)

7. Tentative tax on line 4                       0              700
   (Use rate schedule below)

8. Tax on average annual gain                1,383            2,520
   (Line 6 minus line 7)

9. Total tax on capital gains                9,681           17,640
   (Line 8 multiplied by line 2)

                          FOOTNOTE TO TABLE

     /*/ Disregard fractional parts of a year unless they amount to
one-half or more, in which case, count them as a full year.

                           END OF FOOTNOTE

Cases III and IV Schedule C

Statement of Gains, Where There Are No Losses, from Sale (or Exchange) of Assets

(In cases where there are losses and no gains from sale (or exchange) of assets, this form may be used by treating losses as gains sifter inserting a minus sign before each loss)


                                g. Gain       9.           10.
                                            No. of       Weighted
                                             years      gains (Col.
                                           held /*/     8 x Col. 9)

                                - 2,000          1          - 2,000
                                - 3,000          2          - 6,000
                                - 4,000          3         - 12,000
                                - 5,000          4         - 20,000
                                - 1,000          5          - 5,000
                                - 5,000          6         - 30,000
                                - 7,000          7        - 490,000
                               - 10,000          8         - 80,000
                                - 5,000          9         - 45,000
                                - 5,000         10         - 50,000
1. Total                       -110,000     XXXXXX        - 740,000

                                          Case III          Case IV

2. Average investment period                     7                7
   for gains /*/ (Line 1, Col.
   10 dividend by Col. 8)

3. Average annual gain (Line 1,           - 15,714         - 15,714
   Col. 8 divided by line 2)

4. Surtax net income (From                       0           10,000
   item 24 page 1 of return;
   if none, enter a zero)

5. Surtax net income plus                 - 15,714          - 5,714
   net average annual gain
   (Line 3 plus line 4)

6. Tentative tax on line 5                 - 1,383            - 297
   (Use rate schedule below)

7. Tentative tax on line 4                       0              700
   (Use rate schedule below)

8. Tax on average annual gain              - 1,383            - 997
   (Line 6 minus line 7)

9. Total tax on capital gains              - 9,681          - 6,979
   (Line 8 multiplied by line 2)

                          FOOTNOTE TO TABLE

     /*/ Disregard fractional parts of a year unless they amount to
one-half or more, in which case, count them as a full year.

                           END OF FOOTNOTE

Cases V, VI and VII Schedule C -- Part 1

Statement of Gains and Losses from Sale (or Exchange) of Assets


            g Gain      9.       10.            11.           12.
                      Loss      No. of       Weighted      Weighted
                                years         gains         losses
                               held /*/     (Col. 8g X    (Col. 9 x
                                             Col. 10)      Col. 10)

             2,000                   1          2,000
             3,000                   2          6,000
             4,000                   3         12,000
             5,000                   4         20,000
             1,000                   5          5,000
             5,000                   6         30,000
                      70,000         7                      490,000
            10,000                   8         80,000
                       5,000         9                       45,000
                       5,000        10                       50,000
1. Total    30,000    80,000    XXXXXX        155,000       585,000

2. Average investment period for gains /*/                        5
   (Line 1, Col. 11 divided by Col. 8)

3. Average investment period for losses /*/                       7
   (Line 1, Col. 12 divided by Col. 9)

4. Average annual gain (Line 1, Col. 8                        6,000
   divided by line 2)

5. Average annual loss (Line 1, Col. 9                       11,429
   divided by line 3)

6. Net average annual gain or loss                          - 5,429
   (Line 4 minus line 5; if line 5 exceeds
   line 4, indicate net average annual loss
   by using minus sign)

7. Average annual gain or loss for longer                  - 11,429
   investment period (Enter line 4 if line 2
   is greater than line 3; otherwise enter
   line 5, preceded by a minus sign)

                          FOOTNOTE TO TABLE

     /*/ Disregard fractional parts of a year unless they amount to
one-half or more, in which case, count them as a full year.

                           END OF FOOTNOTE

Cases V, VI, and VII Schedule C -- Part 2

Computation of Tax or Tax Credit on Capital Gains and Losses


                                 Case V      Case VI      Case VII

8. Surtax net income (From            0       10,000        100,000
   item 24, page 1 of
   return; if none, enter
   a zero)

9. Surtax net income            - 5,429        4,571         94,571
   adjusted for net
   average annual gain
   or loss (Line 6 plus
   line 8)

10. Tentative tax on              - 274          206         30,797
    line 9 (Use rate
    schedule below)

11. Surtax net income          - 11,429      - 1,429         88,571
    adjusted for average
    annual gain or loss for
    longer average
    investment period (Line
    7 plus line 8)

12. Tentative tax on line         - 857         - 57         27,314
    11 (Use rate schedule
    below)

13. Tentative tax on line             0          700         34,000
    8 (Use rate schedule
    below)

14. Annual tax or tax               583          263          3,483
    credit with respect to
    shorter average
    investment period
    (Line 10 minus line 12)

15. Total tax or tax credit       2,915        1,315         17,415
    with respect to shorter
    average investment
    period (Line 14
    multiplied by line 2 or
    line 3, whichever is
    smaller)

16. Annual tax or tax             - 857        - 757        - 6,686
    credit with respect to
    longer average
    investment period
    (Line 12 minus line 13)

17. Total tax or tax credit     - 5,999      - 5,299       - 46,802
    with respect to longer
    average investment
    period (Line 16
    multiplied by line 2 or
    line 3, whichever
    is greater)

18. Aggregate tax or tax        - 3,084     - 3,984        - 29,387
    credit on capital gains
    and losses (Line 15
    plus line 17)

Cases VII, IX and X Schedule C - Part 1

Statement of Gains and Losses from Sale (or Exchange) of Assets


            g. Gain      9.      10.            11.           12.
                       Loss     No. of       Weighted      Weighted
                                years         gains         losses
                               held /*/     (Col. 8 X     (Col. 9 X
                                             Col. 10)      Col. 10)

             2,000                   1          2,000
             3,000                   2          6,000
             4,000                   3         12,000
             5,000                   4         20,000
             1,000                   5          5,000
             5,000                   6         30,000
            70,000                   7        490,000
            10,000                   8         80,000
                       5,000         9                       45,000
                       5,000        10                       50,000
1. Total   100,000    10,000    XXXXXX        645,000        95,000

2. Average investment period for gains /*/                        6
   (Line 1, Col. 11 divided by Col. 8)

3. Average investment period for losses /*/                      10
   (Line 1, Col. 12 divided by Col. 9)

4. Average annual gain (Line 1, Col. 8 divided               16,667
   by line 2)

5. Average annual loss (Line 1, Col. 9 divided                1,000
   by line 3)

6. Net average annual gain or loss (Line 4                   15,667
   minus line 5; if line 5 exceeds line 4,
   indicate net average annual loss by using
   minus sign)

7. Average annual gain or loss for longer                   - 1,000
   investment period (Enter line 4 if line 2
   is greater than line 3; otherwise enter
   line 5, preceded by a minus sign)

                          FOOTNOTE TO TABLE

     /*/ Disregard fractional parts of a year unless they amount to
one-half or more, in which case, count them as a full year.

                           END OF FOOTNOTE

Cases VIII, IX and X
Schedule C -- Part 2

Computation of Tax or Tax Credit on Capital Gains and Losses

                                  Case VIII     Case IX     Case  X

8. Surtax net income                    0        10,000     100,000
   (From item 24, page 1
   of return; if none,
   enter a zero)

9. Surtax net income               15,667        25,667     115,667
   adjusted for net
   average annual gain
   or loss (Line 6 plus
   line 8)

10. Tentative tax on                1,377         3,210      43,714
    line 9 (Use rate
    schedule below)

11. Surtax net income              -1,000         9,000      99,000
    adjusted for average
    annual gain or loss
    for longer average
    investment period
    (Line 7 plus line 8)

12. Tentative tax on line             -40           600      33,410
    11 (Use rate schedule
    below)

13. Tentative tax on line               0           700      34,000
    8 (Use rate schedule
    below)

14. Annual tax or tax               1,417         2,610      10,304
    credit with respect
    to shorter average
    investment period
    (Line 10 minus line 12)

15. Total tax or tax credit         8,502        15,660      61,824
    with respect to shorter
    average investment period
    (Line 14 multiplied by
    line 2 or line 3,
    whichever is smaller)

16. Annual tax or tax credit          -40          -100        -590
    with respect to longer
    average investment period
    (Line 12 minus line 13)

17. Total tax or tax credit          -400        -1,000      -5,900
    with respect to longer
    average investment period
    (Line 16 multiplied by
    line 2 or line 3,
    whichever is greater)

18. Aggregate tax or tax            8,102        14,660      55,924
    credit on capital gains
    and losses (Line 15
    plus line 17)
 
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