The Alaska daily empire., 1918-03-12
INCOME TAX
 PRIMER FOR
 BUSY PEOPLE
Continued from Yesterday

| NOOUIlHucu lTOiIl 1eSJeTudyt
 54. Will it be the taxpayers duty to advise himself what proportion of dividend received by him is prop erly chargeable, under section S1 (b) act of September 8, 1916, as amended to the corporate earnings or profits for each tax year?
 Yes.
 B. Assuming that a corporation had assets upon which had greatly appreciated in value and had car ried the amount of that appreciat ton to it's surplus account and capital l ized same, or that it capitalized it's good will, and then issued the new stock to it's shareholders as divi- dend, would this dividend be subject 1 to tax?
 1 Only such dividends as represent a distribution of earnings or profits accrued since March 1, 1913, are sub ject to the additional tax when re- ceived by the shareholedrs. AS ap- preciation estimated to have occurred in the value of the assets held and good will do not represent actual earnings, profits, or income, divi- dend based upon a capitalization of any such items is not subject to tax when received by the shareholders. It should be understood, however, that when any of the stock received in payment of such a dividend is sold, the entire proceeds derived from the same are to be returned un- der Gross income" in the share holders return for the year during which the sale is made, and will be subject to both the normal and ad- ditional income taxes.
 56 A corporation on July 1, 1917, declared a dividend and in that dec laration specifically stated that it would be paid out of earnings or profits which had accumulated and were on hand prior to March 1. 1913 Is this dividend subject to be return ed for income-tax purposes?
 No. Section 31 (b), act of Septem
 
 Der 8, 1916, as amended provides that none of it's provisions shall ap- ply to any distribution made prior to August 6, 1917, and of earnings or profits accrued prior to March l. 1913.
 57. Are dividends on paid-up life insurance policies subject to income tax?
 Dividends on paid-up life insurance policies are subject to the additional tax for the year in which received.
 General Deductions
 58. In rendering personal re- turn what items may I claim as deductions?
 See section of the act of Sep tember S. 1916, as amended by the war-revenue act.
 59. What constitutes an item al lowable as deduction under the head, Business expenses"
 All amounts of expenses actually paid during the tax year in the con duct of a business, trade or profes- sion.
 This includes all amounts actually paid by a farmer for labor in pre- pairing his land for a crop and the cultivation, harvesting. and market ing of the crop; the cost of the seed and fertilizer used; the amounts ex- pended for labor used in caring for livestock and the cost of the feed; the cost of stock purchased for the purpose of resale. Qt should be un- derstood, however, that if such cost is claimed as a deduction, the entire proceeds received upon a sale of the stock is to be returned as income.) The amounts actually paid in making repairs to farm buildings, but not the dwelling house; repairs to fenc- es, farm machinery, etc.; the cost Of materials for immediate use and farm tools which are used up in the course of year or two, such as binding twine, stock powders, pitch forks, spades, etc.; and the amount of rent paid for farm may also be CldluHCu AC duOuhto PoAu' AOA stock which is to be used for breed ing purposes are held to represent investment of capital and are not al lowable as deductions.
 A merchant may claim as deduc- tions the amounts paid for advertis- ing, hire of clerks. and other em' ployees; the cost of the light, fuei' water telephones, etc, used in or at his place of business; drayage ana freight bills; the cost of operating de livery wagons, trucks, and the re- pairs to same.
 The cost of goods purchased Tor resale is not to be claimed as de duction. as a credit for that cost may be obtained by following the method of computation outlined in the an swer to the thirty-fifth question.
 A physician may claim as deduc- tions the cost of medicines and med