Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1921-01-14
THE INCOME TAX
Facts You Should Know for
Making 1921 Report

lowed taxpayers are found in the in
come tax returns Deductible items
are omitted and other items which are
not deductible are included. Deductions
for business expenses are the principal
deductions allowed. the law expressly
prohibiting deductions for personal,
living, or family expenses.
The revenue act provides that in
computing net income there shall be
allowed as deductions from gross in
come all the ordinary and necessary
expenses paid or incurred in the tax
able year in carrying OH any trade,
business. profession. or vocation. Typ
zeal expenses of a mercantile estab-
lishment are amounts paid for adver-
tising. hire of clerks and other en-
ployecs. rent, light. cheat, and water,
telephone, insurance. delivery ex-
penses, the cost of operating delivery
wagons and motor trucks, and in
cidental repairs to such vehicles. The
expenses of a manufacturing business
include labor, raw materials, supplies.
repairs. light and heat, power, selling
cost. administration. and similar
charges.
PROFESSIONAL MEN
professional man may claim as
deductions the cost Of supplies used by
him in his practice, expenses paid in
the operation and repair of an auto
mobile used in making professional
calls, dues to professional societies
and subscriptions to professional jour-
nails, Office rent. the expense of fuel,
light, water. and telephone used in
such offices, and the hire of assistants.
A travelling man. working on salary
or commission, is allowed to deduct
certain business expenses. Reason
able and necessary travelling expenses
include railroad fares and meals and
lodging A travelling man working on
salary. without reimbursement for
travelling expenses, or employed on
commission basis with no expense al
loWance, may deduct his expenses for
railroad fare. and also his expenses for
meals and lodging in an amount in
excess of the ordinary cost for such
living expense. when at home.
If ne receives salary and is repaid
his actual travelling expenses, he must
include as gross income an amount
equal to the ordinary expense for
meals and lodging when at home. as
such amount is held to be additional
compensation to the taxpayer. Pay
ment for the use of a sample room for
the display of goods is a business ex-
pense.
The farmer may deduct all amounts
paid in the production, harvesting. and
marketing of crops, including labor.
cost of seed and fertilizer used. cost
of minor repairs to farm buildings
(other than the dwelling), fences, and
machinery, and of small tools which
are used up in the course Of the year.
ERRONEOUS CLAIMS
Taxpayers frequently make the
mistake of claiming as deductions ex-
penditures for articles more or less
permanent in character or for perma-
nent Improvement of their property.
In the case of the business man they
include claims for the erection of new
buildings or installation of machinery.
A farmer claims as deduction the cost
of new thrashing machine or trac-
tor, or the expense of putting a new
roof on his barn. Such deductions are
expressly disallowed by the revenue
act. and are held to be investments of
capital.
ALLOWANCES FOR LOSSES.
Allowable deductions, in addition to
business expenses. include losses sus-
tanned by the taxpayer in any transac-
tion entered into for profit outside Of
his regular business.
A reasonable allowance is made for
depreciation of business property, in
Guiding obsolescence. and for the de-
pletion of oil and gas and other nat
ural deposits.
Contributions made during the year
1920 to corporations organized exclu-
sively for charitable, scientific, relig-
ious. or educational purposes, or for
the prevention of cruelty to children
or animals or the special fund for yo-
cational rehabilitation. may be deduct
ed to an amount not exceeding Is per
cent of the taxpayers income, COM
puted without the benefit Of this de-
duction.
Other items which may be deducted
are rs follows:
Taxes paid or accrued during the
year 1920. except income, war profits,
or excess profits taxes. and those as
sessed against local benefits of a kind
tending to improve the value OF the
taxpayers property.
Losses Of PROPERTY not connected
with trade or business arising from