I have found an old newspaper clipping from 1912 on Ancestry.com that I would like to print out and distribute. Am I legally allowed to do so, or is the clipping still held under copyright? Does the answer change if the newspaper is now defunct (The San Francisco Call)?
The San Francisco Call (among other papers) is available online at the California Digital Newspaper Collection. The copyright blurb on that site says
For more information on copyright of images from this collection, see their about link.
All of this implies to me that you can just get a copy of the same newspaper from the CDNC and not worry about Ancestry's policies.
Hilariously Superfluous Disclaimer: I am not a lawyer, you are not my client.
Your rights regarding clippings found on Ancestry.com and similar content-providing sites are limited by Terms of Service first, copyright second; their Terms of Service may limit your rights even if the clipping is free of copyright. Once you know the clipping exists, it may be relatively easy to locate the same on another site, but there you'll be bound by their Terms of Service...
There generally are multiple copyrights involved; there is the original content and publication, there is the photographing and digitisation of that content, and possibly some image manipulation to enhance the image (and recognise it as theirs...).
If you found an original paper in your attic, you would not have to worry about those Terms of Service, but would you'd still have to deal with copyright law, which is a topic unto itself. However, a quick answer to your second question; that a newspaper is defunct does not imply that all their content is in the public domain. You may need to track down the current copyright holder.
The real question here is "When does a copyright expire?"
About.com summarizes the situation in the US with this table:
Given that your clipping was published before 1923, it is in the public domain. I'm not sure if Ancestry.com can make any claims against it -- the digital copy of the clipping may be a copyrightable work (IANAL). If this is the case, you at least have a reference that you could use to search for an alternative, unencumbered digitized version of the clipping.
If had been published between 1923 and 1978, it might still be under copyright, but that's only if it were published with a notice and was properly renewed. Various works from that period have fallen into the public domain because they were published without a copyright notice and/or the copyright was not renewed. If the publisher was defunct (like the SF Call), then it's likely the copyright wasn't renewed and the work is in the public domain.
Also, not that it's necessarily legal, but if the publisher is defunct, and nobody owns the copyrights, then who's to enforce them?
The Legal Genealogist recently blogged on the topic of copyright and newspapers. However, you should also consult the terms and conditions of the website where you got the clipping.
How do you intend to distribute it and how many copies do you want to make? Copyright prevents copying without permission, so you could ask for permission.