SIXTY-FIFTH CONGRESS. Sess. III. Ch. 18. 1919. 1059 The term "withholdin agent" means an erson re uired to deduct ,, ”'°°“ nxand withhold any tax uiider the provision; lbf sectioii 221 or section ageziiiihhuding 237* — The term "personal service corporation" means a corporation ¤,:,§,Z§‘§§§¥» “’"i"" whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material in- _ come-producing factor; but does not include any foreign corpora- Em‘“‘°'“· tion, nor any corporation 50 per centum or, more of whose gross income consists either (1) of gains, prohts or income derived from trading as a principal, or (2) of gains, profits, commissions, or other income, derived from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive; H _ U The term ‘;ipaid," for the purposes of the deductions and credits ,mdi®{,,’f‘,,‘§‘,,,“’°,g"}j», under this ti e, means "pa1d or accrued" or "paid or incu.r·red,"u¤{,ggI§j$djt; d°d¤°· and the terms "paid or incu.rred" and "paid or accrued" shall be ` construed according to the method of accormting upon the basis of which the net income is computed under section 212. nrvmmzns. mmm- Sec. 201. (a) That the term "dividend" when used in this title m{’,,%*§,¤‘_§c‘;,gg¤;•f (except in paragraph (10) of subdivision (a) of section 234) means ¤<>¤¤F¤%¤¤m¤1¤¢¤d (1) any distribution made by a corporation, other than a personalsiw ° "`”’°8’*°”‘ service corporation, to its shareholders or members, whether in cash or in other property or in stock of the corporation, out of its earnings or {profits accumulated since February 28, 1913, or (2) any such distri ution made by a personal service corporation out of its earnings or profits accumulated since February 28, 1913, and prior to Janu- 1, 1918. arlrb) Any distribution shall be deemed to have been made from mgf"’“‘°d '“’“‘ °’”'°' earnings or profits unless all earnings and profits have first been distributed. An distribution made in the year 1918 or any year! For ms, mgauar, thereafter shall lie deemed to have been made from earnings or siiii;rsi»°ri»`i-Pymgigf profits accumulated since February 28, 1913, or, in the case of a personal service corppration, from the most recently accumulated earnings or profits; ut any_earnings or profits accumulated prior r£*;‘,h_$r{;g¤¤°*<>¤¤ lf to March 1, 1913, may be distributed in stock dividends or other- p ` wise, exem t from the tax, after the earnings and profits accumulated since El·`ebruary 28, 1913, have been distributed. (c) A dividend paid in stock of the corporation shall be con- S‘°°"‘""‘*""‘*“"· sidered income to the amount of the earnings or profits distributed. Amounts distributed in the liquidation of a corporation shall be b\}{§g;¤;d=¤¤i·>¤¤ distritreated as payments in exchangp for stock or shares, and any gain ` or profit realized thereby shall e taxed to the distributee as other g&?5§(§prOEtS' k di ‘d d (1) ‘ d b mxp b D ri a rms an stoc V1 en is receive y a ayer etween ‘iViO·*¤ S 0 - · January 1 gud November 1, 1918, both dates inclusive, or (2) is medi xyw°am°d' during such eriod bona fide authorized or declared, and entered on the books ofp the corporation, and is received b a taxpayer after November 1, 1918, and before the expiration of thirt days after the passage of this Act, then such dividend shall, in tlire manner rovided in section 206, be taxed to the recipient at the rates dprescril>ed by law for the ears in which the corporation accumulate the earnings or profits Hom which such dividend was paid, but the dividend shall be deemed to have been paid from the most recently accumulated earnings or profits.
