Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-01


nroachinr and the question of
what can be deducted and
what cannot be is of impor-
lance. The motorist is particular
~ interested.
With this in mind, the American
Automobile Association has out
lined deductions from gross IN
come allowed motor car owners on
account of automobile ownership
and operation under the Bureau
of Internal Revenue.
First, the car owner may deduct
from his gross income all sums
paid during the calendar year in
the form of registration fees,
drivers licenses, State personal
property taxes and municipal
taxes.
Second, the gasoline tax may be
deducted in all cases where 1t Is a
CONSUMERS tax" under the State
law, but not where it Is specifically
enacted as a distributors tax"
Consumers Tax Deductible.
The bureau has ruled that the
gas tax is a consumers tax in the
District of Columbia and the fol-
lowing States: Idaho, Illinois, In
diana, Kentucky, Kansas, LouiSl-
ana, Massachusetts, Maryland,
Michigan, Missouri, New Hamp-
shire, New Mexico, New York,
North Carolina, North Dakota,
PENNSYLVANIA, Rhode Island, South
Dakota, Virginia, Washington and
Wisconsin.
Third, the interest on money
borrowed for the purchase of an
automobile is deductible, irreSpec-
tive of whether the car Is used for
business purposes or for pleasure.
If the taxpayer keeps his accounts
on a cash basis such interest will
be deductible only for the year in
which paid. If accounts are kept
on an accrued basis, interest may
be deducted as 1t accrues.
Fourth, If q passenger car is
used wholly for business purposes,
all expenses incident to main
tenance, including depreciation at
the rate of 20 per cent per annum,
may be deducted. Where the car
Is used Chiefly" or more than SO
per cent, for business and Incl
dentally for pleasure, the expense
may be deducted on a pro rata
basis.
Fifth, loss sustained by reason
Of damage to a passenger automo-
bile while being used for pleasure
is deductible. The loss, however,
must be an actual loss to the per-
son claiming the deduction. In
other words, If 1t Is compensated
for by insurance or otherwise, 1t is
not deductible.
Damage DeductibIe.
Sixth, the bureau has ruled that
where a motoriSt paid damages
for injury to a pedestrian, such
amount is deductible, provided at
the time the injury occurred the
car was being used for business.
There has never been a decision,
however, on whether q fine paid
by a motorist might be deducted
as a business expense, where, at
the time the expense was incurred,
the car was being used for bust
ness or professional purposes.
Seventh, loss when sustained
where an automobile used for
business purposes is traded in for
q new car may be deducted.
Eighth, the amount paid for in
Surance on automobiles used for
business purposes and also the
amount Of finance charges on a
purchased car which covers inter
est and risk on the loan, but not
the amount covering the premium
on insurance to protect the finance
c0Ynnanv'S interest
The A. A. A. points out that in
no case Is a loss deductible where
1t Is sustained when an automo-
bile used for pleasure is traded in
for a new car. At the same time,
1t Is stated that in no case is the
amount paid for an automobile
used for either business or pleas
ure allowed as a deduction. This
is regarded by the bureau as a
capital investment, but is subject
to claim for depreciation when
used for business purposes. In the
case Of purchase by a farmer for
strictly farm use, only the expense
incident to operation is deductible,
as in the case Of any other bust
ness or professional use.
How can a motoriSt determine
whether or not he is entitled to
the advantages set forth in the
clause dealing with deduction of
maintenance costs for cars used
wholly for business? On this
point the national motoring body
says: