THEODORE R. MCKELDIN, GOVERNOR 1803

under this sub-title, ascertained to be partially worthless and
to the extent charged off within the taxable year and debts
which become totally worthless within the taxable year, re-
gardless of the year in which they are charged off, to the extent
that the same had been previously reported as income under
this sub-title, or in the case of a debt existing on January 1st,
1937, to the extent of its fair market value on that date. In
the case of taxpayers who keep regular books of account on an
accrual basis and according to standard accounting practice,
there may be deducted, in lieu of the foregoing, additions to
reserve for bad debts, under such rules as the Comptroller may
prescribe. If the Comptroller at any time shall deem the re-
serve excessive, he may restore such excess to the income either
in a subsequent year or as a part of the income of the taxable
year in which deducted.

(j) (1) A reasonable allowance for exhaustion, wear and
tear of property used in trade or business, or held for the pro-
duction of income, including a reasonable allowance for ob-
solescence, but such allowance shall only be allowed on prop-
erty which is considered depreciable under federal standards,
and in the case of natural resources, allowance for depletion,
as permitted by rules and regulations of the Comptroller; (2)
With respect to any emergency facility as defined by the
Federal Revenue Act applicable to the taxable period, pro-
vided that the taxpayer has included in gross income any pay-
ments by way of reimbursements for the cost of such emer-
gency facility, an allowance under subparagraph (1) hereof,
or, at the election of the taxpayer, an allowance for amortiza-
tion deduction as permitted by rules and regulations of the
Comptroller.

(m) All ordinary and necessary expenses (not otherwise
herein provided for) paid or incurred during the taxable year
for the acquisition of income or the care of income-producing

property, which expenses shall be allowed as a deduction

from PROPERTY. TO THE EXTENT TO WHICH SUCH
EXPENSES ARE PAID OR INCURRED OUTSIDE TRADE
OR BUSINESS BUT FOR THE ACQUISITION OF IN
VESTMENT INCOME OR FOR THE CARE OF INVEST-
MENT INCOME PRODUCING PROPERTY, THEY SHALL
BE ALLOWED AS A DEDUCTION FROM investment in-
come. If such expense exceeds EXPENSES EXCEED the
amount of taxable investment income, such excess expense
EXPENSES shall be allowed as a deduction from ordinary
income.

227. Net Income. Net income means the gross income of
a taxpayer as defined in Section 223 hereof, less the deductions