The Bourbon news. [volume] (Paris, Ky.) 1895-19??, 1914-03-13
HOW FARMERS
. SHOULD COMPILE
THEIR INCOMES
Government Department of
Agriculture Makes Re-
ply to Inquiries
EXPENSES TAKEN
FROM INCOME
Interesting Pointers Given in
Regard to the New

d hSl income OF over $4,000 year in
case he is bachelor, or $4,000 if
married, he is subject to the income
tax, and under the law each individ-
ual must make a return to the Inter-
nal Revenue Collector of his district
on or before the first day of March if
he has a net income of $4,000 or over
tS2,5OO for the ten months of 1879.
While the interest of most farmers in
this subject is purely academic, the
Department of Agriculture has receiv-
ed inquiries indicating that some wish
to know just what is required of them
under the new law
The income tax law of October 5.
1913, places a tax of 1 ger cent. upon
all net incomes of over $4,000, with
an additional tax on incomes of S2O.-
600 or more. The first question aris-
ing in the minds of most people is
what constitutes a net income For
a man receiving a regular salary, or
a business man with a good system
of bookkeeping, it is easy to deter
mine whether or not his income is
taxable. But for the farmer who re-
ceives no stated income, and who Of
ten fails to keep accurate account of
receipts and expenditures, it is more
difficult to calculate his net income.
In order that farmers may be posted
on the income tax as it may concern
them, the following information has
been furnished by the Internal Reve-
nue. Bureau of the Treasury Depart
ment:
In general, an income consists of
amounts derived from salaries, wag-
eS, or compensation for personal SER
vice. paid in any form; also from pro-
fessions, business, sales or dealings in
property, Of from rents, interest on
bonds or mortgages, dividends on
stocks, or other income from invest
ments. These items constitute gross
income, from which there should be
deducted the expenses of carrying on
the business; interest paid on indebt-
edness: worthless debts charged off |;
losses by fire, storm or shipwreck, not
covered by insurance; exhaustion,
wear and tear of property, and any in
come upon which the income tax has
already been deducted at the source,
of a corporation which has already
paid the tax on it's earnings.
The provisions regarding net in
comes of $4,000 apply only to unmar-
ried persons, or to married persons
not living with wife or husband. A
husband and wife living together are
entitled to an exemption of $4,000 on
their aggregate income. This means
that in case the wife has a separate
income, if this added to the husbands
income amounts to $4,000 the total is
subject to the tax; or, if the wife has
no separate income, the husbands in
come is taxable only in case it, reaches
$4,000. But a return must be made if
the aggregate income of both Is $4,000
for the year 1913. The joint exemp-
ton, however, would be $3,333:33.
In arriving at his net income the
farmer should start with his gross in
come. This would consist of any
items of the kind above mentioned,
and specially all receipts from the
sale of products of every description
from the farm. This would include
all money received for produce and
animals sold, and for the wool and
hides of animals slaughtered, If the
wool and hides are sold; but he may
deduct from these items the amounts
actually paid as purchase money for
the animals sold or. slaughtered dur
ing the year. When the animals
raised by the owner are sold or
slaughtered, however, their value
should not be deducted.
From the gross income there
should be deducted amounts of mon
o@,, For
Grating the farm and producing the
farm products, live stock, etc. This
would include hired farm help, farm
supplies purchased that are necessary
to carry on the business and not an
investment that represents principal,
etc. Expenses for repairs on farm
property may be deducted, provided
the amount deducted does not exceed
the amount spent for such repairs
during the year for which the return
is made. The cost of replacing tools
or machinery may also be deducted
to the extent that the cost of the new
articles does not exceed the value of
the old. No deduction may be made
for the cost of additional farm ma
chinery, but credit NAV be allowed
for the annual depreciation in the val
ue of such machinery. For example,
if a machine cost 500 and is regard
ed as good for ten years of service,
the annual depreciation would be 10
per cent. and a deduction of $40 each
year could be made on this account,
as part of the expense of operating
the farm.
The expense of supporting the fam
lily, however, can not be deducted
from the gross income. Among the
items for which credit is not allowed
are expense for medical attendance,
life insurance, insurance on dwellings,
store accounts, family supplies, wages
of domestic servants and cost of