52 STAT.] 75TH CONG. , 3D SESS.-CH. 2S9--MAY 28, 1938 SEC. 13 . TAX ON CORPORATIONS IN GENERAL. (a) ADJUSTED NET INCOME.-For the purposes of this title the term "Adjusted n "adjusted net income" means the net income minus the credit pro- ost,d p.fi47. vided in section 26 (a), relating to interest on certain obligations of the United States and Government corporations. (b) IMPOSITION OF TAx. - There shall be levied, collected, and paid Imposition of for each taxable year upon the net income of every corporation the net income of which is more than $25,000 (except a corporation sub- ject to the tax imposed by section 14, section 231 (a), Supplement G, P0, PP- 454 or Supplement Q) a tax computed under subsection (c) of this section 52 or a tax computed under subsection (d) of this section, whichever tax is the lesser. (c) GENERAL RULE.- T he tax computed under this subsection shall General rule. be as follows: (1) A tentative tax shall first be computed equal to 19 per Tentative tax centum of the adjusted net income. putation. (2) The tax shall be the tentative tax reduced by the sum of- Credits. (A) 161/2 per centum of the credit for dividends received provided in section 26 (b); and (B) 21/2 per centum of the dividends paid credit provided in section 27, but not to exceed 21/2 per centum of the adjusted net income. (d) ALTERNATIVE TAX (CORPORATIONS WITH NET INCOME SLIGHTLY Alternative ta fMORE THAN $25,000).- net income sl (1) If no portion of the gross income consists of interest moremthaun$, allowed as a credit by section 26 (a) (relating to interest on cer- Poa, p. 467. tain obligations of the United States and Government corpora- tions), or of dividends of the class with respect to which credit is allowed by section 26 (b), then the tax computed under this subsection shall be equal to $3,525, plus 32 per centum of the amount of the net income in excess of $25,000. (2) If any portion of the gross income consists of such interest nirOsico or dividends, then the tax computed under this subsection shall dividends. be as follows: Computation. (A) The net income shall be divided into two divisions, the first division consisting of $25,000, and the second division consisting of the remainder of the net income. (B) To the first division shall be allocated, until an aggre- gate of $25,000 has been so allocated: First, the portion of the gross income consisting of such interest; second, the por- tion of the gross income consisting of such dividends; and third, an amount equal to the excess, if any, of $25,000 over the amounts already allocated to the first division. (C) To the second division shall be allocated, until there has been so allocated an aggregate equal to the excess of the net income over $25,000: First, the portion of the gross income consisting of such interest which is not already allo- cated to the first division; second, the portion of the gross income consisting of such dividends which is not already allocated to the first division; and third, an amount equal to the excess, if any, of the net income over the sum of $25,000 plus the amounts already allocated to the second division. (D) The tax shall be equal to the sum of the following: (i) A tax on the $25,000 allocated to the first division, computed under section 14 (c), on the basis of the alloca- tion made to the first division and as if the amount so allocated constituted the entire net income of the corporation. 455 Corporations in gen- eral et in- tax. 8, 630,
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