Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1921-01-19
THE INCOME TAX
Facts You Should Know for
Making 1921 Report

Increased rentals added largely &c
the profits Of the landlords last year.
every dollar Of which must be includ-
ed in the taxpayers return Of income.
Gross income includes all amounts
received as rents. Both landlord and
tenant are allowed certain deductions.
Where property Is held for renting
purposes. the owner may deduct the
cost Of securing tenants. such as ad-
vertising. and the maintenance ex-
penses. such as light. fuel. janitor SER
vice, insurance. and ordinary repairs.
A tenant may deduct the rent paid for
business premises. but not for his
home, which is a personal or living
expense Interest and taxes paid by
the tenant on behalf of the landlord
are deductiblc by the tenant as addi-
tional rental, provided the property is
business property. Such items rep
resent income to the landlord and must
be included in his return Of gross in
come. but are deductible by him also.
frequently a tenant agrees to erect
building or make other permanent
improvements for the benefit of the
landlord. The cost of such improve
ment is a capital expenditure, and in
order to return to the tenant his in
vestment Of capital an annual deduc-
ton may be made from gross income
Of an amount equal to the total cost
Of such improvements divided by the
number of years of the term of the
lease. and such deduction shall be in
lieu of q deduction for depreciation.
Under the head of depreciation own
ers are allowed a reasonable amount
for exhaustion, wear and tear of prop
erty used in trade or business, includ-
ing a reasonable allowance for obso-
1escence." This deduction must be
made as a separate item on the return.
and must be explained by showing
separately each class of property. it's
cost or fair market value on March
/, 1918. if acquired prior thereto, value
at the date of acquisition If acquired
by gift. devise, or descent, estimated
life, depreciation charged for the year
1920, and total depreciation charged
for all taxable years.
NO SPECIFIC RATE
AS the rate at which depreciation
may be claimed is dependent upon 10
cal conditions. the use to which the
property is put, and it's probable life
time under normal conditions. no spe-
cific rate is established by the law and
regulations. While each taxpayer
must compute the probable lifetime of
his property without regard to the
following figures. it has been estimat-
ed that the probable lifetime Of a
frame building is 25 years, a brick
building 35 years. stone, steel, or
concrete building so to 100 years.
To compute the proper amount of
depreciation the taxpayer should de-
termine the probable lifetime of the
property. then divide the fair market
value as of March /, 1913, or the cost
II acquired subsequent thereto, by the
number of years SO determined. This
will give the annual depreciation al
lowabls. For example. a frame build
ing, the probable lifetime of which is
IS years. cost $4,000. Divide $4,000 by
25 and claim $3.50 each year as depre-
ciation.<
Deductions for depreciation are lin
tied strictly to business property,
which includes not only buildings but
machinery, automobiles, farm tractors,
mine and mill equipment, Office furni-
ture, instruments used by professional
men, and books.