The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1920-02-13
nership a return on Form 1865 must

nership return on Form 1865 must
be filed.
Gross Income.
An individuals gross income from
a profession includes all compensa-
ton for his services.
Where services are paid for with
something other than money, the
fair market value of the thing taken
in payment is the amount to be in
cluded as income. If the services
were rendered at a stipulated price,
in the absence of evidence to the con-
trary such price will be presumed to
be the fair value of the compensa-
ton received.
In the case of salary received,
this should be shown separately, in
Book B, of the return. Many pro-
fessional men and women-lawyers,
medical examiners, teachers, ac-
countants etc.,-are officers or en-
ployees of State, or political SUBJ
division of a State such as a city,
town or county. Their salaries or
wages as such officers or employees
is exempt from the Federal Income
Tax. The exemption also applies to
fees received by notaries public
commissioned by the States also the
commissions of receivers appointed
by State courts.
AS to fees for services to clients
patients etc., these should be includ-
ed in the gross income for the tax
able year in which received unless
they are included when they accrue
to him in accordance with an ap-
proved method of accounting fol-
lowed by him.
Cash Basis.
A professional man may make his
return on the basis Of cash intake
and actual expenditures for the year.
It should be noted here that a tax
payer is deemed to have received in
come which has been credited to or
set apart for him without restrict
ion.
Accrual Basis.
A more exact and equitable method
of figuring net income is on the sac
lcrual basis" This means a computa-
ton on the basis Of income earned
and expenses incurred, whether paid
or not, that actually pertain to the
taxable year, excluding income
earned and expenses incurred in
previous or succeeding years. A
professional man who keeps books of
accounts should make returns by this
method, if his accounting method is
one generally employed and shows a
correct net income.
Deductions.
A professional man may claim as
deductions the cost of supplies used
by him in the practice of his pro-
fession, expenses paid in the opera
ton and repair of an automobile
used in making professional calls,
dues to his professional societies and
subscriptions to professional jour
mails, the rent paid for such offices and
the hire of Office assistants. Amounts
expended for books, furniture and
professional instruments and equip
ment of a permanent character are
not allowable as deductions.
In the deductions from gross in
come, the law specifically bars per-
sonal living Or family expenses.
In the case of a professional man
who has regular place of business
and who rents a residence but Incl
dentally receives there clients, pa
tients or callers in connection with
his professional work, no part Of the
rent at his home is deductible. Is
however, he uses part of the house
for his Office such portion Of the
rent as is properly attributable to
such Office is deductible.
| Bad Debts.
The uncollectible bills of profess
sional men, particularly doctors,
dentists and lawyers have a very i'm
portant bearing on the net earnings
for each year. The principal point
in connection with such bad debts in
returns figured on the "cash basis. T"
That is, person who has been MAX
ing his annual returns on the basis of
cash received and actual cash ex-
lpenditures each year has never shown
as income his accounts with patients
or clients, and is, therefore, not en-
titled to take them out of income.
On the other hand a peson who an
nualy figured his gross income on the
accrual basis that is included in his
leash receipts and charges against
patients and clients for all of his
services performed during each year
is entitled to deduction for "Bad
debts" covering such accounts as he
Iascertained during the year were un-
Icollectible and charged off on his
books.
An account merely written down
or debt known to be worthless prior
to the beginning of the taxable year
is not proper item for deduction.
Wear and Tear.
A reasonable allowance for the
wear and obsolescence of such in
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