Twin city review. [volume] (Champaign, Ill.) 19??-1929, 1926-03-05
INCOME TAX IN A NUTSHELL.
Continued from Page -

nc lii HltI may utuutl dS ltttHSdi
expenses all amounts actually eXpend-
ed in carrying on the business of
farming, such as amounts paid in the
production and harvesting Of his crops,
cost of seed and fertilizer used cost
of minor repairs to farm buildings,
and cost of small tools used up in the
course of a year on two. The cost of
farm machinery, equipment, and farm
buildings is not deductible as expense
Deductions for personal or living
expenses, such as repairs To the tax
payers dwelling cost of food, cloth
ing, education of children, etc, are
not allowed
Losses if incurred in a taxpayers
trade or business or profession or in
any transaction entered into for
profit" not compensated for by in
surance or otherwise are deductble
from gross income in determining net
income upon which the income tax is
assessed. To be allowed, losses not
incurred in trade, business, or profess
sion must conform closely to the
wording of the statute. For example,
loss incurred in the sale of tax
payers home or automobile, which at
the time of purchase was not bought
with the intention of resale, is not
deductlble, because il was not trans |
action entered into for profit.
Losses sustained in the operation of II |
farm as a business venture are de- |
ductibe. If sustained in the opera |
ton of farm as a business venture |
are deductible. If sustained in the |
operation of a farm operated merely |
for the pleasure of the taxpayer, they |
are not deductible.
Loses arising from fires, storms, |
shipwreck, ''or other casualty, "or
from theft, whether or not connected |
with a taxpayers business, may be
deducted from gross income in his
1925 income tax return. II his home
or automobile is destroyed by fire on
his property damaged by storm, the
loss is deductible for the year in which
it was incurred.
Loss Of property by theft or bur
glary is an allowable deduction, and
need not be incurred in the taxpayers
trade or business.
A loss from emheZzlement is also
deductible.
All losses are deductible only to
the extent by which they are not com
pensated for by insurance or other
wise.
A debt discovered to be worthless
and charged off the books of the tax
payer for the year 1925 may be de
Quoted from the gross income in com
putting net income for that year. The
return must show evidence of the
manner in which the WorthlessnesS Of
the debt was discovered and that or
binary and legal means for its col
lection have been or would be IN
availing.
Bad debts may be deducted in whole
or in part. When deducted, the tax
payer must be able to show with a
reasonable degree of certainty the
amount uncollectible. Partial de
auctions are allowed with respect to
specific debts only.
A valid debt proved TO be worthless
may not ALWAYS be a proper deduc-
ton. For example, unpaid amounts
representing wages, rentals, OF similar
items are not allowed as deductions
unless included as gross income in the
creditors return for the year in which
the deduction is sought or in a pre-
vious year. The fact that expected
income was not received does not re
duce the amount of taxable income Of
the creditor.
Unpaid loans made to needy rela-
tives or friends with little or no eN-
pectation that they would be repaid
are not deductible, but are regarded
as gifts.
Where by reason of illness or alb
sence from home additional time for
ming an income tax return is required.
the taxpayer should address 10 the
Collector of Internal Revenue, for his
district, a request for an extension
The request must be made before the
return IS due--on OF before March
ID, 1926, if made on the calendar
year basls-and must contain a full
recital for the causes of the delay.
An extension Of time for filing the
return does not extend the time Of
payment of the tax or any Install
ment thereof unless SO specified in the
extension. As a condition of granting
an extension, the Collector may re-
qulre the submission of a tentative
return and estimate of the amount of
the tax, and the payment of at least
one-toufth of the estimated amount.
Under the revenue act of 1926.
thousands Of persons are required to
nile returns Of income although the
incomes are not taxable. The act pro-
Vldes that returns shall be filed bv
every single person whose net income
1 Tor 1925 was 81 800 or more or
whose gross income was $1,000 or