PUBLIC LAWS-CH. 289-MAY 28, 1938 Post, p. 518 . Charitable, etc., con- tributions by corpora- tions. Restriction. Dividends of certain banking corporations. Post, p. 506. Items not deduct- ible. General rule. Personal, etc., ex- penses. Property improve- ments, etc. Property restora- tion, etc. Life insurance pre- miums for employees. Deductions alloca- ble to tax-exempt in- comes. Losses from sales or exchanges. Losses disallowed. Between members of family. Post, p. 465. Individual and cor- poration. Personal holding companies. year of the transfer or payment or a subsequent year) of the employer ending within or with a taxable year of the trust with respect to which the trust is exempt from tax under section 165. (q) CHARITABLE AND OTHER CONTRIBUTIONS BY CORPORATIONS.- In the case of a corporation, contributions or gifts payment of which is made within the taxable year to or for the use of a domestic corpora- tion, or domestic trust, or domestic community chest, fund, or founda- tion, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes or the prevention of cruelty to children (but in the case of contributions or gifts to a trust, chest, fund, or foundation only if such contributions or gifts are to be used within the United States exclusively for such purposes), no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation; to an amount which does not exceed 5 per centum of the taxpayer's net income as computed without the benefit of this subsection. Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Commissioner, with the approval of the Secretary. (r) For deduction of dividends paid by certain banking corpora- tions, see section 121. SEC. 24. ITEMS NOT DEDUCTIBLE. (a) GENERAL RULE. -In computing net income no deduction shall in any case be allowed in respect of- (1) Personal, living, or family expenses; (2) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate; (3) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; (4) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such policy; or (5) Any amount otherwise allowable as a deduction which is allocable to one or more classes of income other than interest (whether or not any amount of income of that class or classes is received or accrued) wholly exempt from the taxes imposed by this title. (b) LossES FROM SALES OR EXCHANGES OF PROPERTY.- (1) LOSSES DISALLOWED.-In computing net income no deduc- tion shall in any case be allowed in respect of losses from sales or exchanges of property, directly or indirectly- (A) Between members of a family, as defined in para- graph (2) (D) (B) Except in the case of distributions in liquidation, between an individual and a corporation more than 50 per centum in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual; (C) Except in the case of distributions in liquidation, between two corporations more than 50 per centum in value of the outstanding stock of each of which is owned, directly or indirectly, by or for the same individual, if either one of 464 [52 STAT.
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