The Alaska daily empire., 1918-03-16
INCOME TAX PRIMER FOR
 BUSY PEOPLE
Continued from Yesterday

It must be (a) a bona fide debt, 1 (b) definitely ascertained to be worthless and uncollectable during the year for which the deduction is claimed and Co if books are kept it must be charged off within the year for which the deduction is claimed and no longer considered an asset or carried as such on the books
 91. In 1917 corporation or a firm to which I had loaned money became bankrupt. Can this debt be considered absolutely worthless and claimed as a deduction for 1917? No, unless the affairs of the debt or have been finally adjusted, it's assets sold for the benefit of, or distributed to, it's creditors, and it's receiver in bankrupcy discharged. If all this has occurred during the year 1917, so much of the debt as re- mains unpaid after the receiver is discharged may be claimed as de duction for the year 1917.
 ! 92. Is it absolutely necessary that the debtor corporation or firm men, toned in the ninety-first inquiry be declared a bankrupt and it's receiver discharged before l can claim de duction on account of the debt in question?
 No. If the debtor corporation has no assets whatsoever, and it is defi- nitely known that nothing whatsoever can be collected from debtor itself or any person connected with it, a creditor need not go to the expense of instituting bankruptcy proceedings in order to establish his right to claim the worthless debt as a deduc- tion.
 l 93 "A" indorses a note for ''B" The latter has since departed for parts unknown and the note became due in 1917, and "A" was required to make good his indorsement. Can he now claim as deduction the amount paid by him to the creditor?
 Yes. If he has no knowledge of I "B's" present whereabouts and has good reason to believe that he is possessed of no assets and that it if his intention never to make payment of it, the amount so paid by "A" may be considered bad debt due him from "B." 1 94. If, on account of friendship or relationship advanced certain sum | to assist needy friend or relative and at the time such advance was | made, had little or no reason to l expect that the amount so advanced would ever be returned, may I not claim deduction 10 cover such ad vance?
 l No. Such an advance, partaking of philanthropic donation or good will offering is not held to consti ute bona fide debt.
 95. In rendering my 1914 return I claimed a deduction to cover a debt then believed to be absolute ly worthless In 1917 the debtor has discharged part of his obligations. How should I treat this payment for income-tax purposes?
 Consider it as an item of income and include this amount under Gross income" in your 1917 return.
 96 A professional man earned fee in 1916. AS he keeps no books, he reports his income for tax pur- poses on an actual receipt basis. As this fee has never been reported as income, can it be claimed as deduc- ton if collection can not be made? l No; never having been returned as income, it can not be claimed as a deduction.
 I 97. "A" loaned "B" $10,00O the debt being secured by mortgage on farm. Foreclosure proceedings were resorted to and "A" to protect his interests, purchased the farm for $S,OO0 Can the difference be- tween these two amounts be claimed as a deduction?
 Where, under foreclosure, the mort gagee buys in the mOrtgaged prop erty, the difference between the pur chase price and the debt will not be allowed as a deduction. The prop erty which was security for the debt being in the possession and owner ship of the mortgagee, is, for pur- poses of the income tax, held to be sufficient to justify the disallowance of a claim for bad debts. Where the purchaser of the property upon foreclosure is another than the mort gagee, the latter may claim the diff ference between the amount of the debt and the net amount paid to the mortgagee as a bad debt.
 9S. "A" claimed that "B" owed him $1.O00 "B" contested the claim, but agreed to pay $500 in compro- mise. May "A" claim as a deduc- tion the balance which he contended was due him?
 No. Where an indebtedness is claimed, contested, and settlement is bad by way of compromise, where by an amount less than the debt claimed is accepted in full payment, the difference between the amount claimed and the amount paid can X IA l . = fn" ..fI