The Barre daily times. (Barre, Vt.) 1897-1959, 1921-01-27
NET EQUIPMENT
NOT DEDUCTiBLE
In Preparing Income Tax Returns,
Salary Reductions.

In computing net income, deduc
ton for business expense or disburse.
ment or charge must have certain quail.
ties in order to be allowed. IL must re
late to trade. business, profession. or
vocation carried on by the taxpayer
in which he has invested time and
money for the purpose Of livelihood
or profit. A single transaction or a
\ series of isolated transactions do not
ordinarily constitute trade or business.
A business is being carried on BY its
owner, even though all it's activities
may be conducted by employees.
| A taxpayer may carry on more than
one business or trade il he desotes suf-
ficient time and attention TO each
enterprise, and may claim as dedue-
| tions the business expenses of each.
Mere investment of capital. however.
is not sufficient to allow such claim
For example. manufacturer bnving
stock in a mine or oil well who desires
70 isit the scene Of operation may not
claim as a deduction the cost of his
journey.
The deduction must be a business
expense and not an investment Of
capital" Amounts expended for the
erection Of new buildings, installation
of machinery and the purchase of tools
or implements Of permanent value do
not constitute business expenses, be
ing merely change in the form Of
capital and not a reduction OF wealth
Expenditure for property which is
used UP in the course of the year may
be deducted as business expense.
Salary Deductions.
The law provides for the deduction
as 4 business expense Of a reasonable
allowance for salaries or other compen-
sati0n for personal services actually
rendered Such claims are subject to
careful scrutiny by the bureau Of in.
ternsl revenue, and to be allowed must
conform strictly TO the working OF the
statute The test OF deductibility il
the amounts paid are reason
a BILE, and whether they are, in fact. |
purely for personal services Reason
2 bic compensation is held by The bu. 1
rcau to mean only such amounts as
would ordinarily be paid for like sery.
ICES by like enterprises in like eireum
stances
Claims for deductions for salary pay
ments are allowed only when the com
pensation is for services actually rem
iered. and for no other consideration.
For example. should stockholders Of
corporation draw salaries in amounts
which bear a close relationship 10 their
stock holdings, and If such payments
ire found 10 be in excess Of a reason
,ble allowance for services rendered.
be excess would be regarded as dis
ribuiion Of profits under the guisc Of
alaries.
Complete Return Required
Each years returns. both as to gTos,
income and deductions therefrom.
hould BE- complete in itself, and iaN
ayers are expected and required t.
make every reasonable effort 70 ascar
ain the facts necessary 10 make a cor
ct return. Expenses. liabilities an
eiicits paid y incurred in 1919 OF prios
ears for which no deductions wrf
laimed IN the return Of those year
ann0t be included ift the 1929 return.
ezses hy theft ~ emhezzlement sus-
= ned ID one YEAR and discovered II
mother are deiuctihle ouly for the yea
& their oocurTeuce. II taxpayer d.
overs less sustained in prisr
ear. be NAV render a. AMENDED "
arm for that year and ME q claim fer