The Mankato free press., 1919-01-31
nected directly and solely with his
How Farmer Must Figure

nected directly and solely with his
practice.
How Farmer Must Figure
"A farmers must figure up all in
come derive 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
total his expenses of the year con
nected with the planting, cultivation,
harvesting and marketing of the
crop. or the care, feeding and mar
ketipg of live sotck. He is not al
lowed to deduct the amount expend
ed in 1918 in purchasing stock for
resale, but when such stock is sold
its cost is to be deducted from sale
price in ascertaining the gain to be
included iE his return of income.
The cost price of stock bought prior
to 1917 cannot be deducted as in the
case just cited, if such cost was in :
cluded in the deduction 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
merchandise, groceries, etc, the
market value of the articles received
in exchange must be included.
"All other items of incomes arising
during the year through personal
service, business or trade, through
use Of property of money, should be
added into the gains for 1918.
Income That Is Exempt
Everybody wants to know what
income is exempt from tax Very
few plums that fall to tho average
man may be legally disregarded in
figuring up his 1918 inome. Gifts and
beQuests car be eliminated, also pro-
ceeds of life insurance received by
the beneficiary of an insured person.
\ person who cashes an endowment
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 received
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. Dividends or uneXpired life
insurance policies are not taxable
income; but dividends on paidup
policies must be considered income.
Alimony is rot income to the reci-
pient, nor is it ar allowable deduc-
tioE on the part of the person who
pays.
From the total of all items Of
income, there are certain deductions
allowable by law. All interest paid
on personal Indebtedness and all
taxes paid during the year are de-
ductible, except federal income and
excess profits taxes, inheritance tax
es and assessments for local i'm
provements, such as sidewalks, sew
ers, ETC., Losses incurred in busi-
ness or trade are allowable, also los
ses arising from fires, storms ship
wreck or other casualty, or from
theft in cases where such losses are
not compensated for by insurance or
otherwise. Losses incurred outside of
a persons regular business are al
lowable to the extent of gains re-
ported from similar transactions with
in the year. Debts due to the tax
payers actually ascertaincd to be
worthless during the year. are de-
ductible.
Depreciation on Property
Depreciation on property used in
a profession, in business, or in
farming as another item that may be
claimed as a deduction. The store
keeper my claim depreciation on his
fixtures, and or 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 a
physician who maintains a team or
auto for making his calls on patients
reasonable depreciation may be claim
ed. The farmer may claim deprec-
:atior or his farm buildings, aside
from his personal residence, also on
farm machinery, his work horses and
teamwork wagons. The theory of de-
probation in connection with the in
come tax, is that wear and tear caus-
ed by use in earning income is real
expense in the earning of tnat in
come The rate is determined by
the number of years that the proper
ty ordinarily would be useful, and
the cost of the property is the basis
of the computation. If the property
suffering depreciation was bought or
acquired prior to March 1, 1913, the
market value as Of that date is used,
instead of the cost in figuring de-
probation.
contributions or gifts actually
made in 1918 to organizations oper-
ating exclusively for religious, chari-
table, scientific or education pur-
poses, and to societies for the pre-
vention of cruelty to children or ami
mails, may be deducted, to an amount
not exceeding fifteen per cent of the
net income computed without the
benefit of this deduction.
The Net Income
After the total of all income is
found and the deduction allowable by
law have been computed as an Offset.
such deductions is the ret income,
which forms the basis of the assess
ment of tax.
"If every person in this district will
examine his own 1918 income and his
allowable deductions, in line with
data that have given, he will know
beyond doubt whether he must file
his return when the blanks arrive.
And here is how he will determine
biS liability to file a return IF he is