The Leavenworth echo. [volume] (Leavenworth, Wash.) 1904-current, 1919-03-07
FIGURING YOUR INCOME TAX
AND DEDUCTIONS ALLOWED
Liberal Exemptions Made For Bust.
ness Expense-HOw 1t Affects
Different Industries

Liberal deductions for business ex-
penses are allowed by the new Income
Tax bill.
Business expenses" are the
amounts actually paid or incurred dur
ing the tax year in the conduct of a
business, trade or profession. In COM
putting net income a merchant may
find his profits on the following basis:
First ascertain the gross sales and
the other items of gross income, such
as interest on bank balances and mis-
cellaneous items. Then add together
the inventory at the beginning of the
year and the cost of goods purchased
for resale. From this sum subtract
the inventory at the end of the year
and the result is the cost of goods
sdd. This cost, plus necessary bust
ness expenses, is to be deducted from
the gross sales and other income, and
the result is the net income of the
business.
IF the taxpayers accounts are kept
on a receipts and payments basis, the
return may be made in accordance
Herewith.
A merchant may claim as deductions
the amount paid for advertising, hire
of clerks and other employees, the cost
of light and fuel water, telephone,
etc, used in his place of business, the
cost of operating delivery wagons,
motor trucks and incidental repairs to
such vehicles.
Amounts expended in entertaining
an out-of-town customer may be de-
Quoted if the sole purpose is to Guilt
vate the good will of the customer and
obtain an increase in trade.
A physician may claim as deduc-
tons the cost of medicines and med
ical supplies used by him in his prac-
tice, a reasonable proportion of the
expenses paid in the maintenance and
repair of an automobile used in max
ing professional calls, the expenses of
attending medical conventions, dues
to medical societies and subscriptions
to medical journals, the rent paid for
office rooms, the cost of heat, water.
telephone, ect., used in such office
rooms and the hire of office assis-
tants. If his office is in a rented
home, he may claim as a deduction
that proportion of the rent properly
chargeable to the rooms used for pro-
fessional purposes. The same deduc-
tions are allowed dentist. u
The farmer may deduct all amounts
paid in preparing his land for crop,
and the cultivation harvesting and
marketing of the crop. The cost OF
seed and fertilizer used and amounts
spent in caring for live stock are de-
ductible items. The cost of minor re-
rairs to farm buildings, other than
the dwelling, and of fences, farm ma
chinery and wagons may be claimed,
also the cost of farm tools which are
used up in the course of a year OF
two and of materials for immediate
use, such as binding Irvine, stock pow
ders, etc. The cost of machinery of
permanent character, such as thresh-
ing machine or tractor, is held to be
capital investment, and is not allow,
able deduction. Deduction may be
made for rent paid for a farm.
This, in a general way, outlines the
ordinary expenses incurred by mer-
chant, professional man or farmer,
and the principle underlying these al
lowances is equally applicable in the
conduct of any trade, business or pro-
fession. In short, all expenses con-
nected directly and solely with the
conduct of an income producing bust
ness, trade or profession, or vocation,
are allowable.