54 STAT.] 76TH CONG., 3D SESS.-CH. 757-OCT. 8 , 1940 977 "(C) Income Taxes. - The deduction for taxes shall be Incometaxes. increased by an amount equal to the tax (not including the tax under section 102) under Chapter 1 for such taxable 3 Stat.35 . 26 U. S. C., Supp. year; v, §102. "(D) Long-term Gains and Losses.-There shall be Long-termgainsand excluded long-term capital gains and losses. There shall be losse excluded the excess of gains from the sale or exchange of property held for more than eighteen months which is of a character which is subject to the allowance for depreciation provided in section 23 (1) over the losses from the sale or s3Stat. 14. 26 U. S. C., Supp. exchange of such property; Vg.23cs u pp . "(E) Income From Retirement or Discharge of Bonds, men discharge of and So Forth.-There shall be excluded, in the case of any bonds, etc. taxpayer, income derived from the retirement or discharge by the taxpayer of any bond, debenture, note, or certificate or other evidence of indebtedness, if the obligation of the taxpayer has been outstanding for more than eighteen months, including? in case the issuance was at a premium, the amount includible in income for such year solely because of such retirement or discharge; "(F) Refunds and Interest on Agricultural Adjustment Reunds and inter- Act Taxes.- There shall be excluded income attributable to Adjstment Acttaxes. refund of tax paid under the Agricultural Adjustment Act 7 US. C . , ch. 26; of 1933, as amended, and interest upon any such refund; Supp. V,ch. 26. "(G) Interest on Certain Government Obligations.-The Interest on certain Government obliga- normal-tax net income shall be increased by an amount equal tions. bga- to the amount of the interest on obligations held during the taxable year which are described in section 22 (b) (4) any 53 tat 10 part of the interest from which is excludible from gross v, 22(b)(4).' Sp income or allowable as a credit against net income, if the taxpayer has so elected under section 720 (d); and Po, p. 85. "(H) Recoveries of Bad Debts.- There shall be excluded Recoveies of bad income attributable to the recovery of a bad debt if a deduc- deb tion with reference to such debt was allowable from gross income for any taxable year beginning prior to January 1, 1940. "(3) TAXABLE YEAR LESS THAN TWELVE MONTHS.-If the taxable thanle'ontya le s year is a period of less than twelve months the excess profits net income shall be placed on an annual basis by multiplying the amount thereof by the number of days in the twelve months ending with the close of the taxable year and dividing by the number of days in the taxable year. The tax shall be such part of the tax computed on such annual basis as the number of days in the taxable year is of the number of days in the twelve months ending with the close of the taxable year. "(b) TAXABLE YEARS IN BASE PERIOD.- bae period.a "(1) GENERAL RULE AND ADJUSTMENTS.- The excess profits net cneral rule and income for any taxable year subject to the Revenue Act of 1936 d49 tat. 1655. shall be the normal-tax net income, as defined in section 13 (a) v26 . c(., snpp. of such Act; and for any other taxable year beginning after December 31, 1937, and before January 1, 1940, shall be the special-class net income, as defined in section 14 (a) of the 3 SUat..8 p. applicable revenue law. In either case the following adjustments v, 14 (a). shall be made (for additional adjustments in case of certain reorganizations, see section 742 (e)): Pot,p. 93. "(A) Income Taxes.- The deduction for taxes shall be Incometaxes. increased by an amount equal to the tax (not including the tax under section 102) for such taxable year under Title I or S26 s5. .Spp. Chapter 1, as the case may be, of the revenue law applicable v, 102. to such year; 193470°-41-PT . I-62
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