>perty situated outside of the United States is excluded in deterning the value of the gross estate.

b) Effective date.-Subsection (b) of section 18 provides that the endments which repeal the exclusion for real property situated oute of the United States are effective with respect to the estates of cedents dying after the date of the enactment of the bill. Hower, special provisions apply in the case of decedents dying after such te of enactment and before January 1, 1963.

Under one of these provisions, the value of real property situated tside of the United States is not included in the gross estate of the cedent under section 2033, 2034, 2035(a), 2036(a), 2037(a), or 38 (a) to the extent the decedent's interest in it was acquired before ebruary 1, 1962. Under another of these special provisions, the lue of real property situated outside the United States is excluded om the gross estate of a decedent who dies after the date of the entment of the bill and before January 1, 1963, to the extent the -operty or interest therein was either held by the decedent and the rviving tenant in a joint tenancy or tenancy by the entirety before ebruary 1, 1962, or, even though the joint tenancy or tenancy by the tirety was created on or after February 1, 1962, to the extent the roperty or interest therein was acquired by the decedent before ebruary 1, 1962. Under still another of these special provisions, in he case of decedents dying after the date of the enactment of the bill ad before January 1, 1963, the value of real property situated outside he United States is excluded from the gross estate to the extent that efore February 1, 1962, it was subject to a general power of appointent possessed by the decedent.

For purposes of applying these three special provisions, the real roperty, interests therein, and general powers of appointment to hich these special provisions apply, which are acquired by the ecedent after January 31, 1962, by gift within the meaning of secon 2511, or from a prior decedent by devise or inheritance, or by eason of death, form of ownership, or other conditions (including the xercise or nonexercise of a power of appointment), are treated as cquired before February 1, 1962, if the donor or prior decedent cquired the property, his interest therein, or a power of appointment whether or not a general power) in respect thereof, before that date. or example, assume that A, who bought foreign real property on December 1, 1961, dies on March 1, 1962, and by will leaves the proprty to B who dies after the date of the enactment of the bill and before anuary 1, 1963. In this example B will be treated as having acquired he property before February 1, 1962, since A, the prior decedent from hom B acquired the property, had acquired it before February 1,

962.

For purposes of the amendments made by section 18(b) of the bill, ubstantial capital additions and improvements to real property made fter January 31, 1962, are to be treated as separate properties. Capial additions or improvements to either commercial or residential property which do not materially increase the value of the property are to be disregarded.

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SECTION 19. REPORTING OF INTEREST, DIVIDEND, AND set PATRONAGE DIVIDEND PAYMENTS OF $10 OR MORE DURING A YEAR

Section 19 of the bill as passed by the House provided a system for the withholding of tax at the source on interest, dividends, and patronage dividends. Your committee has struck out those provisions and has inserted provisions which would require annual information reporting of certain dividend, interest, or patronage dividend payments. Such reporting is to be required with respect to payments to any person when they aggregate $10 or more in amount to such person in any calendar year. In addition, your committee has added provisions requiring that payers of interest, dividends, or patronage dividends furnish to the recipients of these amounts annual statements showing the amounts paid to them as reported on the information returns filed with the Government. New penalty provisions are provided by your committee for failure to file information returns with respect to pay. ments of interest, dividends, or patronage dividends and for failure to furnish to a recipient of such payments an annual statement of such payments.

(a) Returns regarding payment of dividends and corporate earnings and profits.-Subsection (a) of the new section 19 completely revises section 6042 of the 1954 Code (relating to returns regarding corporate dividends, earnings, and profits). Under existing section 6042 of the code the Secretary of the Treasury or his delegate has discretionary authority to require corporations to make information returns, with respect to their payments of dividends, showing the name and address of, the number of shares owned by, and the amount of dividends paid to, each shareholder. In addition, the Secretary of the Treasury or his delegate may require corporations to furnish other specified infor mation, such as statements of accumulated earnings and profits, the names and addresses of shareholders who would be entitled to such earnings and profits if they were distributed, and the amounts that would be payable to each.

SECTION 6042. RETURNS REGARDING PAYMENT OF DIVIDENDS AND CORPORATE EARNINGS AND PROFITS

(a) Requirement of reporting.-Subsection (a)(1) of the new section 6042 requires every person making payments of dividends aggregating $10 or more to any other person during any calendar year to file an information return with respect to such payments. In addition. such new subsection requires persons receiving payments of dividends in the capacity of nominee to report payments by them aggregating $10 or more during any calendar year to any other person with respect to the dividends so received. Thus, if an individual has his stock registered in the name of his stockbroker, the stockbroker must file an information return showing the name and address of the individual and the amount of dividends he received and paid over to, or credited to the account of, such individual during the calendar year if they amount to $10 or more. The return to be filed under section 6042(a)(1) is to be made according to the forms or regulations prescribed by the Secretary of the Treasury or his delegate and is

et forth the name and address of the person to whom the pay.. ts were made and the aggregate amount of such payments. ection 6042 only requires reporting with respect to dividends paid >ne "person" to another "person. For purposes of this section 1 secs. 6044, as amended by the bill, and 6048, as added by the the term "person" has the meaning assigned to it by section 1 (a)(1) of the code. Under that section the term "person" does include the United States, a State, a foreign government, a tical subdivision of a State or foreign government, or an interional organization. Therefore, dividends (and patronage divids and interest) paid by or to one of these entities need not be orted. The person required to report under subsection (a)(1) he person on whose capital stock the dividends are paid. The m "payment" includes constructive payment. Thus, dividends ich are credited to the account of a shareholder by a mutual id must be reported by the fund if they aggregate $10 or more ring the calendar year. The term "nominee" does not include partner acting with respect to property of a partnership of which is a member or a person who, acting in the capacity of trustee, lds record title to trust property. The general rules discussed in is paragraph are also applicable with respect to the new reporting quirements for interest and patronage dividends.

Subsection (a) (2) of the new section 6042 gives the Secretary of the easury or his delegate discretion to require information returns to filed with respect to dividend payments aggregating less than $10 iring a calendar year.

(b) Dividend defined.-Subsection (b)(1) of the new section 6042 fines the term "dividend" for purposes of section 6042 to mean: 1) any distribution by a corporation which is a dividend as defined section 316 of the code; and (B) any payment made by a stockroker to any person as a substitute for a dividend (as so defined). eporting is required whether a dividend is paid in cash or in other roperty. A dividend paid by an insurance company to a policyolder, other than a dividend upon the capital stock of such insurance ompany, is not a dividend within the meaning of section 6042 (b)(1). Subsection (b) (2) of the new section 6042 provides that the term 'dividend," for purposes of section 6042, does not include: (A) to the xtent provided in regulations prescribed by the Secretary of the Treasury or his delegate, any distribution or payment (i) by a foreign corporation, or (ii) to a foreign corporation, a nonresident alien, or a partnership not engaged in trade or business in the United States and composed in whole or in part of nonresident aliens; or (B) any amount lescribed in section 1373 of the code (relating to undistributed taxable ncome of electing small business corporations).

Subsection (b) (3) provides that if the person making any payment described in subsection (a) (1) is unable to determine the portion of the payment which is a dividend or is paid with respect to a dividend, the total amount of the payment is to be treated as a dividend for purposes of information reporting required by subsection (a)(1). Thus, if a corporation is unable to determine what portion of its distributions to its shareholders during the calendar year is paid out of earnings and profits, the total amount of the distributions must be treated as a dividend.

(c) Statements to be furnished to persons with respect to whom information is furnished. Subsection (c) of the new section 6042 requires every person making a return under subsection (a)(1) of section 6042 to furnish to each person whose name is set forth in such return 8 written statement showing (1) the name and address of the person making the return, and (2) the aggregate amount paid to the person as shown on the return. Such written statement is to be furnished to the person on or before January 31 of the year following the calendar year for which the return was made. However, no statement is required to be furnished to any person under this subsection if the aggregate amount of payments to the person as shown on the return made under subsection (a) (1) is less than $10.

(d) Statements to be furnished by corporations to Secretary. Subsec tion (d) of the new section 6042 provides that every corporation shall, when required by the Secretary of the Treasury or his delegate

(1) furnish to the Secretary of the Treasury or his delegate a statement stating the name and address of each shareholder, and the number of shares owned by each shareholder;

(2) furnish to the Secretary of the Treasury or his delegate s statement of such facts as will enable him to determine the portion of the earnings and profits of the corporation (including gains, profits, and income not taxed) accumulated during such periods as the Secretary of the Treasury or his delegate may specify, which have been distributed or ordered to be distributed. respectively, to its shareholders during such taxable years as the Secretary of the Treasury or his delegate may specify; and

(3) furnish to the Secretary of the Treasury or his delegate s statement of its accumulated earnings and profits and the names and addresses of the individuals or shareholders who would be entitled to such accumulated earnings and profits if divided or distributed, and of the amounts that would be payable to each. These provisions are substantially the same as provisions contained in the present section 6042.

SECTION 19. REPORTING OF INTEREST, DIVIDEND, AND PATRONAGE DIVIDEND PAYMENTS OF $10 OR MORE DURING A YEAR (Continued)

(b) Returns regarding payments of patronage dividends.-Subsection b) of the new section 19 amends section 6044 of the 1954 Code, to revise the provisions relating to information returns which must be filed by cooperatives.

Under existing law, a cooperative must file an information return with respect to patronage dividends which it pays to a patron during s calendar year if the aggregate is $100 or more. Existing law also gives the Secretary of the Treasury or his delegate authority to require such information returns with regard to all patronage dividends regardless of amounts. The revised section 6044 requires reporting with respect to all payments of $10 or more during the calendar year and, in addition, reflects the provisions of the new subchapter To chapter 1 (relating to the tax treatment of cooperatives and patrons which is added to the code by section 17 of the bill.

SECTION 6044. RETURNS REGARDING PATRONAGE DIVIDENDS

(a) Requirement of reporting. Subsection (a) (1) provides that, xcept as otherwise provided in section 6044, every cooperative to hich part I of subchapter T of chapter 1 applies, which makes ayments of amounts described in subsection (b) aggregating $10 r more to any person during any calendar year, is to file an infornation return with respect to such payments. Such return is to be ade according to the forms or regulations prescribed by the Secretary f the Treasury or his delegate and is to set forth the aggregate amount f the payments and the name and address of the person to whom aid.

Subsection (a) (2) provides that the Secretary of the Treasury or is delegate may require information returns regarding payments of mounts described in subsection (b) where such payments aggregate ess than $10 to any person during any calendar year.

(b) Amounts subject to reporting. Subsection (b) (1) provides that he amounts with respect to which reporting is required by subsection a) are (except as otherwise provided by sec. 6044): (A) Patronage dividends paid in cash, qualified written notices of allocation, or other property (except nonqualified written notices of allocation); (B) in he case of an exempt farmers' cooperative, amounts described in section 1382 (c) (2) (A) (relating to amounts paid with respect to nonDatronage earnings) which are paid in money, qualified written notices of allocation, or other property (except nonqualified written notices of allocation); (C) amounts described in section 1382(b)(2) paid in redemption of nonqualified written notices of allocation which were previously paid as patronage dividends; and (D) amounts described in section 1382 (c) (2) (B) paid by an exempt farmers' cooperative in redemption of nonqualified written notices of allocation previously paid with respect to nonpatronage earnings. The cooperative is required to report these amounts even though it must pay tax with respect to them because they were not paid within the prescribed time limits.

Subsection (b) (2) provides that information reporting shall not be required, to the extent provided in regulations prescribed by the Secretary of the Treasury or his delegate, with respect to any payment (A) by a foreign corporation, or (B) to a foreign corporation, a nonresident alien, or a partnership not engaged in trade or business in the United States and composed in whole or in part of nonresident aliens. (c) Exemption for certain consumer cooperatives.-Subsection (c) of the new section 6044 provides that a cooperative which the Secretary of the Treasury or his delegate determines is primarily engaged in selling at retail goods or services of a type that are generally for personal, living, or family use is to be granted exemption from the requirements of information reporting imposed by subsection (a) upon application for such exemption to the Secretary of the Treasury or his delegate. The application for exemption is to be made in accordance with regulations prescribed by the Secretary of the Treasury or his delegate.

(d) Determination of amount paid.-Subsection (d) provides that for purposes of section 6044, in determining the amount of any payment, property (other than a written notice of allocation) is to be taken into account at its fair market value, and a qualified written notice of allocation is to be taken into account at its stated dollar amount.