Evening star., 1922-03-15
FEDERAL INCOME AND
EXCESS, PROFITS TAXES
Conducted by DR. JOSEPH j. KLEIN. c. p. a.
ARTICLE XLvI.

Conducted by DIR. JOS
Copyright. 1922, by Joseph
ARTICLE xLvI.
This article concludes the present
series. Its editorship has been a
pleasant experience. I regret that /
have been unable to answer more
than a mere fraction of the inquiries
which have reached my desk. and that
l have not been able to discuss as
thoroughly as I had wished all the
matters which it would be necessary
to present in order to offer a complete
analysis of the federal income tax
law. A remaining topic to which at
tention can be given is:
EXCHANGE OF PROPERTY.
Under the old law and regulations
practically every exchange of prop
erty was deemed closed transac-
ton. e.. one which resulted in either
loss or gain. Regulations No. 81. in
Article 1861 to 1868, inclusive. treat
OF this very important subject. We
nave time to refer to but two OF the
many specific items therein discussed.
1t Is now possible to sell real estate:
receiving payment partly In cash and
the balance in mortgages, without in
curing immediate tax liability.
To illustrate: Suppose 1 had pur-
chased some real estate in 1918 for
?20o. 900. and sold the same property
100000 represented by a first mort
gage and $4,000 represented by a Sec
ond mortgage. Under the old law and
regulations. disregarding the question
OF depreciation, l would be subject to
a tax on a profit Of 100000. At best
difference between the cost $200. .000)
and the market value of the proceeds
OF the sale at the time of the sale
(cash S150.000, plus market value OF
both mortgages).
Under the new law and regulations
transaction until and unless 1 have
recovered in cash or its equivalent the
full amount of my investment lad
justed by depreciation where .neces-
sary).
If stock is exchanged for stock, or
is recognized as a result Of the trans
action. The application Of the prin-
ciple Is almost infinite. Should the
law remain unchanged. the machinery
OF the stock market may be radically
modified.
1t is regrettable that I cannot ex-
tend this discussion further, not alone
because Of Its great interest, but be-
cause of its great practical impor-
tance.
QUESTIONS AND ANSWERS.
=. I94-(a) In a recent issue of
your paper you stated that a loss
resulting from the sale of taxpayers
own residence is not a deductible loss.
Does this infer that the profit re-
own residence need not be returned.
as the transaction was not entered
into for profit? If this is not SO, how
can you explain the difference in the
treatment between a loss and a profit
on such a transaction?
CD In 1911 I received as a gift
from my husband a house and lot in
New Jersey for use as a private resi-
dence, which 1 sold in 1921. How am
l to arrive at the value of it as of
the first Of March, 1913? The tax
assessors valuation is Of absolutely
no value. as. according to the taxa
ton board. the values in Morris
varying from 20 to 60 per cent of
their real value. Must 1 take the
purchase price and add my improve
ments made in the grounds and
permanent Improvements Of the house
to March !. 1913. and can 1 also add
to the valuation of March l, 1913,
permanent improvements made. as,
Ava iHothhSCs a uC" pOTCn,
rebuilding the garage. screening
porch and house, and Improvement of
the grounds?
A. (a) The profit is taxable. AL
though it may seem unfair, the law
Is clear on this point.
(b) Get the opinion of an apprais-
er. such as your bank president or a
real estate experts as to the March I.
1919. value of your property, and add
to such value all expenditures made
since March /. 1913, for permanent
improvements.
Q. Ns5)-I lost my job. In order to
get another one. 1 was compelled to
move to new location at consider
able expense. Can I deduct my NOV
ing expenses from my taxable in
come? 1t seems to me that this would
come under the head OF travelling
expenses" in Article 13 Of the in
struction sheet.
A. Unfortunately; no.
Q. Qs6)-Kindly let me know il in
paid on the amount of collection or
on the amount of the sales. For in
stance, il goods sold for entire year
G92D cost $4,000 and was charged
at $4,000 and only $4,000 was col
lected. how much would tax be paid
on?
A. If you wish. only thirteen -fif-
tSSHsaAS oh SosVvV hSSo NC lSpOl lCu ds
1921 income.
@. us7)-My father-in law paid in
come tax last year and this year he
received an income blank from the
revenue department. He has not
worked since April l, 1921. and has
not had any salary since then. He
has an income Of about $25 a month
rent, which does not amount to
$1,000, he being single. Does he have
to send in a sworn statement or not !?
One party said he did. so I am writ
ing you for a definite answer.
A. 1t is not necessary to file, q re-
turn. but I think it would be advis-
able for him to do SO to avoid later
annoyance.
@. (19s)-I am a married man. NV
income is $1,000. plus $240 increase OF
compensation. I am paying $166.5s
interest. $39.40 tax. have a son under
eighteen years attending high school
H4o0). According to Public No. ss-
67 Congress (H. r. Sa45) I am allow
ed $500 personal exemption. Must
I make a return: IL so, how?
A. Assuming that the interest you
paid is a deductible item. you need
not file a return.
@. (rss)-I have been reading your