The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1922-01-29

as TO whether the Federal tax on
the sale of new cars which in
creases the selling price and is
therefore indirectly paid by the
purchaser can be deducted by the
purchaser. This cannot be deduct
ed by the purchaser, but only by
the manufacturer who directly pays
IL.
The same is true as to the Fed
ersl tax on accessories
The cost of gasoline, ordinary re-
pairs and upkeep Of an automobile,
including garage. rent and chaur-
feur's salary. II used wholly for
business purposes, is deductible as
an expense of the buiness. The
cost of substantial or permanent
improvements to the car. such as a
new top or body, is not regarded
as repairs and is not deductive.
A physician. lawyer or other pro-
fessional man is entitled to a SINH
lar deduction IL, the car is used
primarily for professional pur-
poses.
IL the automobile is used partly
for business or professional pur-
poses and partly for the pleasure or
convenience Of the taxpayer or his
COStS DC dpDOT-
toned according to the extent OF
the use for purposes of business
and pleasure or convenience. and
only the proportion of such cost
justly attributable to business or
professional purposes is deductible.
About Depreciation.
The owner of a car used wholly
for business purposes of the owner
IS entitled TO deduct a reasonable
amount for annual depreciation in
the value of the car: the owner Of
car which is used solely for
pleasure purposes is not entitled to
a deduction for depreciation. II the
car is used partly for business and
partly for pleasure purposes. the
depreciation is to be apportioned
accordingly. Thus. IL the annual
depreciation OF your car is figured
at $500 and 40 per cent Of the mile
age for the year was for business
purposes, your deduction for de-
probation would be $3.50.
In figuring the amount of the de-
probation of the car for the tax
able year il is necessary first to
estimate the probable life of the
car in terms of years. The life of a
car no 49,.
four to seven years. according to
the usage. The salvage value OF
the car should then be estimated
as of the end of the active life of
the car.
This amount should be deducted
from the purchase price and the
difference should be divided by the
number of years estimated for the
life of the car. This gives the an
nual depreciation.
For example, new car is pur-
chased for $4,000 on January l. 1921,
and you figure that the active life
of the car will be five years and
that its salvage value at the end
of that time will be $500. You should
subtract $500 from 5000 and divide
the balance. $4,000, by FIVE, which
would give $40 as the annual depre-
citation Of the car. You are entitled
to a deduction of that amount, pro-
vided your car is used exclusively for
business or profe ssional purposes, or
the proper proportion of II # the car
is used partly for business and part
" for personal purposes.
The life of car used by a phys
ician is seldom estimated at more
than four years.
The premium paid for automobile
liability insurance is considered a
part of business or professional ex-
penses. and is deductible as such in
computing nett income. When the
car is also used for pleasure pur-
poses each item Is deductible but the
items must be apportioned. Thus IL
a lawyer uses mis- car 80 per cent of
h. f-.
80 per cent of this item as well as
other costs of upkeep and ordinary
repair, may be deducted.
II your car Is used exclusively for
business or professional purposes and
is damaged in an accident the entire
cost of repairs and new parts may be
deducted as a business expense or
loss. If the car Is used for pleasure
purposes as well, the item is not de-
ductible IL the accident occurred
while the car was being driven on
pleasure purposes.
A salesman who maintains his own
car in order to perform his duties to
his employer and earn his salary may
deduct as business expense" the
actual expenses satisfactorily shown
to have been incurred in the opera
ton of the automobile for business
purposes. plus a proper allowance to
cover depreciation.
II a business or professional man
who uses his car for business or pro-
fessional purposes. also uses it to
drive from his home to his ONCE.
this Is not considered a business use,
but rather a matter OF convenience /;
and in apportioning the use of the
car as between business and plea
sure uses, he should not make any
deduction for operating cuts incl
dent to such use
The cost of a new car is not a de-
ductible item.
Can a taxpayer deduct as a neces-
sary expense of the business fines
paid by him for operating his auto
mobile (either by himself or en-
ployes) in violation of the traffic O,
motor vehicle laws? The Internal
Revenue Department has answered
that. amounts paid for violation OF
laws are not ordinary or necessary
expenses incurred in the course of
business and therefore do not con-
stitute allowable deductions for in
come tax purposes. Likewise, a fine
paid for violation while the car is
being driven for pleasure purposes, Is
not a deductible item.
II YOU borrow money for tn. D,,r