amount of gifts made during the calendar year. "Future interests" is a legal term, and includes reversions, remainders, and other interests or estates, whether vested or contingent, and whether or not supported by a particular interest or estate, which are limited to commence in use, possession, or enjoyment at some future date or time. The term has no reference to such contractual rights as exist in a bond, note (though bearing no interest until maturity), or in a policy of life insurance, the obligations of which are to be discharged by payment in the future. But a future interest or interests in such contractual obligations may be created by the limitations contained in a trust or other instrument of transfer employed in effecting a gift. For the valuation of future interests, see subdivision (7) of article 19. SEC. 505 (AS AMENDED BY SECTION 517 OF THE REVENUE In computing net gifts for any calendar year there shall be allowed as deductions: (a) Residents. In the case of a citizen or resident (1) SPECIFIC EXEMPTION.-An exemption of $50,000, less the (2) CHARITABLE, ETC., GIFTS.- (A) the United States, any State, Territory, or any politi- (B) a corporation, or trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation; (C) a fraternal society, order, or association, operating under the lodge system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; (D) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual; (E) the special fund for vocational rehabilitation authorized by section 12 of the World War Veterans' Act, 1924. (b) Nonresidents. In the case of a nonresident not a citizen of the United States, the amount of all gifts made during such year to or for the use of— (1) the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes; (2) a domestic corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation; (3) a trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation; but only if such gifts are to be used within the United States exclusively for such purposes; (4) a fraternal society, order, or association, operating under the lodge system, but only if such gifts are to be used within the United States exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; (5) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual; (6) the special fund for vocational rehabilitation authorized by section 12 of the World War Veterans' Act, 1924. (c) The deductions provided in subsection (a) (2) or (b) shall be allowed only to the extent that the gifts therein specified are included in the amount of gifts against which such deductions are applied. SEC. 301, REVENUE ACT OF 1935. * * (b) Section 505 (a) (1) of the Revenue Act of 1932 (relating to the specific exemption for gift-tax purposes) is amended by striking out "$50,000” and inserting in lieu thereof “$40,000”. (c) The amendments made by subsections (a) and (b) of this section shall be applied in computing the tax for the calendar year 1936 and each calendar year thereafter (but not the tax for the calendar year 1935 or a previous calendar year), and such amendments shall be applied in all computations in respect of the calendar year 1935 and previous calendar years for the purpose of computing the tax for the calendar year 1936 or any calendar year thereafter. ART. 12. Specific exemption.-In determining the amount of net gifts of a given calendar year there may be deducted, if the donor was a resident or citizen of the United States at the time the gifts were made, a specific exemption of $40,000 ($50,000 if the calendar year is before 1936), less the sum of the amounts claimed and allowed as an exemption in prior calendar years. The exemption, at the option of the donor, may be taken in its entirety in a single year, or be spread over a period of years in such amounts as he sees fit, but after the limit has been reached no further exemption is allowable. In determining the aggregate sum of the net gifts for the preceding calendar years (see article 5), the total amount of the specific exemption claimed and allowed for such preceding years should be deducted, except that if tax is being computed for the calendar year 1936 or for any calendar year thereafter such deduction can not exceed $40,000. The specific exemption is authorized only in the case of a citizen or resident of the United States. A donor, who was a nonresident alien at the time of the gift or gifts, is not entitled to this exemption. ART. 13. Charitable, etc., gifts.-In determining the amount of net gifts of a given calendar year, in the case of a donor who was a citizen or resident of the United States at the time when the gifts were made, there may be deducted the amount of such gifts as were to or for the use of (A) the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes; or (B) any corporation, trust, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, provided no part of the net earnings of such organization inures to the benefit of any private shareholder or individual, and no substantial part of its activities is carrying on propaganda, or otherwise attempting, to influence legislation; or (C) a fraternal society, order, or association, operating under the lodge system, provided such gifts are to be used by such fraternal society, order, or association exclusively for one or more of the purposes enumerated in (B); or (D) any organization of war veterans or auxiliary unit or society thereof if such organization, auxiliary unit, or society thereof is organized in the United States or any of its possessions, and if no part of its net earnings inures to the benefit of any private shareholder or individual; or (E) the special fund for vocational rehabilitation authorized by section 12 of the World War Veterans' Act, 1924. In case the donor was a nonresident alien of the United States at the time the gifts were made, the deduction of the amount of charitable, etc., gifts is governed by the same rules as those applying to similar gifts made by citizens or residents, subject, however, to the two following exceptions: (1) If the gift be made to or for the use of a corporation, such corporation must be one created or organized under the laws of the United States or of any State or Territory thereof; and (2) if made to or for the use of a trust, or community chest, fund, or foundation, or a fraternal society, order, or association, operating under the lodge system, the gift must be for use within the United States exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals. The deduction is not limited in the case of donors who were citizens or resident aliens to gifts to or for the use of domestic corporations, or for use within the United States when made to a trust, or community chest, fund, or foundation, or a fraternal society, order, or association, operating under the lodge system. If money or other property is so given that the income is, for the duration of a life or a term of years, to be paid to the donor or other individual, or is to be used for a purpose not described in section 505 (a) (2) or (b), and the property is then to be devoted exclusively to some one or more of the uses described in section 505 (a) (2) or (b), only the present worth of the remainder is deductible. To determine the present worth or value of such remainder (that is, its value as of the date of the gift), the amount of the money or the value of the property transferred should be multiplied by the appropriate factor in column 3 of Table A or B, a part of article 19. ART. 14. Religious, charitable, scientific, literary, and educational organizations. The corporation, or trust, or community chest, fund, or foundation to which a gift is made must meet three tests to entitle the donor to deduct the amount of the gift: (1) It must be organized and operated exclusively for one or more of the purposes specified in the statute; (2) it must not by a substantial part of its activities carry on propaganda, or otherwise attempt, to influence legislation; and (3) no part of its net earnings shall inure to the benefit of private shareholders or individuals. The donor is not deprived of the right to deduct an amount equal to the value of property so transferred by reason of the fact that private individuals are the recipients of the benefits which the organization dispenses. Such right is lost, however, where any part of the net earnings of the organization inures to the benefit of a private shareholder or individual. ART. 15. Proof required.-In order to prove the right to this deduction, the donor must submit such documents or evidence as may be requested by the Commissioner. ART. 16. Charitable, etc., gifts with power to divert.—If a fraternal society, order, or association, operating under the lodge system, is empowered to divert a part of the property or fund transferred by gift to a use or purpose which would have rendered it, to the extent that it is subject to such power, not deductible had it been directly transferred by the donor for such use or purpose, deduction will be limited to that part of the property or fund which is not subject to the exercise of the power. SEC. 506. GIFTS MADE IN PROPERTY. If the gift is made in property, the value thereof at the date of the gift shall be considered the amount of the gift. ART. 17. Gifts made in property.-A gift made in property is subjcet to the tax in the same manner as a gift of cash, and the amount of the gift is the value of the property at the date of the gift. ART. 18. Situs of property. The statute imposes a tax upon gifts made by citizens of the United States, residents or nonresidents thereof, and upon those made by residents of the United States, citizens or aliens, irrespective of whether the property transferred (real or personal, tangible or intangible) be situated within or without the United States. But gifts by nonresidents of the United States who are not citizens thereof (see article 4) are subject to tax only if the property transferred is, at the time of the transfer, situated within the United States. Real estate and tangible personal property physically located in the United States constitute property having a situs in the United States. Intangible personal property, such as a bond, share of stock, note, insurance contract, simple debt, or other chose in action, has a situs in the United States if consisting of a property right issuing from or enforceable against a corporation (public or private) organized in the United States or a person who is a resident of the United States. Intangible personal property also has a situs in the United States if the certificate of stock, bond, bill, note, or other written evidence of such property, which is customarily treated as being the property itself, is physically located in the United States, whether such certificate of stock, bond, etc., was issued by a resident or nonresident of the United States. For example, a share of stock of a corporation organized in the United States constitutes property situated in the United States even though the stock certificate is in England; and a share of stock of a corporation organized in England constitutes property situated in the United States if the stock certificate is in the United States. Paragraph (10) of section 1111 (a) of the Revenue Act of 1932 defines the term "United States," when used in a geographical sense, as including only the States, the Territories of Alaska and Hawaii, and the District of Columbia. ART. 19. Valuation of property.-(1) General.-The statute provides that if the gift is made in property, the value thereof at the date of the gift shall be considered the amount of the gift. The value of the property is the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell. The value of a particular kind of property is not to be determined by a forced sale price or by an estimate of what a whole block or aggregate would fetch if placed upon the market at one and the same time. Such value is to be determined by ascertaining as a basis the fair market value at the time of the gift of each unit of the property. For example, in the case of shares of |