The evening herald. [volume] (Albuquerque, New Mexico) 1914-1922, 1920-02-26
Income Tax Facts
You Should Know

Before claiming as "A deduction IN
the preparation Of an Income lax re-
turn 'ail the ordinary and necessary
expenses paid or Incurred during the
taxable year. IN carrying on any trade
or business u mus. be determined
jus what constitutes a trade or bust
ness
Trade or business" has been held
10 include professions and vacations.
The trade or business OF an Individual
- the pursuit OF an occupation 10
which he devutes wholly or IN part
his time and attention for the pur-
pose Of livelihood or profit. a single
.t~ransaction or a series Of Isolated
transactions Is not regarded as a bust
ness.
A person may carry on more than
business or trade II he deyotes
sufficient time and attention to each
enterprise. q may claim a. dcduc-
tiOus the business expenses Of each
Mere Investment OF capital for profit.
however b. not sufficient TO allow
such claim. For example. a merchant
investing in oil stocks who desires
to visit the scene OF operations may
not include h cost OF tho journey
as q business expense.
Allowable Items.
From his gross sales. a manufac-
.turer or merchant should deduct the
cost Of goods sold during the year.
the result being his gross Income for
the yea In this computation he
should take into consideration the in
v~entofies OF goods on hand at the
beginning and end Of the taxable
year.
From his gross Income he Is allow
ed TO deduct as business expenses
such items as salaries and wages,
rent paid FOR use OF business prop
crty In which taxpayer has no equity,
interest on business indebtedness 10
others. taxes on business and busl-
ness property. minor repairs, u rca-
sonable allowance for wear and q
81 property used In business. aud
losses OF business property by fire.
storm. or other casualty. or by theft.
when not compensated FOR by insur-
lance or otherwise. Bad accounts acc
tunliy charged on because they were
ascertnincd during the year To DE
worthless may also bo claimed as "a
deduction.
The smaller Incidental expenses.
such as advertising. freight, express.
postage. stationery. telephone. etc,
are Also deduction items
However. deductions for business
NhN'NANHH may wv AhNNAHAH NNfN""NA'NNH
of q permanent nature such ns OK
porditureH FOR the erection Of new
buildings. installation OF machinery,
and the purchase OF tools or nipple
mcnis Of permanent value, since they
constitute merely a change In form
Of capitol and not "a reduction %
wealth.
Salary Payments.
The law provides FOR the deduction
of "a reasonable allowance for sul-
nries or other compensation for per-
snnai services actually rendered.
such payments are subject 20 CAREFUL
acruany bY the bureau OF Internal
revenue. ana, 10 nc allowed, must
conform strictly with the wording OF
the statute a payment ts not "a sal
AIRY % in fac ID h paid for some con-
sldcratioR other than personal acr-
vice. 70 example. should atockhold-
ere Of a corporation draw salaries In
amounts which bear close relationship
10 their stock holdings and " such
payments are found 20 be in eNcess of
"a reasonable allowance" f0r services
rendered. the excess viii be regarded
as "a dividend under the guise OF sal
ary.
.KcnHonahie compensation b. held hy
TIE bureau 30 mean only such mount
al would ordinarily be paid for like
services by like enterprise iu like
circumstance as. Tor instance "a bar
gain between strangers.