PUBLIC LAWS-CH. 367-JULY 26, 1939 Property restora- tion, etc. Life insurance pre- miums for employees, etc. Holders of life or terminable interest. Exceptions. Credits. Personal exemption. Credit for depend- ents. Change of status. In return for frac- tional part of year. Net income comput- ed on basis of annual accounting period. (3) any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; and (4) premiums paid on any life-insurance policy covering the life of any officer or employee or of any person financially inter- ested in any trade or business carried on by the taxpayer when the taxpayer is directly or indirectly a beneficiary under such policy. (b) HOLDERS OF LIFE OR TERMINABLE INTEREST.-Amounts paid under the laws of any State, Territory, District of Columbia, pos- session of the United States, or foreign country as income to the holder of a life or terminable interest acquired by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction allowed by this Act (except the deductions provided for in subsections (1) and (m) of section 23 of the Federal Revenue Act of 1926 as amended) for the purpose of computing the net income of an estate or trust but not allowed under the laws of such State, Territory, District of Colum- bia, possession of the United States, or foreign country for the pur- pose of computing the income to which such holder is entitled. PERSONAL EXEMPTIONS AND CREDIT FOR DEPENDENTS SEC. 9. (a) CREDITs. -T here shall be allowed to individuals the following credits against net income: (1) PERSONAL ExEMPTION.- In the case of a single person or married person not living with husband or wife, a personal exemption of $1,000; in the case of the head of a family or a married person living with husband or wife, a personal exemp- tion of $2,500; a husband and wife living together shall receive but one personal exemption, the amount of such personal exemp- tion shall be $2,500. If such husband and wife make separate returns the personal exemption may be taken by either or divided between them. (2) CREDIT FOR DEPENDENTS.- $400 for each person (other than husband or wife) dependent upon and receiving his chief support from the taxpayer if such dependent person is under eighteen years of age or is incapable of self-support because mentally or physically defective. (b) CHANGE OF STATUS. -I f the status of the taxpayer, insofar as it affects personal exemption or credit for dependents, changes during the taxable year, the personal exemption and credit shall be appor- tioned under rules and regulations prescribed by the Commissioners, in accordance with the number of months before and after such change. For the purpose of such apportionment a fractional portion of a month shall be disregarded unless it amounts to more than half a month in which case it shall be considered as a month. (c) IN RETURN FOR FRACTIONAL PART OF YEAR. - In the case of a return made for a fractional part of a year, the personal exemption and credit for dependents shall be reduced respectively to amounts which bear the same ratio to the full credits provided as the number of months in the period for which the return is made bears to twelve months. ACCOUNTING PERIODS SEC. 10. The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regu- larly employed in keeping the books of such taxpayer; but if no such 1092 [53 STAT.
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