Yerington times. [volume] (Yerington, Nev.) 1907-1932, 1921-12-21
HOW TO FIGURE
YOUR INCOME TAX

The following statement is issued by
Collector OF Internal Revenue. Mr.
Luois a. Spc1ier, the district OF Ne
vada
Merchants manufacturers and busi-
ness men generally need experience
no difficulty i'll takinv their Inventories
for the year 1921 to conform with the
new revenue act The language OF the
Rvenue Act OF 1918 and the Revenue
Act of 1921, (Sec 205) relating to in
ventories are identical:
That whenever in the opinion of
the Commissioner the use of inven-
tories is necessary in order to clearly
determine the income of any taxpay-.
err Inventories shall be taken by such
taxpayer upon such basis as the Com
missioner with the approval OF the
secretary. may prescribe as conform
ing as nearly as may be to the best
accounting practice in the trade or
business and most clearly rejecting
the income:
Thereafter, the regulations provide.
changes can be made only after per-
mission is obtained from the Commits
sioner of Internal Revenue.
''ln the case of merchant cost
means the invoice price less trade or
~ ,-j,
discounts approNimating a fair rate
of interest. which may be deducted or
not at the option of the taxpayer pro-
vidinS a consistant course is followed
TO the net invoice price should be
added the cost OF transportation aud
other necessary charges incurred i'll ac-
curing possession OF the goods,
In the case OF manufacturer cost
means the cost ,of raw materials and
supplies. expenditures Tor labor and in
direct costs incident to production, in
Guiding a reasonable proportion of
management expenses. but not includ-
ing any cost of selling or securing re
turn on capital.
"Market means the current bid
price prevailing at the date OF the i'll
ventory for the particular merchandise
The burden OF the proof as to the
correctness OF the price rests with
the taxpayer in each case. Where no
open market quotations are available
the taxpayer must use such evidence
Of fair market price at the dates OF
the inventory as may be available,
such as specific transactions or COM
pensation paid for cancellation OF con-
tracts or purchase commitments.
Where. because of abnormal condi- |
tons, the taxpayer has regularly sold
merchandise at prices lower than the
market bid price, the inventory may
be valued at such prices The correct
ness of such prices will be determined
by reference to the actual sales OF the
taxpayer for a reasonable period be
Prices which vary materially from the
actual prices so aScertained will not
be accepted as rejecting the market.
The value of each item in the in
ventory may be measured by cost or
market. whichever is lower An en-
tire stock may not be inventoried at
cost and also at market price, and the |
lower OF the two Inventories used. |
Inventories. on whatever basis taken, |
will be subjected to investigation by
the Commissioner of Internal Reve- !
nue., and the taxpayer must satisfy
the Commissioner of the correctness !
Of the prices adopted. He must be !
prepared to show both the cost and |
the market price OF each article in |
cluded in the inventory.
''ln the conduct OF modern bust |
ness, il is OF the utmost importance |,
that every business, large or small, |
whether corporation, partnership or |
individual. shall maintain an exact rec !
ord OF receipts and expenses No !
special system OF accounts is pre- |
scribcd by the Bureau of Internal Rev |
enue, but the books should show in |
detail, Inventories, purchases. sales. |
capital investments, depreciation and |
similar items required in making up |
income tax returns