CHAPTER 591

AN ACT to amend and reenact § 58-78, as amended, of the Code of Vir-
ginia, relating to definition of gross income and exclusions there-
from for purpose of income taxation. g

(S 281]

Approved March 29, 1958

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, divi-
dends, securities or transactions of any business carried on for gain or
profit or gains or profits and income derived from any source whatever, in-
cluding gains or profits and income derived through estates or trusts by the
beneficiaries thereof, whether as distributive or distributable shares.

The term includes all interest received within the taxable year on re
funds of State or United States taxes.

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 in-
strumentality 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 meth-
ods of accounting permitted herein such amounts are to be properly ac-
counted for as of a different period.
(b) Exclusions from gross income.—The following items shall not
he a 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.

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 in-
heritance, 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
or of any political subdivision 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 ac-
count 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 mar-
riage.

(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 divorce or of separate
maintenance, periodic payments (whether or not made at regular intervals)
received subsequent to such decree in discharge of, or attributable to prop-
erty transferred (in trust or otherwise) in discharge of, a legal obligation
which, because of the marital or family relationship, is imposed upon or in-
curred by such husband under such decree or under a written instrument
incident to such divorce or separation shall be includible 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 payment, as a sum which is payable
for the support of minor children of such husband. In case any such per-
iodic payment is less than the amount specified in the decree or written
instrument, for the purpose of applying the preceding sentence, such pay-
ment, to the extent of such sum payable for such support, shall be con-
sidered a payment for such support. Installment payments discharging a
part of an obligation the principal sum of which is, in terms of money or
property, specified in the decree or instrument shall not be considered
periodic payments for the purposes of this subsection; except that an in-
stallment payment shall be considered a periodic payment for the pur-
poses 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 tax-
able 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 payment 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-
er in connection with the performance by him of services as an em-
ployee,

(3) Reimbursed expenses in connection with employment.—The de-
ductions 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 ar-
rangement with his employer;

(8a) Outside salesman.—The deductions allowed by § 58-81 which
are attributable to a trade or business carried on by the taxpayer, if such
trade or business consists of the performance of services by the taxpayer
as an employee and if such trade or business is to solicit, away from the
employer’s place of business, business for the 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 deductions
(other than those provided in paragraph (1)) allowed by § 58-81 as losses
from the sale or exchange of property; and

(7) Dividend deductions.—The deductions allowed by § 58-81 (k)
and (1).

2. This act shall be in force for taxable years beginning after December
31, 1957.