accident or sickness not compensable under the workmen's compensation law, and resulting in his total disability to perform any work for remuneration. In addition, eligible unemployed individuals who become totally disabled and, thus, unable to obtain unemployment benefits are eligible for a weekly disability benefit. New Jersey Statutes Annotated, Title 43, Chapter 21, Section 4(f) (1) (1962). The purpose of this section of the New Jersey law is to protect against the hazard of earnings loss caused by nonoccupational sickness or accident. New Jersey Statutes Annotated, Title 43, Chapter 21, Section 26 (1962).

Both employers and employees are required to make contributions to the fund providing unemployment benefits and the fund providing disability benefits. With respect to employee contributions, an employer is required to withhold the amount of such contributions from the employees' wages at the time the wages are paid. New Jersey Statutes Annotated, Title 43, Chapter 21, Section 7 (1962).

In lieu of the State fund providing disability benefits, an employer may establish a private plan for the payment of disability benefits. The benefits under such a private plan may be provided through an insurance contract issued by an authorized insurer or through a plan of self-insurance. An employee can not be required to contribute toward a private plan an amount which is greater than that required to be paid to the State disability benefits fund. New Jersey Statutes Annotated, Title 43, Chapter 21, Section 32 (1962).

Section 164(a) of the Code provides, in addition to the taxes enumerated therein, that there shall be allowed as a deduction State and local, and foreign, taxes which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 of

the Code (relating to expenses for the production of income).

Section 262 of the Code provides that, except as otherwise expressly provided, no deduction shall be allowed for personal, living, or family

expenses.

The word "taxes" has been defined as an enforced contribution, exacted pursuant to legislative authority in the exercise of the taxing power, and imraising revenue to be used for public posed and collected for the purpose of or governmental purposes. See Rev. Rul. 71-49, 1971-1 C.B. 103. The New Jersey Unemployment Compensation Commission and the Federal and New Jersey courts regard the contributions to the State unemployment compensation fund as taxes. See In re Wm. Akers, Jr., Co., 121 F. 2d 846 (3rd Cir., 1941); Singer Sewing Ma(3rd Cir., 1941); Singer Sewing Machine Co. v. New Jersey Unemployment Compensation Commission, 128 N.J.L. 611, 27 A.2d 889 (1942), affirmed, 130 N.J.L. 173, 31 A.2d 818 (1943); Raines v. Unemployment Compensation Commission, 129 N.J.L. Compensation Commission, 129 N.J.L. 28, 28 A.2d 46 (1942), affirmed, 129 N.J.L. 387, 30 A.2d 31 (1943), cert. denied, 319 U.S. 757 (1943). The New Jersey courts have also held that "contributions" which are paid into the New Jersey temporary disability benefits fund constitute taxes. See State v. Cannarozzi, 77 N.J. Super. 236, 168 A.2d 113 (1962); and State Division of Employment Security v. Pilot Manufacturing Co., 83 N.J. Super. 177, 199 A.2d 78 (1964).

Accordingly, it is held that amounts paid or accrued in carrying on a trade or business by employers to the New Jersey unemployment compensation fund and to the New Jersey temporary disability benefits fund pursuant to chapter 21, title 43 of the Revised Statutes of New Jersey, as amended and supplemented, are taxes deductible under section 164 (a) of the Code.

In the case of employees, amounts withheld from their wages for contribution to the New Jersey unemploy

ment compensation fund pursuant to the New Jersey unemployment compensation law providing indemnity coverage for the loss of wages due to unemployment resulting from business contingencies are taxes paid or accrued by the employees in carrying on a trade or business and, therefore, are deductible by the employees under section 164(a) of the Code. However, such amounts are deductible by an employee only if his deductions are itemized in computing taxable income under section 63(a).

Amounts withheld from the wages of employees for contribution to the New Jersey temporary disability benefits fund for indemnity coverage under the New Jersey temporary disability benefits law for loss of wages due to unemployment resulting from non-occupational hazards do not qualify as any of the types of taxes specified in section 164(a) of the Code and are not paid or accrued in carrying on a trade or business. Therefore, these amounts are not deductible by employees under section 164 (a). Such

amounts are in the nature of nondeductible personal expenses under section 262. See Rev. Rul. 71-73, 1971-1 C.B. 52.

Also, contributions made by employees to private plans of insurance as substitutes for coverage under the State disability benefits law are not taxes within the meaning of section 164(a) of the Code. Such amounts are nondeductible personal expenses under section 262.

It is further held that both the amounts withheld from the wages of employees for making contributions to the New Jersey temporary disability benefit fund, which provides indemnity for loss of earnings during disability, and amounts contributed to private plans as substitutes for coverage under the State disability benefits law, which are attributable to insurance coverage providing indemnity for loss of earnings during disability, are not deductible as medical

expenses under section 213 of the Code. See Rev. Rul. 68-212, 1968-1 C.B. 91, which holds that premiums paid for insurance policies providing indemnity for loss of earnings during disability will not be deductible as medical expenses under section 213 for taxable years beginning after December 31, 1966.

I.T. 3970 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.

26 CFR 1.164-1: Deduction for taxes. (Also Sections 213, 262; 1.213-1, 1.262-1.)

State taxes; unemployment and disability; Rhode Island. Contributions made by employers to the Rhode Island temporary disability benefits fund are deductible as taxes under section 164(a) of the Code. Amounts withheld from employees' wages for contribution to the State fund are neither deductible as taxes under section 164(a) nor as medical expenses under section 213 but are nondeductible personal expenses. I.T. 3663 superseded.

Rev. Rul. 75-1481

The purpose of this Revenue Ruling is to update and restate, under current statute and regulations, the position set forth in I.T. 3663, 1944 C.B. 110.

The question presented is whether contributions made by employers and employees to the Rhode Island temporary disability benefit fund pursuant to chapter 40, title 28 of the General Laws of Rhode Island (1968 Reenactments) are deductible as taxes under section 164 of the Internal Revenue Code of 1954.

The Rhode Island statute provides weekly disability benefits based upon average weekly wages where the eligible individual becomes unemployed

1 Prepared pursuant to Rev. Proc. 67-6, 1967-1

C.B. 576.

as a result of suffering an accident or sickness not compensable under the workmen's compensation law, and resulting in his total disability to perform any work for remuneration. The purpose of this section of the Rhode Island law is to protect against the hazard of earnings loss caused by nonoccupational sickness or accident.

Both employers and employees are required to make contributions to the required to make contributions to the fund providing disability benefits. With respect to employee contributions, an employer is required to withhold the amount of such contributions from the employees' wages at the time. the wages are paid.

Section 164 (a) of the Code provides, in addition to the taxes enuallowed as a deduction State and local merated therein, that there shall be and foreign taxes which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 (relating to expenses for the production of income).

Section 262 of the Code provides that, except as otherwise expressly provided, no deduction shall be allowed for personal, living, or family expenses.

The word "taxes" has been defined as an enforced contribution, exacted pursuant to legislative authority in the exercise of the taxing power, and imposed and collected for the purpose of raising revenue to be used for public or governmental purposes. See Rev. Rul. 71-49, 1971-1 C.B. 103.

Accordingly, amounts paid or accrued in carrying on a trade or business by employers to the Rhode Island temporary disability benefits fund pursuant to chapter 40, title 28 of the General Laws of Rhode Island (1968 Reenactments) are taxes deductible under section 164(a) of the Code.

Amounts withheld from the wages of employees for contribution to the Rhode Island temporary disability temporary disability benefits fund for indemnity coverage under the Rhode Island temporary

disability benefits law do not qualify as any of the types of taxes specified in section 164 (a) of the Code and are not paid or accrued in carrying on a trade or business because they are incurred to provide indemnity coverage for loss of wages due to unemployment resulting from nonoccupational hazards rather than from hazards arising from business contingencies. Therefore, these amounts are not deductible by employees under section 164(a). Such amounts are nondeductible personal expenses under section 262. See Rev. Rul. 71-73, 1971-1 similar C.B. 52, which held that employee contributions under the New York Workman's Compensation Law are nondeductible personal expenses.

Furthermore, the amounts withheld from the wages of employees for making contributions to the Rhode Island temporary disability benefit fund, which provides indemnity for loss of earnings during disability, are not deductible as medical expenses under section 213 of the Code. See Rev. Rul. 68-212, 1968-1 C.B. 81, which holds that premiums paid for insurance policies providing indemnity for loss of earnings during disability will not be deductible as medical expenses under section 213 for taxable years beginning after December 31, 1966.

I.T. 3663 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.

26 CFR 1.164-1: Deduction for taxes. (Also Sections 213, 262; 1.213-1, 1.262-1.)

State taxes; unemployment and disability; California. Contributions made by employers to the California unemployment fund are deductible as taxes under section 164(a) of the Code. Amounts withheld from employees wages for contribution to the State disability fund or a substitute private plan are neither deductible as taxes under section 164(a) nor as medical expenses under section 213

but are nondeductible personal expenses. I.T. 3966 and I.T. 3967 superseded.

Rev. Rul. 75-1491

The purpose of this Revenue Ruling is to update and restate, under current statute and regulations, the positions set forth in I.T. 3966, 1949-2 C.B. 27 and I.T. 3967, 1949-2 C.B. 33.

The question presented is whether contributions made by employers and employees to the California unemployment fund and to the California unemployment compensation disability fund pursuant to the California Unemployment Insurance Code are deductible as taxes under section 164 of the Internal Revenue Code of 1954. The question is also presented as to the deductibility of contributions made by employees to private plans as substitutes for coverage under the same provisions of California law.

The California statute provides for unemployment benefits to be paid to unemployed eligible individuals if the individual is able to work and is available for work, and has demonstrated that he is actively seeking

work.

The California statute also provides weekly disability benefits based upon average weekly wages where the eligible individual becomes unemployed as a result of suffering an accident or sickness not compensable under the workmen's compensation law, and resulting in his total disability to perform any work for remuneration. In addition, an individual eligible for disability benefits who is confined in a hospital will receive additional benefits for each day of such confinement.

to the individual claimant and cannot be made payable to the hospital rendering the services unless prior consent is given by such individual. Section 2711, California Unemployment Insurance Code.

Employers are required to make contributions to the fund providing unemployment benefits and employees are required to contribute to the fund providing disability benefits. With respect to employee contributions, an employer is required to withhold the amount of such contributions from the employees' wages at the time the wages are paid. California Unemployment Insurance Code, Section 986 (1972).

In lieu of the State fund providing disability benefits, an employer may establish a private plan for the payment of disability benefits. The benefits under such a private plan may be provided through an insurance contract issued by an authorized insurer or through a plan of self-insurance. An employee can not be required to contribute toward a private plan an amount which is greater than that required to be paid to the State disability benefits fund. California Unemployment Insurance Code, Section 3260 (1972).

Section 164(a) of the Code provides, in addition to the taxes enumerated therein, that there shall be allowed as a deduction State and local and foreign, taxes which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 (relating to expenses for the production of income).

Section 262 of the Code provides

provided, no deduction shall be allowed for personal, living, or family

1 Prepared pursuant to Rev. Proc. 67-6, 1967-1

C.B. 576.

expenses.

The word "taxes" has been defined as an enforced contribution, exacted pursuant to legislative authority in the exercise of the taxing power, and imposed and collected for the purpose of

raising revenue to be used for public or governmental purposes. See Rev. Rul. 71-49, 1971-1 C.B. 103.

Accordingly, amounts paid or accrued in carrying on a trade or business by employers to the California unemployment fund pursuant to Section 976 of the California Unemployment Insurance Code are taxes deductible under section 164(a) of the Code.

Amounts withheld from the wages of employees for contribution to the California disability fund for indemnity coverage under the California Unemployment Insurance Code do not qualify as any of the types of taxes specified in section 164 (a) of the Code and are not paid or accrued in carrying on a trade or business because they are incurred to provide indemnity coverage for loss of wages due to unemployment resulting from nonoccupational hazards rather than from hazards arising from business contingencies. Therefore, these amounts are not deductible by employees under section 164 (a). Such amounts are nondeductible personal expenses under section 262. See Rev. Rul. 71-73, 1971-1 C.B. 52, which held that similar employee contributions under the New York Workman's Compensation Law are nondeductible personal expenses.

Also, contributions made by employees to private plans of insurance as substitutes for coverage under the State disability benefits law are not taxes within the meaning of section 164(a) of the Code. Such amounts are nondeductible personal expenses under section 262.

Furthermore, both the amounts

withheld from the wages of employees

for contributions to the California disability fund, which provides indemnity for loss of earnings during disability, including the additional benefits during hospital confinement, and amounts contributed to private plans as substitutes for coverage under the State disability benefits law, which are at

tributable to insurance coverage providing indemnity for loss of earnings during disability, are not deductible as medical expenses under section 213 of the Code. See Rev. Rul. 68-212, 19681 C.B. 91, which holds that premiums paid for insurance policies providing indemnity for loss of earnings during disability will not be deductible as medical expenses under section 213 for taxable years beginning after December 31, 1966, and Rev. Rul. 68-451, 1968-2 C.B. 111, which holds that premiums paid on an insurance policy providing payment of a specified amount during hospital confinement are not amounts paid for insurance covering medical care.

I.T. 3966 and I.T. 3967 are superseded, since the positions set forth therein are restated under current law in this Revenue Ruling.

26 CFR 1.164-1: Deduction for taxes.

State taxes; unemployment compensation; Alabama. Contributions made by employers and employees to the Alabama unemployment compensation fund, providing indemnity coverage for the loss of wages due to unemployment resulting from business contingencies, are deductible as taxes under section 164(a) of the Code; I.T. 3111 superseded. Rev. Rul. 75-1561

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in I.T. 3111, 1937-2 C.B. 85.

The question presented is whether contributions made by employers and employees to the Alabama unemployment compensation fund pursuant to article 3, title 26 of the Code of Alabama, as amended, are deductible as taxes under section 164 of the Internal Revenue Code of 1954.

1 Prepared pursuant to Rev. Proc. 67-6, 1967-1

C.B. 576.

The Alabama statute provides for unemployment benefits to be paid to unemployed eligible individuals if the individual is able to work and is available for work, and has demonstrated that he is actively seeking work. Code that he is actively seeking work. Code of Alabama, Title 26, Article 3, Section 213 (1958).

Both employers and employees are required to make contributions to the fund providing unemployment benefits. With respect to employee contributions, an employer is required to withhold the amount of such contributions from the employees' wages at the time the wages are paid. Code of Alabama, Title 26, Article 3, Section 203 (1958).

Section 164 (a) of the Code provides, in addition to the taxes enumerated therein, that there shall be allowed as a deduction State and local, and foreign, taxes which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section duction of income). 212 (relating to expenses for the pro

The word "taxes" has been defined as an enforced contribution, exacted pursuant to legislative authority in the exercise of the taxing power, and imposed and collected for the purpose of raising revenue to be used for public or governmental purposes. See Rev. Rul. 71-49, 1971-1 C.B. 103.

Accordingly, amounts paid or accrued in carrying on a trade or business by employers to the Alabama unemployment compensation fund pursuant to article 3, title 26 of the Code of Alabama, as amended, are taxes deductible under section 164(a) of the Code.

In the case of employees, amounts withheld from their wages for contribution to the Alabama unemployment compensation fund pursuant to the Alabama unemployment compensation law providing indemnity coverage for the loss of wages due to unemployment resulting from business contingencies are taxes paid or accrued

by the employees in carrying on a trade or business and, therefore, are deductible by the employees under section 164 (a) of the Code. However, such amounts are deductible by an employee only if his deductions are itemized in computing taxable income. under section 63(a).

Compare Rev. Rul. 75-148, page 64 of this bulletin, which disallows the deduction for payments into a fund providing indemnity coverage for loss of wages due to unemployment resulting from nonoccupational hazards.

I.T. 3111 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.

26 CFR 1.164-1: Deduction for taxes. (Also Section 461; 1.461-1.)

Massachusetts real property tax; accrual date. An accrual method fiscal year Massachusetts corporation that did not elect under section 461(c)(1) of the Code to accrue Massachusetts real estate taxes ratably over the period to which they apply but rather accrued them as of January 1 of each year, the date they are assessed and become liens, must continue to accrue them as of January 1 despite a legislative change in the billing period from a calendar to a fiscal year.

Rev. Rul. 75-157

Advice has been requested concerning the Federal income tax treatment of deductions for real estate taxes by an accrual method taxpayer under the circumstances described below.

The taxpayer, a Massachusetts corporation, computes taxable income under the accrual method of accounting and files its Federal income tax returns on the basis of a fiscal year ending April 30. The taxpayer did not elect under section 461(c)(1) of the Internal Revenue Code of 1954 to accrue real estate taxes ratably

over the period to which they apply, but rather deducted the taxes in the year in which they accrued.

In Massachusetts, real property is assessed as of January 1, and a lien

for the tax assessed attaches as of that same date. Although the Massachusetts legislature recently changed the billing period for real property tax from a calendar year to a fiscal year ending June 30, no change was made to the assessment and lien date which remains January 1st.

The recently enacted legislation, Mass. Ann. Laws. Ch. 60, sec. 3, note (1973), provides for changes in billing of taxes for the 18-month fiscal period beginning January 1973. In general, the changes require two assessments and two bills for the 18-month period. The first bill is based upon property assessed as of January 1, 1973, at a rate of two-thirds of the amount required to be assessed by law for the 18-month fiscal period. The second bill is based upon property assessed as of January 1, 1974, at a rate of onethird of the amount required to be assessed by law for the 18-month fiscal period.

Section 1.461-1(a)(2) of the Income Tax Regulations states, in part, that under an accrual method of accounting, an expense is deductible for the taxable year in which all the events have occurred that determine the fact of the liability and the amount thereof can de determined with reasonable accuracy. Section 1.461-1 (c) (1) provides certain general rules in connection with the accrual of real property taxes that are not applicable here. It also provides that for general rules relating to deductions for taxes section 164 of the Code and the regulations thereunder should be consulted.

Section 164(a) of the Code provides, in part, that state and local, and foreign, real property taxes shall be allowed as a deduction for the taxable year within which paid or accrued.

Massachusetts real property taxes levied as of January 1st, the lien date, have been held to be accruable on that date. See George E. Warren Corporation, 11 P-H B.T.A. Mem. 806 (1942) and Harbor Building trust, 11 P-H B.T.A. Mem. 850 (1942).

Accordingly, it is held that since the lien and assessment date for Massachusetts real property taxes has not changed despite the new billing periods, the taxpayer must continue to accrue Massachusetts real property taxes as of January 1 of each year based upon the amount of taxes that

are assessed as of and become a lien on such date.

26 CFR 1.164-1: Deduction for taxes.

Whether the tax assessed by Australia on dividends pursuant to section 128B of their Income Tax Assessment Act is an income tax. See Rev. Rul. 75-164, page 233.

26 CFR 1.164-7: Taxes of shareholder paid by corporation.

Treatment of refund to bank of personal property taxes imposed on bank shareholders and paid by the bank either out of corporate funds or declared dividends belonging to shareholders. See Rev. Rul. 75-133, page 21.

Section 165.—Losses
26 CFR 1.165-1: Losses.
(Also Section 1221; 1.1221-1.)

Worthless corporate stock held by corporate officer; ordinary v. capital loss. An officer-stockholder of a stock brokerage and investment banking firm who voluntarily purchased his stock in the corporation during its period of prosperity and rapid growth when the stock appeared to be an attractive investment sustained a capital loss rather than an ordinary loss in the year the corporate stock became worthless.

Rev. Rul. 75-13

Advice has been requested whether,

under the circumstances described below, an individual sustained an ordinary loss or a capital loss in the year certain shares of his corporate stock became worthless.

In 1960 the taxpayer began his employment with an incorporated stock brokerage and investment banking firm. He became an officer of the corporation in 1962. In the period 1962 to 1968 the taxpayer's employer experienced extremely rapid growth and high prosperity, and the firm was generally regarded as having a high potential for continued good performance. However, beginning in 1968 the firm encountered difficulties so serious that in 1970 the firm ceased all normal business operations and began to liquidate.

Subsequent to his promotion in 1962 the taxpayer first purchased stock in his employer. The employer encouraged officers to make such purchases on the theory that the officers would work more efficiently if they had a financial stake in the success of the corporation. The purchases were not mandatory, but the officers considered such purchases to be potentially helpful in advancing their positions within the corporation.

The taxpayer received additional promotions after 1962, and shortly after receiving some of the promotions he purchased varying amounts of stock. His last purchase was in December 1967, and he was in a position to know the full extent of the firm's difficulties that began in 1968. Despite ceasing his stock purchases, the taxpayer received two significant promotions in the next two years. The taxpayer's salary tripled in the period 1962 to 1970.

The taxpayer's stock became worthless in 1970 when it became clear that the stock had no present or potential liquidation value.

Section 165(a) of the Internal Revenue Code of 1954 provides that there shall be allowed as a deduction any loss sustained during the taxable