CHAPTER 537

An Act to amend and reenact § 58-78,as amended, of the Code of Virginia,
which section defines gross income.
[H 752]

Approved April 5, 1954
Be it enacted by the General Assembly of Virginia:

1. That § 58-78, as amended, of the Code of Virginia be amended and
reenacted as follows:

§ 58-78. (a) General definition.—The term “gross income”, as used
herein, includes gains, profits and income derived from salaries, wages or
compensation for personal services of whatever kind and in whatever
form paid or from professions, vocations, trades, businesses, commerce or
sales or dealings in property, whether real or personal, growing out of the
ownership, use or interest in such property; also from rent, interest,
dividends, securities or transactions of any business carried on for gain
or profit or gains or profits and income derived from any source whatever,
including gains or profits and income derived through estates or trusts by
the beneficiaries thereof, whether as distributive or as distributable shares.

The term includes compensation received for personal service as an
officer or employee of the United States, any territory or possession or
political subdivision thereof, the District of Columbia or any agency or
instrumentality of any one or more of the foregoing; and the term “officer
or employee”’ includes a member of a legislative body, a judge or officer of
a court and a person in the armed forces.

The amount of all such items shall be included in the gross income
for the taxable year in which received by the taxpayer, unless under the
methods of accounting permitted herein such amounts are to be properly
accounted for as of a different period.

(b) Exclusions from gross income.—The following items shall not be
included in gross income and shall be exempt from taxation under this
chapter:

(1) The proceeds of life insurance policies and contracts paid upon
the death of the insured.

(2) The amount received by the insured as a return of premium or
premiums paid by him under life insurance, endowment or annuity con-
tracts, either during the term or at the maturity of the term mentioned
in the contract, or at the surrender of the contract.

(3) The value of property acquired by gift, bequest, devise or
inheritance, but the income received from such gifts, bequests, devises and
inheritances shall be assessed under the provisions of this chapter.

(4) Any amount received through accident or health insurance or
under workmen’s compensation acts or under ordinances in the nature
of workmen’s compensation acts, as compensation for personal injuries
or sickness and the amount of any damages received, whether by suit or
agreement, on account of such injuries or sickness.

(5) Interest upon obligations of the United States or of this State
and interest upon securities issued under the provisions of the Federal
Farm Loan Act.

(6) Pensions received from the United States or this State on account
of military or naval service in armed forces, whether such service was
rendered by the recipient of the pension or by a relative by blood or
marriage.

(7) Amounts received as pensions, annuities, or similar allowances
for personal injury or sickness resulting from active service in the armed
forces of the United States or of this State.

(8) Benefits received under federal and state social security acts.

(9) The rental value of a dwelling house and appurtenances thereof
furnished to a minister of the gospel as part of his compensation.

(c) Alimony, etc., income.—In the case of a wife who is divorced
or legally separated from her husband under a decree of a divorce or of
separate maintenance, periodic payments (whether or not made at regular
intervals) received subsequent to such decree in discharge of, or attribu-
table to property transferred (in trust or otherwise) in discharge of, a
legal obligation which, because of the marital or family relationship, is
imposed upon or incurred by such husband under such decree or under a
written instrument incident to such divorce or separation shall be includ-
ible in the gross income of such wife, and such amounts received as are
attributable to property so transferred shall not be includible in the gross
income of such husband. This subsection shall not apply to that part of
any such periodic payment which the terms of the decree or written
instrument fix, in terms of an amount of money or a portion of the pay-
ment, as a sum which is payable for the support of minor children of such
husband. In case any such periodic payment is less than the amount
specified in the decree or written instrument, for the purpose of applying
the preceding sentence, such payment, to the extent of such sum payable
for such support, shall be considered a payment for such support. Install-
ment payments discharging a part of an obligation the principal sum of
which is, in terms of money or property, specified in the decree or instru-
ment shall not be considered periodic payments for the purposes of this
subsection; except that an installment payment shall be considered a
periodic payment for the purposes of this subsection if such principal sum,
by the terms of the decree or instrument, may be or is to be paid within
a period ending more than ten years from the date of such decree or
instrument, but only to the extent that such installment payment for the
taxable year of the wife (or if more than one such installment for such
taxable year is received during such taxable year, the aggregate of such
installment payments) does not exceed ten per centum of such principal
sum. For the purposes of the preceding sentence, the portion of a pay-
ment of the principal sum which is allocable to a period after the taxable
year of the wife in which it is received shall be considered an installment
payment for the taxable year in which it is received. (In cases where such
periodic payments are attributable to property of an estate or property
held in trust, see § 58-121.1.)
(d) Definition of “adjusted gross income”’.—As used in this chapter
the term ‘‘adjusted gross income” means the gross income minus:

(1) Trade and business deductions.—The deductions allowed by §
58-81 which are attributable to a trade or business carried on by the tax-
payer, if such trade or business does not consist of the performance of
services by the taxpayer as an employee;

(2) Expenses of travel and lodging in connection with employment.—
The deductions allowed by § 58-81 which consist of expenses of travel,
meals, and lodging while away from home, paid or incurred by the tax-
payer in connection with the performance by him of services as an
employee;

(3) Reimbursed expenses in connection with employment.—The
deductions allowed by § 58-81 (other than expenses of travel, meals, and
lodging while away from home) which consist of expenses paid or incurred
by the taxpayer, in connection with the performance by him of services
as an employee, under a reimbursement or other expense allowance
arrangement with his employer;

) Deductions attributable to rents and royalties —The deductions
(other than those provided in paragraphs (1), (5), or (6)) allowed by
§ 58-81 which are attributable to property held for the production of rents
or royalties;

(5) Certain deductions of life tenants and income beneficiaries of
property.—The deductions (other than those provided in paragraph (1))
for depreciation and depletion, allowed by § 58-81 (i) and (j) to a life
tenant of property or to an income beneficiary of property held in trust;

(6) Losses from sales or exchange of property.—The deduction (other
than those provided in paragraph (1)) allowed by § 58-81 as losses from
the sale or exchange of property; and

nh ) Dividend deductions.—The deductions allowed by § 58-81 (k)
and .