The Coconino sun., 1919-01-24

1 ventory of goods on hand at the year
 end, and the result is the cost of tn
 goods sold. This cost, plus necessar,
 expenses incurred solely through con
 duct of the business, is to be deducte,
 from the gross sales, and the resul
 IS the net earnings of the business.
 "A professional man arrives at hi
 professional income by ascertaininl
 the total of fees for services and de
 ducting therefrom all expenses con
 nected directly and solely with hi
 practice.
 "A farmer must figure up all in
 come derived from the sale or ex
 change of products during the year whether such produce was raised or the farm or purchased and resold
 He is allowed to deduct from this to tai his expenses of the year connect
 ed with the planting, cultivation, har vesting and marketing of the crop, ol the care, feeding and marketing O. livestock. He is not allowed to de duct the amount expended in 1918 1T purchasing stock for resale; bu' when such stock is sold it's cost is tC be deducted from sale price in ascer taining the gain to be included in his return of income. The cost price oi stock bought prior to 1917 cannot b, deducted as in the case just cited, il such cost was included in the deduc. tion made in the year of purchase.
 The farmer is not required to in. clude in his income tax computation the value of farm produce consumed by himself and family. But in cases where he exchanges produce for mer. chandise, groceries, etc, the market value of the articles received in ex, change must be included.
 "All other items of income arising during the year through personal ser. vices, business or trades, through use of property or money, should be add, ed into the gains for 1918.
 Everyone desires to know what in. come is exempt from tax Gifts and bequests can be eliminated; also pro- ceeds from life insurance received by the beneficiary of an insured person A person who cashed in an endow- ment policy need report as income only that portion which exceeds the total of the premiums he paid in all years on that policy. Annuities are not taxable, unless the person receiv- ed in the year payments which repre- sent, when added to all prior pay ments on the annuity, an amount greater than the original cost of the annuity. Dividens on unexpired life insurance policies are not taxable ih- come. But dividends on paid-up pol icies must be considered income. Ali mony is not income to the recipient nor is it an allowable deduction on the part of the person who pays.
 From the total of all items of in- come, there are certain deductions al- lowable by law. All interest paid on personal indebtedness and all taxes paid during the year are deductable, except Federal Income and Excess Profits taxes. inheritance taxes and assessments for local improvements, such as sidewalks, sewers. etc. Loss es incurred in business or trade are allowable, also losses arising from fires, storms, shipwreck or other cas- ualty, or from theft, in cases where such losses are not compensated for by insurance or otherwise. Losses incurred outside of a persons regu- lar business are allowable to the ex- tent of gains reported from similar transactions within the year. Debts due to the taxpayer actually ascer- tained to be worthless during the year are deductible.
 "Depreciation on property used in a profession, in business or in farm ing is another item that may be claim ed as a deduction. The storekeerer may claim depreciation on his fix lures, and on his delivery horses and wagons. but not on his stock held for sale. The professional man may claim similar deduction on his instruments; and, in the case of physician who msintains a team or auto for making his calls on patients reasonphle de- preciation may be claimed. The farm CT may claim denreciation on his farm buildings, aside from his personal res idence. also on his farm machinery, his work horses and farm worl, wagons. The theory of depreciation in connec- tion with the Income Tax. is that wear and tear caused by use in ear- ing income is a real expense in the earning of that income. The rate is determined by the number of years that the property would ordinarily he useful, and the cost of the propertv is the basis of the computation If the property suffering depreciation was bought or acquired prior to March l, 1913, the market value as of that date is used, instead of the cost, in figuring depreciation.
 Contributions or gifts actually made in 1918 to organizations oper- ating exclusively for religious. char itable, scientific or educational pur- poses, and to societies for the proven