Milford chronicle., 1920-02-27

Dut It IS plain that it will more clear.
ly reflect the results OF the years op-
eratlons, and for progressive farm.
CT or business man it means a valu-
aDle result for comparison with pri-
OF years and ascertaining whether
ne Is progressing, standing still, or
going backwards.
As an Illustration OF the difference
between the two methods, let US take
cash purchase on December 1. 1919
OF tons OF hay and a thousand BUSH
els OF corn and oats for feed By the
cash method this cost would go into
the year 1918, but by the accrual meth
cd the cost of only the amount used in
December would be charged TO that
year, and the balance carried bv in
yentory over into the succeeding
year, would be a charge against in
come OF that succeeding year.
The new income tax form for far
mers, Form l040F, shows a vast i'm
provement over the special form us
ed last year, for it recognizes both
OF these methods and supplies the
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simple but correct and intelligent
computation Of the years income.
For farmer using the accrual
method there is provided special
inventory schedule to be used in the
computation OF gross income. With
respect to the pricing of inventories
as OF December 81, 1913, the farm
price method that is market price
less cost OF marketing has been
recognized by the Commissioner of
Internal Revenue.
Farm Expenses
Among farm expenses allowable
are the cost of j., minor repairs on
buildings (but not the dwelling
house), on fences, wagons, and farm
machinery; also bills paid for horse
shoeing. stock powders, rock salt, SER
vices Of veterinary, insurance (except
on dwelling house, gasoline for Op-
power, and sundry other ex-
penses which were paid for in cash.
As to hired help. all OF the produc-
tive labor Is a necessary expense. But
the wages OF household servants or
help employed to improve the farm,
such as tree planting, building fence.
1ltchlng. etc. are OUTLAWS for inn
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against the earnings. These expend-
lures should be capitalized or added
10 the value of the farm or ranch.
The purpose of farm machinery. .
wagons, animals. etc, and the con-
itruction or extension Of buildings. I
lilo, fencing, etc, should be likewise .
capitalized, as reasonable deduction
nay be made annually in the form
II wear and tear or depreciation. so
hat this cost will be spread over the
Useful life of such addition to the
arm plant
The auto and motor truck has taken
is place on the farm as part Of the
arm equipment. It's cost is not an ex-
'ense, though its upkeep is, if used
Exclusively for farm purposes and not
or pleasure. In such cases a reason
BILE deduction for wear and tear is
llowed.
Farm Losses
Every farmer will want to know
light here how he will treat a loss
aused by a storm in which his crop
+ part of same is ruined. The ans
-er to this is that unless the crop
caches its maturity and is harvested
nd sold, its value never reached
ross income, and therefore an arbi-
-ary deduction for the loss can not
e allowed. The cost of planting,
and cuitivating that crop
allowed in regular order, but the
,ss of a growing crop simply means
lat the farmer has so much less
ross income to report and, therefore,
ill pay reduced tax, if any tax at
Il.
The same is true in the case of the
'ss Of animals, or animals for breed ,
lg purposes, which represented a
lpital outlay such as horses, COWS
nd other animals bought. The
mount that would be allowed in such
ise is the cost less any deductions
aimed on prior returns for depreci- !
ion. Any insurance received must
SO be considered in figuring a loss /
such a case.
A farmer who sustained a loss to ?
IS building through fire, lightning,
storm may claim a loss figured out
? income tax regulations.
Shrinkage in weight or value of |
I'm products held for favorable /
arket prices may not be deducted as Z
loss, for the reason that when such
'oducts are sold the shrinkage will S
reflected in the selling price. \
Sale of Farms and Land
The value of agricultural lands has Y
.en jumping during the past few
ars, and during 1919 many owners d
Id out part Of all of their lands at d
z profits. 1t must be borne in mind
at all such gains constitute income
d must be taken into consideration N
arriving at new income for the y
ar. A
Where the entire farm or the en- n
g land is sold the gain is repre-
nted in the difference between the
st and sale price, but if the farm or
Id was owned prior to March /,
l3, the fair market value as of that
te should be taken instead of cost, is
d if acquired by bequest or descent
ice March /, 1918, the estates ap- 81
1ved inventory value should be US N
instead vi JO5t.
As to buildings, fences, and other OF
prOvements on the land and adjust in
mt must be made for any depreci- A
on, and if sand clay, or other val W
Bile part of the land has been sold u
ring ownership and adjustment in ha
way of depletion must be made.
ese adjustments mean that the IT
ar and tear of the improvements
/ excavation of sand, loan, gravel, M
Y, ETC., have reduced the value, and ~
difference between this reduced IN