(2) If by the terms of such contract no part of the proceeds from the operation of the bridge for the taxable year would, irrespective of the tax imposed by this chapter, accrue directly to or for the use of or be applied for the benefit of such State or political subdi- vision, then the tax upon the net income from the operation of such bridge shall be levied, assessed, collected, and paid in the manner and at the rates prescribed in this chapter. (f) DIVIDEND FROM "CHINA TRADE ACT" CORPORATION. -In the case of a person, amounts distributed as dividends to or for his benefit by a corporation organized under the China Trade Act, 1922, 42 Stat. 849 (U. S . C ., Title 15, c. 4), if, at the time of such distri- bution, he is a resident of China, and the equitable right to the income of the shares of stock of the corporation is in good faith vested in him. (g) SHIPOWNERS' PROTECTION AND INDEMNITY ASSOCIATIONS. - The receipts of shipowners' mutual protection and indemnity asso- ciations not organized for profit, and no part of the net earnings of which inures to the benefit of any private shareholder; but such corporations shall be subject as other persons to the tax upon their net income from interest, dividends, and rents. (h) COMPENSATION OF EMPLOYEES OF FOREIGN GOVERNMENTS.- (1) RULE FOR EXCLUSION. -Wages, fees, or salary of an employee of a foreign government (including a consular or other officer, or a nondiplomatic representative) received as compensation for official services to such government- (A) If such employee is not a citizen of the United States; and (B) If the services are of a character similar to those per- formed by employees of the Government of the United States in foreign countries; and (C) If the foreign government whose employee is claiming exemption grants an equivalent exemption to employees of the Government of the United States performing similar services in such foreign country. (2) CERTIFICATE BY SECRETARY OF STATE. -The Secretary of State shall certify to the Secretary of the Treasury the names of the foreign countries which grant an equivalent exemption to the employees of the Government of the United States performing services in such foreign countries, and the character of the services performed by employees of the Government of the United States in foreign countries. (i) TREASURY BILLS.- For exemption from taxation of gain derived from the sale or other disposition of Treasury Bills, issued after June 17, 1930, under the sec- ond Liberty bond act, as amended, see Act of June 17, 1930, c. 512, 46 Stat. 775 (U. S. C., Title 31, §754). SEC. 117. CAPITAL GAINS AND LOSSES. (a) DEFINITIONS. -As used in this chapter- (1) CAPITAL ASSETS.-T he term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to cus- tomers in the ordinary course of his trade or business, or prop- erty, used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 23 (1); (2) SHORT-TERM CAPITAL GAIN.- The term "short-term capital gain" means gain from the sale or exchange of a capital asset held for not more than 18 months, if and to the extent such gain is taken into account in computing net income; CODIFICATION OF INTERNAL REVENUE LAWS 50
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