REVENUE AND TAXES 3125

(o) In the case of mutual insurance companies (including interinsurers
and reciprocal underwriters, but not including mutual life or mutual
marine insurance companies) requiring their members to make premium
deposits to provide for losses and expenses, the amount of premium deposits
returned to their policyholders and the amount of premium deposits re-
tained for the payment of losses, expenses, and reinsurance reserves.

1939, ch. 277, sec. 218.

225. (Items Not Deductible.) No deductions shall be allowed in re-
spect of the following items:

(a) Capital losses sustained from the sale, exchange or other disposi-
tion of property held by a taxpayer (whether or not connected with his
trade or business) other than stock in trade of the taxpayer or other prop-
erty of a kind that would properly be included in the inventory of the
taxpayer if on hand at the close of the taxable year, or property held by
the taxpayer primarily for sale to customers in the ordinary course of his
trade or business.

(b) Personal, living or family expenses;

(c) Any amount paid out for new buildings or new machinery, for
permanent improvements or betterments, or for any other capital outlay
made to increase the value of any property or estate;

(d) Any amount expended in restoring property or in making good
the exhaustion thereof for which an allowance is or has been made;

(e) Any amount expended or reserved for repairs to or maintenance
of residence property occupied by its owner, or for depreciation thereof;

(f) Premiums paid on any life insurance policy covering the life of any
officer or employee, or of any person financially interested in any trade
or business carried on by the taxpayer, when the taxpayer is directly or
indirectly a beneficiary under such policy;

(g) Local improvement assessments.

1939, ch. 277, sec. 219.

226. (Accounting Basis, Period and Changes Therein.) (a) The in-
come of the taxpayer shall be computed upon the basis of the taxpayer's
annual accounting period (fiscal year or calendar vear, as the case may
be) in accordance with the method of accounting regularly employed in
keeping the books of such taxpayer, but if no such metho'd of accounting
has been employed or if the method employed does not clearly reflect the
true income of the taxpayer, computation shall be made upon the basis
and in such manner, as in the opinion of the Comptroller does clearly
reflect the true income. If the taxpayer's annual accounting period is
other than a fiscal year, as defined in this sub-title, or if the taxpayer has
no annual accounting period, or does not keep books, the income shall be
computed on the basis of the calendar year.

(b) Unless otherwise required by this sub-title or by regulations of the
Comptroller, taxpayers reporting their income on a cash basis shall account
only for amounts actually or constructively received and actually expended
and taxpayers reporting their income on an accrual basis shall account for
amounts earned, whether received or not, and liabilities incurred, whether
paid or not.

(c) If the taxpayer files a Federal income tax return, his income shall
be computed for the purposes of this sub-title on the same basis (cash or