The Redwood gazette. [volume] (Redwood Falls, Minn.) 1873-1940, 1922-01-11
More Information
on Income Tax
RULINGS CANNOT BE GIVEN ON
ABSTRACT CASES; BUREAUS
POLICY DEFINED.

FOLlC4 DEFlN ED.
Requests are being received daily
Tor ruling and advice upon abstract
cases or prospective transactions in
volving questions Of income tax and
profits liability. These requests are
so numerous and the insistence on
prompt action so great that it seems
advisable at this time definitely to out
line the Bureaus policy which will
govern the consideration of these re-
quests.
''The Revenue Acts of 1918 and 1921
depart widely at many points from
prior law or practices and have given
rise to new questions Of such import
ance, complexity, and number that the
resources of the Bureau are no more
than adequate to advise taxpayers
promptly of their present liabilities
4 arising out of past transactions. 1t is
y impossible to answer every question
which the invention or ingenuity OF
the inquirer may devise without neg
lecting the fundamental duty Of det-
ern1ining tax liability upon the basis
of actual happenings. Under these
circumstances, the administrative ne
cessity is obvious Of giving precedence
over abstract or prospective cases to
actual cases in which the taxpayer de-
sires to know what are his immediate
liabilities under the law.
''It will be the policy of the Bureau
not to answer any inquiry except under
the following circumstances:
'The transaction must be COM
Melted and not merely proposed or
planned.
''The complete facts relating to
the transaction, together with alb
stracts from contracts, or other
documents, necessary to present
the complete facts, must be given.
"The names of all the real par
ties interested (not dummies"
used in the transaction) must be
stated regardless of who presents
the question, whether attorney, ac-
countant, tax service, or other re-
preventative"
The Revenue Act of 1921 contains
two new and important provisions,
which are the subject of frequent in
uuiry. The first relates to the person.
al exemptions allowed married per-
sons, and the second to the provision
recurring that return be made OF
gross income of $4,000 or more.
The act provides that married per
son. living with husband or wife,
, whose net income for 1921 was $4,000
z or less shall be allowed personal ex-,
emption of $2,5OO If the net income
of such person was over $4,000 the ex-
emption is $4,000. Under the Revenue
Act of 1918 the personal exemption
allowed married person was S2,O00,
regardless of the amount of net in
come. The normal tax rate remains
unchanged, A per cent on the first 3D.
600 of net income above the exemp-
tions and 8 per cent on the remaining
net income.
Tn order that an income slightly in
excess Of SIS 900 shall not be subjected
to an inordinately disproportionate tax
because of the reduction of the exemp-
tion to $4,000 thereon, the law provides
that such reduction shall not operate
TO increase the tax, which would be
pavable if the exemption were $1,000,
by more than the amount of the net
income in excess of $4,000.
For example, on net income OF 81
O1O. the tax, without this saving
clause. would be $12O40, which is 4
ner cent on No. 3,O1O, the amount Of
net income less an exemption Of $4,000.
The actual tax is $110.40, computed as
a follows: from the net income OF So
O1O is deducted $4,000 leaving $3.50,
the a per cent tax on which amounts
1 TO s1OO O.4O. To this is added $40, the
amount of net income in excess OF 3d.
OO0."
The personal exemptions allowed
married persons, apply also to the
head of a family, person who sup
no,ts in one household one or more
rolatiyes bv blood, marriage or adop-
ton.
heretofore, person whose net in
come was less than his exemption
Isl 900 if single, or $4,000 if marrled)
. was not required to file a return.
? Under the Revenue Act OF 1871, II. the
gross income of an Individual equalled
or exceeded $4,000, or it the combined
oross income of a married couple ana
that of dependent minor children
ennalled or exceeded $4,000, return
,,,nst he filed, regardless of the amount
of net income.
ssNet income is gross income, less
oo,t ain deductions. The fact that al
4 lo1uable deductions from gross income,
for business expenses, losses, bad
debts etc. may reduce the net income
- on amount below the personal ex-
ey,ntions of $1,000 or $4,000, does not
aitar the requirement to file return
If GROSS income, if such gross income
ooualled or exceeded $4,000.