PUBLIC LAWS-CH. 289-MAY 28, 1938 Exclusions from gross income. Life insurance. Annuities, etc. Portion to be in- cluded in gross in- come. Transfers for value. Gifts, bequests, and devises. Tax-free interest. State, etc., bonds. Federal instrumen- talities. Federal obligations. Statement required in return. Limitation in the case of certain obliga- tions. Compensation for personal injuries or sickness. (b) EXCLUSIONS FROM GROSS INCOME. -T he following items shall not be included in gross income and shall be exempt from taxation under this title: (1) LIFE INSURANCE.-Amounts received under a life insur- ance contract paid by reason of the death of the insured, whether in a single sum or otherwise (but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income); (2) ANNUITIES, ETC. - Amounts received (other than amounts paid by reason of the death of the insured and interest payments on such amounts and other than amounts received as annuities) under a life insurance or endowment contract, but if such amounts (when added to amounts received before the taxable year under such contract) exceed the aggregate premiums or consideration paid (whether or not paid during the taxable year) then the excess shall be included in gross income. Amounts received as an annuity under an annuity or endowment contract shall be included in gross income; except that there shall be excluded from gross income the excess of the amount received in the taxable year over an amount equal to 3 per centum of the aggregate premiums or consideration paid for such annuity (whether or not paid during such year), until the aggregate amount excluded from gross income under this title or prior income tax laws in respect of such annuity equals the aggregate premiums or consideration paid for such annuity. In the case of a transfer for a valuable consideration, by assignment or otherwise, of a life insurance, endowment, or annuity contract, or any interest therein, only the actual value of such considera- tion and the amount of the premiums and other sums subse- quently paid by the transferee shall be exempt from taxation under paragraph (1) or this paragraph; (3) GIFTS, BEQUESTS, AND DEVISES.-The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income); (4) TAX-FREE INTEREST.- Interest upon (A) the obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia; or (B) obligations of a corporation organized under Act of Congress, if such corporation is an instrumentality of the United States; or (C) the obligations of the United States or its possessions. Every person owning any of the obligations enumerated in clause (A), (B), or (C) shall, in the return required by this title, submit a statement showing the number and amount of such obligations owned by him and the income received therefrom, in such form and with such information as the Commissioner may require. In the case of obligations of the United States issued after September 1, 1917 (other than postal savings certificates of deposit) and in the case of obligations of a corporation organized under Act of Congress, the interest shall be exempt only if and to the extent provided in the respective Acts authorizing the issue thereof as amended and supplemented, and shall be excluded from gross income only if and to the extent it is wholly exempt from the taxes imposed by this title; (5) COMPENSATION FOR INJURIES OR SICKNESS. -Amounts received, through accident or health insurance or under work- men's compensation acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness; 458 [52 STAT.
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