New-York tribune., 1920-03-04
Federal Income Tax Questions
4nsvered for The Tribune by Morris f. Frey. Assistant
Treasurer Guaranty Trust Company

Q.--R d. h.: Kindly state in the columns
q sonr paper Whdt portion i aav. Of The
Federal and state income tan lan's bu an
individual cunning a tWo-fdnav house. one
part Of aehich "a occupied By hi,nseij and
family and the other part rented;
~ Real estate tdres paid during gear.
(2) Water rates.
t3) Fire insuyamoe premiums
(D Fec paid on extension Of first mort
tb> Repairs as fouoacs:
(GJ RepdiMtinN outside .uestibule doors
ased IN common.
(b) NesO buck stop used only BY tenant
IN lotecr part.
!c) Inferior repairs to pl,.mbing and
painting IN part occupied by ocncr.
(d) Cleaning and repairing stores in both
parts Of house aud cleaning and repairing
furnaces. leader and chimney.
t6J Depreciation for the sir months dur
imO 1919 schcn house acas oDned by Taxpayer
(b,1ck dapeilinU).
What sections Of the lac. or ,chat regula-
tioms or rulings covcr these items:
A.-Ths full amount of real estate taxes
paid is deductible except those assessed
against local benefits which add to the value
OF the property taxed. Only the water
rates and fire insurance premiums paid on
me rented portion. of your house de-
ductible Fees paid on extension of mort
sage are deductible. Depreciation may be
taken only on the part Of the house which
rented. Any repairs which are in the
nSture OF improvements or bettermcnts and
offset depreciation are not dcductbe. Qrd-
nary repairs which do not offset dcprec "a ton
are deductible only to the extent that they
apply to the rented portion of your house.
sect. section "a (a) of the revenue act of 1918
treats OF deductions in general, including
taxes, depreciation, etc, and Section 215
treats of unbelievable deductions. You will
find numerous references to allowable and
unallowabe deductions in Treasury Rcgula-
tions 40. relating to income tax and war
profits and excess profits tax under the
revenue act Of 1918.
,,ts o.-,R soo C e.: Ny total income jor 1913
fs"s $l,sov; I 1cas n'a,y'ed i" Sepfe'nber-
MoMgh L Was not married during the entire
year! Prior to our marriage say ari(c
co71ied approximately $500. Mast add This
TO my income and pay tar accordingly?
A-You and your wife should file Joint
rNurn, including therein both your own in-
r. the date of Your marriage. You arc en-
titled. both under the state and Federal law.
to personal exemption Of $4,000.
On. NJ: On January J., 1919. upo,,
taxing stooh found an Inventory Of $4,000,
and on January /, 1920, ma stock invento,y
su@o 20 AJAX oS2c'o9o lnaking an increase Of stech Of
extra stoch should be classed as an iaeo,as
or pront Gna mast 1 paY tar upon that
extra stock? at the end of the year n5y
business shoWed loss of $500. but Us /
hooe already stdted. 1ny stock has increased.
A.-For the purpose of arriving at the
net taxable income of your business YOU
should proceed follows:
ADD to your inventory at the beginning
OF the year the amount of your purchases
during DURING the year. deducting from the total
thus thus obtained the inventory at the end OF
the year. This item in the case of a mer-
cantile business, represents the net cost of
goods sold: Net cost of goods sold plus other
business deductions such as salaries, wages,
rent. taxes, etc, should be deducted from
gross sales. The balance is the net taxable
income. If the cost of goods sold, as de-
termined above, exceeds the gross sales price.
there is no taxable income.
Inventories should be valued at (a) cost
or 90 cost or market, whichever is lower
The method of valuation adopted must be
applied to each item and not merely to the
total of the inventory, and the method used
in 1919 must be the same as that used in
1918, unless permission to use different
method has been obtained from the COM
missioner.
On s.: Would you lci,sdly let NC knom
if The War Risk Insurance has taa, on 4.
Us my tpUe gets the Insurance on, a $40. .0oe
policy, and also let me knoaU ii / haze TO
p1ay tda on my salary as earned 5000 ia
1919. and arhcre ccn gct the tao pupers.
and il can fill it out myself?
A.-War risk insurance is exempt from
tax. You are subject to tax on the amount
Of your taxable income which is in excess
of your personal exemption. You can Sc
cure the necessary return from the Collector
of Internal Revenue in Brooklyn. You can
make the return out yourself. but if you cx-
perience difficulty there are many places
where you can obtain assistance.
Q.-W. ". E.: Cd My 'cife and !, ,cho
put an a Joint return, are the sole support Of
an orphan child under eiehteen). me ch;la
Is. no relation and does not liue with us.
There has been no legal ddoption Are qrc
ouo'ced exemption for the amount con-
tributed?
CD We sold q Liberty bond, applai,,1 the
proceeds to current enpealses. Is this tar-
able income?
U) Yes.
.(2) If you sustained loss through the
sale OF your Liberty bond, the amount of
such loss is deductible from your gross in
come If you realized profit, which YOU
probably did not. this profit would be tax
able income. W
&C: J. W: Being citizen of the
on1ted States. and resident Of Pennsylvania "a,
achere l oaon property and make mi home
cnd whe1e l a'acaYs paid tares and siW paiI
them Left the states to 90 to foreio1