Norwich bulletin., 1921-01-19
INCOME TAX FACTS
 YOU SHOULD KNOW

Millions of dollars were realized in
 1920 from the sale of property, real and
 personal Profits from such transactions
 is income and must be carefully ac'
 counted for in the recipients return
 whether it be s1o,o0o on the sale of real
 estate or Sl0 on the sale of a secondhand
 automobile.
 The return must show the kind of
 property on which the profit was real ized the name and address ot the pur- chaser or broker; the sale price; cate acuired cost of subsequent improve
 ments, if any depreciation subsequently sustained and cost or market value as | of March 1, 1913, If acquired prior there | i to. Profit from the sale of property IS tax
 able income for the year in which the
 sale occurs. This profit is measured by the difference between the cost, if ac- quired subsequent to March l, 1915, or the fair market value as of March l, 1913, if acquired prior thereto, and the consideration received for the property. The profit, so determined, is subject ts
 a further adjustment on account of ad-
 ditions or betternents added to the prop
 erty and to depreciation sustained. For example real estate acquired in
 1908 at a cost of $S,ooo increased in value and on March l, 1913, is worth I preciation, and no improvements were made thereon. In 1920 the property was D sold for S15,o00. The profit over the cost l is $7,ooo but the taxable profit is only :, }3,o0e.
 e The bureau has not formulated any de- ( finite method for determining the market ] value as of March l, 1913. What that ' value was is a question of fact to be es- a tablished by the taxpayer. Sales of oth- q | AP n hA .RaiQhhNFhnnd aiunilaT- . ly situated on or about March 1, 1913, . is evidential as to the March 1 value. The - opinion of experts, bid and asked prices Il for similar property, and any other rele- e want evidence or facts with respect to l. value on March l, 1913, may be placed n in the record.
 VI Allowable DeduetiesE
 - In the purchase and sale of real es. :. tate brokers fees, commissions, lawyers fees, recording fees, and like expense: S connected with the transact on are con s sidered part of the cost anf. may be de " dueted from the selling price in deter ~ mining profit. If, n-order to sell for { . higher price, property is improved, al ', when house is repainted or an automo = bile everhauled, the expenIe may b, = added to the cost. Such items, however MM MM if deducted from gross income when tn 'ii 'i expenditures were made can not late ~4 '' or, in other words, can not be includes as business expense and also as a par ve of the cost of the property.
 sa The selling price of property include nd netes, mortgages, securities, or anythin s. accepted as cash, and the profit must b cy included as income when received. In til stallment sales, involving a small initia %' payment. are governed by special treas e- ury regulations. The profit is apportion 10 cd to each installment and is reporte s- for taxation as collected. Except wher ed these special regulations apply, note ne mortgages, and other deferred payment of must be considered as if the entir n- amount was paid in cash. mt If, in the latter instance, a note elf found worthless, or if a deferred pay Is" rnent can lot be collected, the taxpaye led after exhausting every reasonable mear IT, of collection, may deduct the amount g k a bad debt in his income tax return fC -or a subsequent year. The sale of tf an property is regarded as a closed transa, CT, tion and the collection of the notes as ss- new item.
 Depreciation.
 lon Depreciation sustained on bushes 'ys property in years prior to the sale mu ad- be considered il the computation of pro nd 1t. For example, taxpayer acquired Iri- building in 1915 at a cost of $1Q,00O ar mt. sold it on January l, 1920, for S15, ,00 'te. Assuming that per cent is a reasel mt able annual allowance for depreciatio th- the total allowance since date of acqu on sitiop to date of sale would be s1,5O ere The profit to be returned in 1920 wou ks, be the difference between the cost, S1t ton 900, less depreciation sustained, s1,5C
 of or s8,5oo, and the sales price of s15,oo Co. The profit of s6,5oo, so determined,
 of subject to tax in 1920. and if the taxpa the CT has net claimed a deduction for q
 he pPeeiation in prior years amended I nee turns may be filed including therein am deduction fnr. depreciation of per ee,
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