Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1921-01-20
The INCOME TAX
Facts You Should Know for
Making 1921 ReDort

To the salaried or professional man
whose principal source of income is
payment for professional services the
problem of making out an income tax
return Is not as great as that present
ed to the owner Of business. In the
case OF merchant, manufacturer, or
any business in which production, pur-
chase or sale of merchandise is an
income-producing factor, inventories
are necessary at the beginning of each
fiscal or calendar year, according to
the taxpayers method of accounting.
The fiscal year is an accounting period
OF II months ending on the last day
OF any month other than December.
Taxpayers who keep their books on a
fiscal-year basis are required to make
their returns on that basis.
The. inventory should include raw
material and supplies on hand that
have been acquired for sale or use in
PRODUCTION, together with all finished
or partly finished goods. 1t should
include merchandise sold but not billed
to the customer at the date of inven-
tory and any goods out upon con-
included in the sales for the taxable
year 1t should also include mer-
chandise purchased though not actual
ly received to which title has passed
to the purchaser
COST OR MARKET
Inventories may be taken either on
the basis of cost or cost or market
40 Ina I, s<I,1 t..
case of a merchant cost" means the
invoice price less trade or other dis
counts, excepting strictly cash dis
counts approximating a fair rate of in
terest, which may be deducted or not
at the option of the taxpayer provid-
ing consistent course is followed.
To the net invoice price should be
added the cost Of transportation and
other necessary charges incurred in
acquiring possession Of the goods.
In the case of manufacturer
cost" means the cost Of raw mate
rails and supplies, expenditures for
labor, and indirect costs incident to
production, including reasonable pro-
portion of management expenses. but
not including any cost of selling or
securing return on capital.
Market" means the current bid
price prevailing at the date of the in
ventory for the particular merchan-
disc. The burden of proof as to the
correctness of the price rests upon
the taxpayer in each case. If the
cost or market" basis is used, each
class of goods must be itemized and
the cost or market price of each
shown separately. The value of each
item in the inventory may be meas
ured by cost or market. whichever is
lower. An entire stock may not be
inventoried at cost and also at market
price. and the lower of the two inven-
tories used.
No special system Of accounts is
prescribed by the Bureau Of Internal
Revenue but the books must show in
detail Inventories, purchases. sales,
capital, investments. and similar items
required in making up an income tax
return. The inventory, which can not
be taken without some form of ac-
counts is the compass Of business.
Without it the direction in which the
business is heading. either for success
or failure, can not be determined.
TAXABLE INCOME
In the making of an income tax re-
turn for the year 1920. taxpayers OF
every class. business and professional
man, wage earners, and farmers,
should present to themselves for con-
sideration the following questions:
Did you receive any interest on bank |
deposits?
y s ~
Have you any property from which |
you receive rent?
Did you receive any income in the