Imperial Valley press., 1922-02-08

sisalt, veterinary service, insurance Tex
operating power and sundry minor
Expenses.
The cost of farm machinery Of 4
permanent character, such as a thrcsh-
ling machine or tractor and extensive
repairs of farm buildings, such as
placing Il new roof on the barn, are
not deductible expenses. These are
Regarded as capital investments, made
, for the purpose of improving the prop
erty and enhancing its value. Amounts
Expended in Che developments of
farms, orchards and ranches prior to
the time when the productive state
was reached, may be regarded as in
.vestments 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
tions, is not deductiblc, but is regarded
as an investment of capital. The cost
of gasoline, repairs and upkeep of al
automobile if used wholly in the busi-
ness of farming is deductible as an
expense, if used partly for business
purposes and partly for the pleasure
0" convenience of the taxpayer or his
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 a
necessary expense.
The farmer who keeps his accounts
'on the receipts and disbursements
basis" which means a record of the |
amount actually received and the |
amount actually paid for expenses
snust file his income tax return for
the year 1921 on that basis. Another
method of keeping accounts of income
and expenses is the "accrual basis"
For those keeping their accounts on
the accrual basis, inventories are ne
each taxable year. The gross profits
are obtained by adding to the inven-
tory value of live stock and farm pro-
duets 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
Ieducting 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 and
basis and the accrual
oasis, let us take a cash purchase or
December /, 1921 of five tons of hay
md 1000 bushels of corn and oats; by {
he receipts and disbursements basis,
he cost would be deducted from gross
ncome for the year 1921, and by the
lccrual method, the cost of only the I
.mount used in December would be
harged to that year, and the balance :
arried by inventory into the year !
922, to be charged against gross in !
one Of that year.
Losses incurred in the operation of {
farm as business enterprise are
leductible from gross income. If,
owever, farm products are held for
avorable markets, no deduction is al
owed on account of shrinkage in
weight or value, for the reason that
when such products are sold, the
will be reflected in the sell
ng price. The total loss by frost.
storm, flood or fire of prospective
,rop is not deductible. The reason is
hat unless the crop reaches maturity
md is harvested and sold, its value
never reacNeu gross income, anu LHefe-
fore an arbitrary deduction of such
oss cannot be allowed. The loss of a
growing crop simply means that the
farmer has so much less gross income
% report and therefore would pay
reduced tax, if any tax at all. A loss
IN the value of animals raised on the
farm is not deductible, except as such
loss is reflected in an inventory, if
used. However, if live stock was pur-
.hased for any purpose and afterwards