The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1921-01-29
1921 INCOME TAX FACTS YOU
SHOULD KNOW.

Claims for deduction for losses form
an important item in income tax re-
turns and heretofore have been the
subject of numerous errors. The mis-
takes are Of commission and omission
Claim is made for loss TO which the
taxpayer is not entitled. In other re-
turns no claim is made for deduct
ibie loss which, if included. would
/ mean Il substantial reduction i'm tax.
To be allowed deductions for losses
must be confined to the Following
classes: Losses. sustained in trade or
business: losses sustained i'm transac-
/ items entered into for profit. though
not connected with a trade or bust
ness: losses sustained of property not
connected with trade or business if
arising from fires, ShipWrcck. storms
on other casualty. or from theft 70
tn" extent any Of the above losses arc
compensated for by insurance they are
not dcduc ibc.
The loss must have been actually
sustained during the year for which il
is claimed in the taxpayers return
\ taxpayer may feel certain that real
estate owned by him is worth less
than the purchase price. \ merchant
may be convinced that certain. stock
| can not be sold unless marked below
cost. In neither event, however. is he
entitled 10 n claim for deduction until
III" loss is made absolute by sale or
other disposition Of tn" property
Must Follow Statute.
Claims for losses must conform
closely to the wording Of the statute.
loss sustained in the sale Of an auto
mobile purchased for personal use is
not dcductiblc. because it is not a
transaction 'entcrCd into for profit
| Many Gains are made for losses SlS-
! tanned in the sale Of property used by
the taxpayer as II residence. Ordinar-
! !lS. when q man buys home and
moves into it, he has no intention OF
selling. II" does not center into "A
transaction for profit" ard such a loss
| IS not dcductiblc.
owners of stocks and bonds can not
dedUct from gross income amounts
! claimed rs losses on account Of The
Shrlnkagc in value OF such securities
through Quotations of the market or
oth'rWi o. The foregoing applies ONLY
:" owners and investors. ana not f.
! dealers in securities. who bv 4 Sncc;al
rule arc given the benefit or anv
ShrinkaTc in In" securities in which
they deal.
Losses ~ Illegal transactions S--pok
or playing, dice, horS" racing. or
! other forms Of gamblinG--arr not de
duCtihlc, although gains in such
transactions constitute taxable income
ana must be included i'm the return.
Bad Debts.
While deductions for worthless
! debts are provided for by revenue act
many claims entered by taXDavrr,, are
not allowed because Of the nature of
the obligation. Claims for such dc
ductiOns must have certain Qualities
The debt must have been charged of
within the year in which its worth
! lcSSncSS was discovered; the return
must show evidence of the nann"r in
which discovery was made: statement
should be made that the debtor has
been discharged in bankruptcy or has
disappeared leaving no trace. or that
the ordinary means Of collection have
been exhausted.
Unpaid loans made to needy rCla -
tiVeS or friends with little or no cX-
prctatiCn that they would bc returned
ar" not dcduCtihlc, but are regarded
as gifts. Where the creditor continues
to extend credit a. debt may not be
claimed as worthless. \ debt may not
be charged off or deducted in part but
must be wholly worthless before any
part can be deducted, though it may
be clearly worth less than the face
amount. If Il debt is forgiven. il can
not be deducted, because it is then
regarded as a gift.
\ debt proved to be worthless is
not always "A proper deduction. Fol
example, unpaid amounts representing
wages. salaries rentals. on similar
it,ms taxable income are not a,
lowed as deductions unless included us
income in the creditors return for th.
year in which the deduction is sought
N m 4 previous year. The lact IN ii
expected Income was NOT received
does not reduce the taxable income.
Payment Of an ordinary debt need
Mt be included i'm the taXpIyer'S 70
turn since il is mere chan"c in form
~ capital Where. however. a irht
charged off as Worthl. ~ i% i'm Il latcI
year recovered or partially recovered
the amount recovered is taxable III.
come TO the creditor for thr ycar in
which received.
London. Jan. 27.-Sir q, ,rer Ar