Every evening, Wilmington daily commercial. (Wilmington, Del.) 1878-1928, 1920-03-02
HOW SHOULD FARMERS
FIGURE INCOME TAX
Internal Revenue Department
Gives Out Statement With
Information for Guidance.

How should farmer figure his income
tax?
This question il being asked by thou
sands of farmers throughout the United
States. and TO answer them one and all the
Internal Revenue Bureau has drawn up
some information TO show just what the
ordinary farmer must DO IN figuring his
income.
1t is pointed out by the bureau that
returns and taxes are due on or before
'-arch rs. mt the office Of the collector OF
email revenue for the district in which
farmer lives.
The term farm" as used in income tax
includes stock farms, dairy farms, poultry
farms, fruit farms and truck farms, also
plantations, ranches, and all land used for
farming operations. W neither the owner
of the farm or a tenant the person or firm
operating the farm is required to consider
income-tax liability on the annual gains.
The revenue law defines gross income
and provides what particular deductions
may he taken from the gress income IN
arriving at the net income. This method
must be followed by every farmer.
In gross income a'farmer is required TO
include ''all gains, profits and income de-
rived from the sale or exchange OF farm
prciucts whether produced on the farm
or purchased and resold." When be ex-
chdnges his products for groceries, cloth
ing Or other articles he must include In his
gross income the value of the articles re-
ccivcd in exchange. \ farmer who lets out
\ farm on crop-sharc basis must report
the cash received when the crops are sold
\ farmer who lets out a farm on cash
rental basis and is paid In crops must re-
port the exact cash rental agreed upon
whether or not the crops are disposed OF.
Care must be taken In figuring gam from
the sale of live stock. Ii the stock was
previously purchased, its cost should be
deducted from the sales price TO ascer,
tain the gain unless the inventory method
Is in use by the farmer.
The entire amount received for animals
raised on the farm should be included IN
gross income.
In case farmer sold any work animals
or farm machinery previously purchased,
there should be included in the gross IN
come any gain realized. The cost there
of, reduced by the amount OF wear and
tear sustained on such animals and ma
chinery, is subtractcd from selling price TO
arrive ut the profit.
From his gross income farmer Is
allowed TO charge off all OF his necessary
expenses in the conduct Of the farm during
the year. These include costs of putting IN
his crop. of caring for his crop, and OF
harvesting and marketing. In addition TO
these costs, he may deduct money spent
for ordinary farm tools Of short HE,
bought during the year. such as shovels,
rakes, etc. Also. the cost of feed purchased
for his live stock may be treated as an en-
pense.
The difference between the farmers
gross income and expenses Is known as his
net income, which is the amount the farm
or must consider, together with other In
come, in determining whether or not an
income tax return Is required.
There are two WAYS In which farmer
NAV figure his income for the year, either
Of which will be acceptable for income tax.
The first a method In more general use, Is
he cash basis" This means, as the term
implies, the difference between the In
lake" in money and goods received for his
products, and the cash paid out Tor actual |
iarm expenses within the year.
II also means that If he did not sell his
grain, hogs, cattle, sheep, or other prod
ucts before January |, 1920, then the
value of the crop or animals raised Is not
income for 1919. but will be income for the
year In which sold. Similarly, If he sold
Outing 1919, anything raised or grown in
prior year, If is income for 1919.
The second or accrual method is by
computing the receipts and expenses in
CURED. whether paid or not, that actually
pertain to the taxable year, excluding in
come earned and expenses incurred in
previous or succeeding years.
For farmer using the accrual method |
here is provided a special inventory |
schedule to be used In the computation of |
ross income. NTH respect TO the pricing |
If inventories as OF December 81, 1919, the |
farm price method is, marked /
lrlce less cost of marketing-has been /
by the commissioner of IN |
ernal revenue.
Among farm expenses allowable are the /
'ost of minor repairs on buildings (but
lot the dwelling house,, on fences, wag-
ms, and farm machinery; also bills paid
or horseshoeing, stock powders, rock
alt, services OF veterinary, insurance lex
ept on dwelling house, gasoline for oper-
ting power, and sundry other expenses
which were paid for in cash.
As to hired help, all of the productive
abor Is necessary expense. But the
wages OF household servants or help en-
1loyed to improve the farm, such as tree
slanting, building fence, ditching. etc, are
,utiays for improvements and cannot be
'iained against the earnings.