The Ordway new era., 1918-01-11
The Tax Problem
Continued from P.se One

income of more than $1,000; every
married man o. head or a family re-
ceiving net income of more than
$4,000: every man and wife living
together. whose combined net income.
together with that of their minor
children. exceeds $4,000; every mer-
camille. manufacturing, or business
corporation.
THE Income Tax asks new duties
of many. When 1t asks how much you
make. how much you save or what
you have done with the rest, it means
to have the correct answer to Just
those questions. There is no need of
letting the subject become a night
mare to you. because it is simple II
followed out along the right lines.
be careless in keeping a-record of his
income and outgo. They deceive
themselves in many instances re-
garding what their income really is,
especially so If they are not working
for regular wage. The business man
and farmer should not reckon how
much business they transact or how
many dollars pass through their
hands in the course of year; the
point is, reckon how much you get,
because there is big difference be-
tween gross income and net income.
"Take for example: A farmer
might have the following transaction
along with his other business during
1917. Ip the month of May, we will
say, he purchased a breeding sow
with litter of FIVE young pigs for
$4OO. He sold the five pigs in Decem-
ber for $500 cash and kept the sow.
The question is How much should
he figure this item in his return. The
the sale of property of any kind is in
come; 1t further states that the cost
involved in bettering property or fat
tening animals may be added to the
orig nal cost and the profit made after
deducting such ,,harges is to be enter
ed as income. The law also states
that farmers may deduct as the ex-
pense of carrying on their business,
the cost of stock purchased for resale
but not if purchased for breeding
purposes. The farmer in the case we
have just stated must turn in the cost
of the SOW as apart from the pigs at
the time of the purchase. The cost of
the sow must be included in the per-
manent investment account and not
as deduction from gross income.
The profits on the pigs must be in
cluded in the gross income. The ex-
pense of keeping and feeding the pigs
may be added to the original cost in
determining the profit. or they may
be omitted here, and included as part
of the general expense of the farm.
"Take the case of person on
salary. Suppose a man earns his
S25O.00 a month, is married and lives
with his wife. We will say that his
travelling expenses are 80 cents a day
to and from his business; he is
member of club that costs him 500
year. his lunch expense Is SO cents
daily. Now outside of these items he
has no business expenses and the
question we want to determine for
him is how do these expenses figure
in his Income Tax Schedule. Now the
law states that operating expense is
one of the first items to be deducted
from ones income to determine how
much taxes they are to pay. A man
may spend a great deal of money for
clothes, education and the like, but
unless these have a direct bearing on
his business, they cannot be deducted.
If the education is for the business,
or the clothes, a uniform or some
thing of that order. having a direct
bearing on ones occupation, it may be
deducted. Therefore in our example
stated above the person will deduct
the travelling expense as business
expense; the club dues are personal
expense and a permanent investment
and will not be deducted, neither will
the ldnch expense because it is a
personal living expense.
Let us take one more example:
that of two men in a partnership in
the grocery business. During 1917
each partner took 500 a month in
cash and the groceries for his family
out Of the business. At the close of