1918-20: Employed by Oriental Mines Co., New York, as assistant to Dr. H. Foster Bain and subsequently to Mr. Fred Searls, Jr., in their Far East mining expedition.

1920-24: Reentered United States of America as student at the University of California. Joined Wah Chang Trading Corp., New York City in 1923.

1924-35: Sent to China by Wah Chang Trading Corp. as Shanghai manager and Far East representative.

1934: November 18, 1934, married Lucy Mao Mei-Yee; graduate of Shanghai University, daughter of late Adm. Mao Chung-Tsai, of the Chinese Navy. 1935-37: Reentered United States of America accompanied by wife, as temDorary visitors. Served Wah Chang Trading Corp. as member of its directorate. Left United States of America in 1937 for Europe and Asia, on business.

1937-38: Became managing director of T. K Li & Co., Ltd., Hong Kong British Ordnance Co.), which acted as representative of Wah Chang Trading Corp. in the Far East. Office at Queens Building, Hong Kong.

1938-39: Reentered United States of America in 1938 as temporary visitor accompanied by wife. April 5, 1939, status was changed to treaty trader.

1939-41: Left United States of America accompanied by wife, in 1939 by plane rom Honolulu for Hong Kong in the interest of Wah Chang Trading Corp. until Pearl Harbor when Hong Kong was occupied by Japanese.

1941-43: Went to Chungking accompanied by wife and served as technical xpert of the National Resources Commission of China.

1943-47: Reentered United States of America in 1943 at Miami as official of Chinese Government, accompanied by wife. Assisted National Resources Commission of China in transporting tin and tungsten from Yunan to United States of America. Concurrently served as executive officer of Wah Chang Trading Corp.

1947-48: Left United States of America end of 1947 accompanied by wife. Visited Hong Kong, Bangkok, Rangoon, studied supply of tin, tungsten, and other are minerals from Far East to United States of America.

1948-49: Reentered United States of America, 1948 at Honolulu as treaty trader accompanied by wife. Served as executive officer of Wah Chang.

1949-51: Left United States of America 1949 from San Francisco accompanied y wife. Served as managing director of T. K. Li & Co., Ltd., Hong Kong lealing in Chinese-American trade.

1951-53: Reentered United States of America 1951 at Honolulu as temporary visitor accompanied by wife. Now serving as executive officer (vice president) of Wah Chang Corp., 233 Broadway, New York City, with plant at Glen Cove, Long Island, N. Y. Also consultant to GSA as tungsten expert.

TAO KAI LI.

The committee, after consideration of all the facts in the case, is of the opinion that the bill (S. 2462), as amended, should be enacted.

33D CONGRESS 1st Session

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SENATE

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REPORT No. 685

AMENDING THE INTERNAL REVENUE CODE TO EXTEND THE TIME DURING WHICH CERTAIN PROVISIONS RELATING TO INCOME AND ESTATE TAXES SHALL APPLY

JULY 28 (legislative day, JULY 27), 1953.-Ordered to be printed

Mr. MILLIKIN, from the Committee on Finance, submitted the following

REPORT

[To accompany H. R. 6426]

The Committee on Finance, to whom was referred the bill (H. R. 426) to amend the Internal Revenue Code to extend the time during hich certain provisions relating to income and estate taxes shall pply, and for other purposes, having considered the same, report avorably thereon with amendments and recommend that the bill as mended do pass.

The amendments are as follows:

Section 204 (a) is amended by striking out lines 17 through 25, clusive, on page 10 and lines 1 through 8, inclusive, on page 11 and serting in lieu thereof the following:

(a) AMENDMENT OF SECTION 116 (a) (2).-Section 116 (a) (2) (relating to exusion from gross income of earned income from sources without the United tates) is hereby amended by adding at the end thereof the following new sennces: If the 18-month period includes the entire taxable year, the amount exuded under this paragraph for such taxable year shall not exceed $20,000. If e 18-month period does not include the entire taxable year, the amount excluded der this paragraph for such taxable year shall not exceed an amount which ears the same ratio to $20,000 as the number of days in the part of the taxable ear within the 18-month period bears to the total number of days in such year. Page 12, line 1, strike out "April 14, 1953" and insert:

ecember 31, 1952, but only to such amounts as are received on or after January 1, -53.

Page 29, line 11, strike out "July" and insert in lieu thereof "June" ad on page 30, line 1, strike out "July" and insert "June."

I. GENERAL STATEMENT

H. R. 6426 contains 17 sections dealing with amendments to th Internal Revenue Code. Six of the sections extend the period durin which certain provisions of the code will apply. The other 11 section relate to amendments to the Internal Revenue Code providing fo removal of inequities in income- and estate-tax cases. Your com mittee believes that it is important to take care of these inequitie ahead of the general revision bill which will be considered next year

II. EXPLANATION OF THE BILL

A. EXTENSION PROVISIONS

Section 101. Election as to recognition of gain in certain corporate liqu dations

This section extends to 1953 the provisions of section 112 (b) ( of the Internal Revenue Code dealing with the nonrecognition gain in certain corporate liquidations. This provision which applie to certain liquidations in a single calendar month in 1951 was extende by the Revenue Act of 1951 to such liquidations in 1952 and is furth extended by this bill to such liquidations occurring in a single calenda month in 1953. Your committee believes that such an extension f 1 year is desirable to enable those who were unable to arrange f liquidation within the requisite period in 1951 or 1952 to have th benefits of this provision if they can complete such liquidations in single calendar month in 1953.

Section 102. Extension of time for elections under Public Law 539 ove ruling Virginian Hotel case

In Public Law 539, approved July 14, 1952, Congress overruled t decision of the Supreme Court in the Virginian Hotel case. Und that decision a taxpayer who deducted depreciation for any year excess of the amount allowable for such year was nevertheless requir to reduce the basis of his property by the entire amount of depreciat allowed, even though he had received no tax benefit from claim such excessive depreciation as a deduction. Under Public Law 53 the basis of the property was not required to be reduced by su excessive depreciation unless the taxpayer had received a tax bene for taking a deduction for such excessive amount. The taxpayer w granted under the law an election (under such regulations as t Secretary prescribed) to apply this new treatment retroactively the period since February 28, 1913, and before January 1, 1952, b no election could be made after December 31, 1952. The Treasu Regulations under the law were not promulgated until December 1952. Thus taxpayers were not given sufficient time to determi whether such an election would be beneficial to them. Your co mittee therefore deems it desirable to extend through December 3 1954, the time within which an election may be made. Since Pub Law 539 provides that an election once made is irrevocable, the bi in order to provide uniform treatment, permits taxpayers to revo within the extended period elections made prior to January 1, 195

Section 103. Extension of time for making election with respect to war loss recoveries

Section 341 of the Revenue Act of 1951 sets forth a new method for treatment of war losses under section 127 of the Internal Revenue Code. It provides that at the election of the taxpayer (under such regulations as the Secretary may prescribe) the tax for the year in which the deduction for the war loss was taken is to be recomputed by reducing the deduction by the amount of the recovered property taken at its depreciated cost on the date of the loss or at its fair market value on the date of recovery, whichever is lower. The resulting increase in tax for the year of the loss, if any, is added to the tax for the year of recovery. The time for electing the benefit of this provision expired on December 31, 1952. Since the Treasury Regulations interpreting this section of the law were not promulgated until December 30, 1952, taxpayers did not have sufficient time to determine whether it was advantageous to make such an election. The bill extends the period for making such an election through December 31, 1953.

Section 104. Extension of period of abatement of income taxes of deceased members of Armed Forces

Section 154 of the Internal Revenue Code provides in the case of an individual who died after June 24, 1950, and prior to January 1, 1954, as a result of active service in a combat zone as a member of the Armed Forces, an abatement of income tax liability which was outstanding at the date of his death. It also provides a forgiveness of the tax with respect to the taxable year in which falls the date of his leath or with respect to any prior taxable year ending on or after he first day he so served in a combat zone after June 24, 1950. The bill extends the period to which this section is applicable for one additional year so as to include the calendar year 1954.

Section 105. Extension of temporary provisions relating to life-insurance companies

The present temporary provisions for the taxation of life-insurance companies are extended for 1 year by this section of the bill. Pending he results of studies being made by the staffs of the Treasury and the Joint Committee on Internal Revenue Taxation, your committee leems it advisable to continue for 1 year the provisions of present law. Section 106. Extension of period for exemption from additional estate tax of deceased members of Armed Forces

Section 939 (b) of the Internal Revenue Code exempts from the dditional estate tax estates of decedents dying after June 24, 1950, nd before January 1, 1954, while in active service as members of the Armed Forces of the United States, where such decedents were killed n action while serving in a combat zone or died from wounds, disease, r injury incurred while so serving in line of duty and by reason of a azard to which they were subjected as an incident of such service. The bill extends the application of this section to January 1, 1955.