The Washington herald., 1921-01-14
Income Tax
Facts 7 ou
Should Know
CHAPTER ".

Numerous inquiries have been re-
eeived by the Bureau of Internal
Revenue concerning the items to be
included under gross income" in
the 1920 income tax returns. Correct
understanding of the term is of para
mount Importance to the taxpayer,
as it is the basis upon which the re-
turn is made.
Income is defined by the revenue
sct to include gains, profits, and in
come derived from salaries, wages,
or personal compensation, or from
professions, vocations, trades, bust
ness, commerce, or sales or dealings
in property; also from interest,
rents. dividends. securities, or in the
transaction of any business carried
on for gain OF profit, and income
derived from any source whatever"
Practically every dollar received by
the tax payer during the year 1920
must be shown in his return as
gross income. In arriving at net
income, upon which the tax is as
sessed. the taxpayer is allowed GER
tain specified deductions, such as
business expenses, losses, and de-
probation. which will be fully ex-
planned later.
Wage Earner's Tax Return.
Taxpayers may be divided into
four general classes-the wage
Garner or salaried class, business
professional. and agricultural. Any
form of compensation for personal
services rendered by the wage
Garner is income, including salaries,
bonuses, pensions paid retired en-
ploSes, and tips. Payment for per-
sonal services may be paid for part
ly in cash and partly in board and
lodging. In this event a fair value
must be placed on the room and
meals, and the amount reported as
income.
Promissory notes received in pay
ment for services, and not merely as
security for such payments, con-
stitute income to the amount of
their fair market value. When serv-
ices are paid for in something other
than money. the fair market value
of the thing taken in payment is
the amount to be included as in
come.
What Is Fair vaIueg
II the services wers rendered at a
stipulated price, in the absence of
evidence to the contrary such price
will be presumed to be the fair
value Of the compensation received,
Compensation credited to a taxpay-
er's account and subject to with
drawal must be reported as income
whether actually received or not.
The gross income of the usual
business consists Of the gross profit
on sales, together with income from,
other sources. The return must
show the gross sales, purchases,
and cost of goods sold. To reflect
net income correctly and to ascer-
tain gross income inventories are
necessary at the beginning and end
of each taxable year.
The lawyer, doctor, architect
actor, author, dentist, clergyman,
and other professional man must
include in his return Of gross in
come all fees, salaries, and other
compensation for professional serv-
ices.
Return by Farmers.
The farmer is required to report
as gross income all pr6fts derived
from the sale or exchange of farm
products, including crops and live
stock whether produced on the
farm or purchased and resold
Where farm. produce is exchanged
for groceries, merchandise, or other
articles the fair market value OF
the article must be reported as in
come. A farmer who rents his farm
on the crop-share basis must report
such income for the year in whieh
the crops are sold. Profit derived
from the sale or rental of farm
lands must be reported.
Withip the meaning of the reve-
nue. act the term farm" includes
stock, dairy. poultry. fruit and
truck farms; also ranches, psanta-
tions and all land used-for farming
operations. Individuals, partner
ships OF corporations that operate
or manage farms for profit, either
as owners or tenants, are desig-
mated farmers
Every taxpayer Is required to in