CHAPTER 215

An Act to amend and reenact § 58-78, as amended, of the Code of Virginia,
relating to definition of gross income and exclusions therefrom for
purpose of income taxation. CH 450]

Approved March 9, 1962

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 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
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 prop-
erly 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 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, interest upon obligations
issued by any educational institution under Chapter 3 of Title 23 of this
Code, 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.

(10) The value of any meals or lodging furnished to an employee by
his employer for the convenience of the employer, but only tf, in the case
of meals, the meals are furnished on the business premises of the employer,
or in the case of lodging, the employee is required to accept such lodging
on the business premises of his employer as a condition of his employment.
In determining whether meals or lodging are furnished for the convenience
of the employer, the provisions of an employment contract or of a State
statute fixing terms of employment shall not be determinative of whether
the meals or lodging are intended as 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 attrib-
utable 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
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 ease 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. 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 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 in-
stallment 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 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-
payer 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 in-
curred by the taxpayer, in connection with the performance by him of
services as an employee, under a reimbursement or other expense allow-
ance arrangement with his employer;

(3a) 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 tax-
payer as an employee and if such trade or business is to solicit, away
from the employer’s place of business, business for the employer;

(4) 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

F a ) Dividend deductions.—The deductions allowed by § 58-81 (k)
an .
ol ioe act shall be in force for taxable years beginning after December