Evening star., 1922-01-26

ARTICLE XIII.
1t is necessary to discuss several
l,additfonal items In order to exhaust
! the topic commenced recently. namely,
DEDUCTIONS FROM GROSS IN
COME.
Item "a. Had Debts.-Bad debts
! where provable as such, may be de-
| Quoted. When only part Of a debt or
| debts is probably bad, then the part
| uncollectible may be deducted. For
the, first time those keeping books
may set up reserve for bad debts"
and employ the amount reasonably
, SO reserved as deduction. For ex-
ample, ii lend John Doe 500 and
cannot collect, the amount from him,
may deduct the debt. IF can col
lect only $50, l may deduct SO. II
sell John Jones on account and
treat the sale as gross income. may
deduct the full amount OF the sale
ii 1 cannot collect the charge from
John Jones. On the, other hand, n
conduct a cash business and do not
report my sales but only my coltec-
tions, / cannot deduct the price of q
sale when I find that the buyer VIII
not pay, but I may deduct, under an
other heading. the cost price Of my
loss.
Item IS. Depreciation.--A taxpayer
may deduct from his gross income
reasonable amount representing the
loss due to the wear and tear OF
property used in his' trade or bust.
ness Business buildings made OF
brick depreciate about or per cent
per year, on the theory that their
useful life lasts about thirty to fifty
yaaro In enacinl oasea th0 donf3e
cfation rate may be larger or smaller.
Apartment houses made of stone and
brick depreciate at about per cent
per year. Structures made OF WOOD
depreciate at a somewhat greater
rate. Machinery depreciates at from
year, all depending upon the circum- l.
stances. Depreciation on an owner s
own residence cannot be deducted
from gross income. In certain cases
deductions for losses due to obso-
lescence may also be deducted.
Item. 26. Contributions.-A taxpay-
er may deduct gifts made by him to
the United States or to any state or
political subdivision thereof for ex-
clusively public purposes, or to any
organization operated exclusively for
religious, charitable, scientific, lit
cluding posts Of the American Le-
gion or the women's auxiliary units
thereof, or for the prevention OF cru
! city to children or animals. A rec,
| ord of such gifts must be retained
| by the taxpayer in order to prove his
| claim.
| tions allowed a taxpayer cannot ex-
I ceed Is per cent of his total net ins
| come For example, II a taxpayer
! gross income amounts to $4,000 and
| his ordinary deductions to $1,000. his
ordinary net income Is 5000. The
| maximum amount OF his charitable
! deduction is is per cent of $4,000. OF
| $3.50. Thus, If he made contributions
| during the year amounting TO $S0t,
| he could only deduct $3.50. and the
remaining $50 would not be deduc-
/ tible.
| 1t may be well to point out that
| gifts made to poor relatives or to
| poor strangers cannot be included
| among the allowable deductions.
QUESTIONS AND ANSWERS.
@. (26)-About a year and a half age
I bought stock in a company OF, the
Lyalue of about $4,000 in order to take
an active part. i discovered short
time before l was to give up my posi- l.
| tion that the man in control was a
"crook" and. on the basis of gross
rescissfon of contract. But nothing
has come of this and it looks as
though l shall never get a cent oui
! Of it, In fact. the concern is moi
| doing, and never has done, any busi-
ness. Ii has broken me and 1 am
wondering if it is permissible under
| the law to deduct this loss from my
| income tax return for this past year
| A--If you can substantiate the fact
| that 1t is reasonable to believe that
even If you secured judgment against
the company, collection would be i'm
possible, it is my opinion that the full