The Redwood gazette., 1919-02-05

pal, county or state bonds. interest
on United States Bonds need not bc
included by the ordinary bond holder
who purchased small amounts. Hold
ers of large amounts of Liberty bonds,
however, should ask their bankers to
write to my office for the rule apply
ing to tax on such interest.
Dividends on stock shares are in
come, and must be included IN the
gross figures, altho the law does not
impose the normal tax on distribu-
tions made by domestic corporations.
"A person buying and selling rner-
chandise must find his profits for the
year on the following basis: First,
ascertain .he gross sales or total
cash receipts. Then add together
the inventory at the beginning of the
year and the purchases of good for
resale. From this latter sum sub
tract the inventory of goods on hand
at the years end, and the result is,
the cost of goods sold. This cost,
plus necessary expenses incurred
elely through the conduct of the busi-
ness. is to be deducted from The gross
sales, and the result is the net earn
ing of the business.
"A professional man arrives at his
professional income by asoertaining
the total of fees for services and de-
ducting therefrom all expenses con-
nccted directly and solely with his
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 on
the farm or purchased and resold. He
is allowed to deduct from the total
his expenses of the year connected
with the planting, cultivation, har-
vesting and marketing of the crop,
or tho care, feeding and marketing of
livestock. He is not allowed 20 de-
duct the amount expended in 1913 in
purchasing sock for resale; but when
such stock is sold its cost is to be
deducted from sale price in ascer-
tanning the gain 20 be included IN
his return of income. This cost price
of stock bought prior to 1917 cannot
be deducted as in the case just cited,
| if such cost was included in .he de-
duction made in the year of pur-
chase.
'sThe 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.
GAIL other items of income arising
during the year through personal serv-
ice, business or trade, through the use
/ of property or money, should be add
ed into the gains for 1918.
"From the total of all items Of in
come. 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
taxes and assessments for local i'm
provements, such as sidewalks, ETC.,
Losses incurred in business or trade
are allowable, also losses arising
from fires, storms, shipWreck or other
casualty, or from theft in cases
where such losses are not compen-
stated for by insurance of otherwise.
Losses incurred outside of persons
regular business are allowable to the
extent of gains reported from similar
transactions mithin the year. Debts
due to the taxpayer actually ascer-
tanned to be worthless during the
year are deductible.
depreciation on property used in
profession, in business, or in farm
ing is another itnm that may be
claimed as deduction. The store
keeper may claim depreciation on his
fixtures, and on his delivery horses
and wagons, but not on his stock held
for sale. The professional man may
1 claim similar deduction on his in
truments; and, in the case of a ply
sician who maintains a team or auto
i for making his calls on patients, rea-
sonable depreciation may be claimed
The farmer may claim depreciation
on his farm machinery, his work hor-
ses and farm work wagons. The the
ory of depreciation, in connection
with the Income Tax, is that wear
and tear caused by use in earning IN
come is a real expense in the earn
ing of that income. The rate is de-
termined by the number of years that
the property ordinarily would be use
full, and the cost of the property 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 for gifts actually
made in 1913 to organizations aperat-
ing exclusively for religious, charita-
. BILE. scientific or educational pur-
poses, and to societies for the preven-
ton of cruelty to children or ami
mails, may be deducted, to an amount
not exceeding Is per cent of the net