The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1922-02-11
Returns Must Be Filed by Single
Persons With $1,000.
1927 TAX RATES UNCHANGED
Rate Is 4 Per Cent on First
$4,000 of Net.
All Necessary Expenses of the
Farmers Are Deductible Items.


approved by the bureau, is to answer
those most frequently presented.
The new act requires that returns
shall be filed by every single person
the term Including widows, wldowers
and persons not living with husband
or wife-whose net income for the
year 1921 was $1,000 or more, or
whose gross income was $4,000 or
more and by every married person
living with husband or wife whose
net income was $4,000 or more, or
whose gross income was $1,000 or
more.
met income" is gross income, less
certain specified deductions, which
are more iberal than were provided
by the revenue act of 1918. In gross
income. the farmer is required to in
clude all gains, profits and income
derived from the sale or exchange OF
farm products. whether produced on
the farm or purchased and resold.
The requirement to file return OF
gross income, regardless of the
amount of net income, is new pro-
vision of law. Whether or net gross
income equalled or exceeded $4,000,
returns must be filed by single per-
sons if the net income eQualled or ex-
ceeded $1,000. and by married per-
sons if the net income equalled or eX-
ceeded $4,000. In computing the net
income of married persons the earn
ings or other income of dependent
The Exemptions.
The exemptions are $1,000 for single
persons, $500 for married persons
and heads of families whose net in
come for 1921 was $1,000 or less and
$4,000 for married persons and heads
OF families whose income was in eX-
cess of 5000. Under the revenue act
of 1918 the exemption allowed such
persons was $4,000, regardless of the
amount of net income. A person who
supports in one household one or more
relatives (other than wife or husband)
is the head of ,- family
The tax rates for 1921 are un-
changed-4 per cent on the first S4,
O0Q Of net income above the eXemp-
ton and per cent on the remaining
net income. The exemption for de-
pendents-a person dependent upon
the taxpayer for chief support who is
under Is years of age or mentally or
physically capacitated-is increased
from $500 to $500. Thus, married
man with three children under IS
years of age whose income Tor IB2l
was $4,000, is entitled to an exemption
of S3.7OO. The exemption allowed
such a man for the year 1920 was
$4,000.
Deductions Allowed Farmers.
All necessary expenses incurred
during the year 1921 in the operate n
of a farm as business enterprise, are
vesting and marketing of crops and
the cost of seed and fertilizer used.
Amounts expended for the cost of feed
for live stock may be claimed, but the
value Of a farmers own products used
for such purposes is not a deductible
item The farmer may deduct the cost
of farm tools used UP m the course of
a year wages paid to employees {Other
than domestic servants) and rent paid
for farm lands and buildings (other
than the dWelling), cost of repairs to
fences and to wagons and machinery,
also bills paid for horseshoeing, stock
powders, rock salt, veterinary service,
insurance Except on the dwelling),
gasoline for operating power and sun
dry minor expenses.
Machinery Not Dcductible.
The cost of farm machinery of a
permanent character, such as a
threshing machine or tractor and eX-
tensive repairs to farm buildings, such
as placing a new roof on the barn, are
not deductible expenses. These are
regarded as capital investments, made
for the purpose of improving the
property and enhancing its value.
Amounts expended in the develop
ment of farms, orchards and ranches
prior to the time when the productive
state was reached, may be regarded as
Investments of capital, also amounts
expended for the purchase of breeding
or dairy animals. The purchase price
OF an automobile, even when wholly
used in carrying on farming opera
lions, is not deductiblet but is regarded
as an investment Of capital. The cost
of gasoline, repairs and upkeep of an
automobile. if used wholly in the bust
ness of farming. is deductble as an eX-
pense, if used partly for business pur-
poses and partly for the pleasure or
family. such cost may be apportioned
according to the extent of such use.
Only the proportion of cost attribut-
able to business is deductible as nee
essary expense.
The farmer who keeps his accounts
con the receipts and disbursements
basis" which means a record of the
amount actually received and the
amount actually paid for expenses
must file his income tax return for the
year 1921 on that basis. Another
method of keeping accounts of income
and expenses is the "accruaI basis
For those keeping their accounts or
the accrual basis, inventories are nee
essary at the beginning and end OF
each taxable year. The gross profits
are obtained by adding to the inventory
value Of livestock and farm products
on hand at the end of the year
amounts received from the sale of the
stock and products and other miscel-
laneous receipts during the year. and
deducting from this sum the inventory
value of stock on hand at the begin
ming of the year, plus the cost OF
stock and produce purchased during
" the year. AS an illustration of the
difference between the receipts ano
disbursements basis and the accrua
basis, let us take a cash purchase or
December l, 1921 of tons of hay and
1000 bushels Of corn and oats; by the
receipts and disbursements basis, the
cost would be deducted from gross in
come for the year 1921, and by the
accrual method, the cost of only the
amount used in December would bt
charged to that year. and the balance
carried by inventory into the yeai
1922, to be a charge against gross
income of that year.
Losses incurred in the operation OF
q farm as a business enterprise are
deductible from gross income. If
however. farm products are held fol
favorable markets, no deduction is al