Norwich bulletin., 1922-02-06
INCOME TAX FACTS
 YOU SHOULD KNOW
AI:owable pednctIoin.s


 Deductions from gross income In cou- puflng net Income upon which inc tax IS assessed, are more liberal under the revenue act of 1921 than were provided by the revenue act of 1918.
 All the ordinary and necessary expans- es paid or incurred in carrying on any trade, business, profession, or vocation are allowable deductions Typical ex- penses of mercantile establishments are amounts ftafd for advertising, hire of celrks and other employees. rent light. heat and water. telephone, insurance, de- livery. expenses tine oost of operating de- livery wagons and motor trucks and in- eidental repairs to such vehicles The expenses Of a manufacturing business in elude l|hor. raw mar e-ials, supplies, re- pairs. li..ht and heat, power, selling cost | adEnini< ration. and similar charges A professional ntln-dawyer. dc-tor, dentist, architect author, etc.-may claim as dedi'H ions the cost of supplies used by him in nls practice, expenses paid the O. eration and repair of an automobile used in making professional calls. dues to pro l fessional societies, subscriptions to lro 1 fe'ssional journals office rent. the expens of fuel Night, water and telH- hone used II such offices, and the hire of assistsnts. Farmers Deductions
 | The farmer may deduct all amount. nue 'sullseAIsq uononpoId ega uI prvr marketing of crops, including labor. cos of seed and fertilizer used. cost of mino repairs to farm buildings (other thal | dswelling). fences and machinery and smal tools used fin the course of the year | TraNering expenses. when the trip i | solely business, including the entir 1 amount spent for meals and lodgini while away from home are formerly de ] ductibte. Formerly expenses for meal and lodging were deductfble only to tn amount In excess of such expenses wi1el at home
 Claims for deductions for articles nor or less permanent in character. or fo permanent Improvements of property ar not allowable. In the case of a bushes man. they include claims for the erectio
 ton the cost of a new tf1resbing machin
 of a new building or the installation C machinf~y. A farmer claims as dedur
 or trailor. $ rh dc | setsons az !
 pressly disallowed by the revenue act
 1921 and are tel1 to be investments C cal9ital
 Deductions for business expenses mus
 have certain qualities to be allowed. The must relate to business. trade, profes sion or vocation "carried on" by the ta , payer, In which he has invested time c money for tlne purpose of a livelihood c | profit single transactelon or series isolated transactions 6o not crdinari, constitute trade or business. A busine, is being carried on by a taxpayer even all of its activities are conducted by en
 ployees. A taxpayer may conduct mol
 than one business or trade and claim II
 business elI9ense of each provided he d r votes sufficient time and attention to eac Salary Allowance
 The act provides for the deSsction
 reasonable allowance for salaries
 other compensation for personad servtc actually rendered." Such claims to - allowed must conform closely to Gn , wording of the statute. The test of q .. .. ductib7lity Is wheather the amounts re ' are reasonable. and whether they are ? fact, purely for personal services. Req 5 enable compensation is held by the bures of internal revenue to mean only SUI | amounts as would ordinarily be paid f ' like services by like enterprises in lii 1 circumstances.
 Bonuses to employees may be dedrct ' by the employer when such payments a o made good faith and as additional cor
 pensation for services actually render
 provided that when added to the stipula | ed salaries the total does not exceed ; "reaso nalble compensation for such SC . vices" Such bonuses must be includ . in the returns of the recipient. Gifts Il employees. which do not have in them t a element of compensation. may not he d 'e ducted by the en17loyer, and need not u included in the return of the recipient. Il efitdbyi-uu1apr9e tn tn tn