Evening star., 1934-02-18

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they cannot be deducted separa
The bureau has ruled that the gas
tax is q consumers tax In the follow
ing States: Connecticut, Delaware.
District of Columbia, Idaho, Illinois.
Indiana, Iowa, Kansas, Kentucky,
Louisiana. Maine, Maryland, Massa-
chusetts, Michigan, Montana, New
Hampshire, New Jersey, New Mexico,
New York, North Carolina, North Da-
kota, Oklahoma, Rhode Island. South
Dakota, Texas, Vermont, Virginia,
West virginia, Washington and Wis
consin. In Missouri, the gas tax Is a
consumers tax, with the exception Of
the fuel tax imposed by Kansas City.
Recent changes in the language OF
some State laws may have added ad-
ditional States to the list where the
gasoline tax may be deducted.
U. S. Tax Not Deductible.
The distinction between the appli-
cation Of State and Federal gasoline
taxes should be noted. The Federal
gasoline tax is imposed on the manu-
facturer and Is not deductible by the
purchaser.
The taxes on new automobiles,
trucks, parts and accessories, tires and
tubes and lubricating oil, imposed un-
der the revenue act of 1882, are like
wise not deductible by purchasers.
even though such taxes are passed to
them as part Of the purchase price.
Third, the interest on money bor-
rowed for the purchase of an automo-
bile is deductible, irrespective of
whether the car is used for business
purposes or for pleasure. If the tax
payer keeps his accounts on a cash
basis, such interest will be deductible
only for the year In which paid. II
are kept on an accrual basis
may be deducted as it accrues.
Fourth, If q passenger car Is used
wholly for business purposes. all ex-
penses incident to maintenance, in
cluding depreciation, may be deduct
ed. The bureau fixes no definite rate
of depreciation. Allowance is made
for exhaustion, wear and tear, obso-
lescence Of property and excludes any
Idea of mere reduction of market value
not resulting from wear and tear.
While the burden Of proof rests on the
taxpayer to sustain the deduction for
such deduction viii not
be disallowed unless shown to be un-
Where the car is used
partly for business and partly for
pleasure, only a proportionate part Of
the maintenance and depreciation may
be deducted, based on the extent tc
which the car is used in the taxpayers
pursuit of business.
Fifth, loss sustained by reason of
damage to a passenger automobile
while being used for pleasure is de-
ductible. The loss, however, must be
an actual loss to the person claiming
the deduction. In other words, II II
IS compensated for by insurance or
it is not deductible.
Sixth, the bureau has ruled that
where a motorist paid damages for
injury to pedestrian, such amount is
deductible, provided at the time the
injury occurred the car was being used
for business. Since q fine paid by q
motorist using a car for business pur-
poses does not constitute an ordinary
and necessary business expense" as
that term is used in the revenue act
Of 1882, no deduction may be taken
for the amount so expended. Fines
paid, or collateral forfeited in connec-
lion with charges Of trafi1c violations,
are not deductible for income tax pur-
poses, regardless Of whether the car is
used for business or pleasure purposes.
Sale Loss Permitted.
Seventh, loss sustained from the
outright sale of an automobile used
primarily for business purposes may
be deducted in computing net income.
Eighth, the amount paid f,r insur.
ance on automobiles used for business
purposes and also the amount Of f.
nance charges on purchased car
which covers interest and risk on the
loan, may be deducted, but not the
amount covering the premium on In
STRANGE to protect the finance COM
pany's interest.
With reference to loss due to dam
age to car maintained for pleasure,
the A. A. A. quoted the bureau as fol-
lows:
"A loss occasioned by damage to an
automobile maintained for pleasure
where such damage results from the
faulty driving Of the taxpayer but is
not due to his willful act or negligence,
may be deducted in the computation
Of the net income Of the taxpayer.
Where damage to taxpayers auto
mobile results from the faulty driving
Of the operator Of an automobile with
which the automobile of the taxpayer
collides, the loss occasioned by the
taxpayer by such damage is likewise
deductible. The amount Of loss must
however, be reduced by the amount Of
any insurance or other compensation
received and by the salvage value, II
any, Of the automobile"
The national motoring body points
out that loss sustained from the out
right sale Of an automobile does not
apply to cars traded In for new cars
to be used in the business of the tax
payer. On this point, the Bureau Of
Internal Revenue said:
When an automobile used solely
In the trade or business Of q tax
payer is traded In as part payment
on another automobile, no gain or
loss Is realized. In determining the
basis for subsequent depreciation
and the computation OF
gain or loss where exchanges of this
kind occur. the purchase price Of the
new machine should be decreased or
Increased respectively, according to
the trade-in value of the old
machine is greater or lesser than the
deprecated cost Of the old machine"
Although the Federal Government
today Is engaged In q vast program
of highway development, speakers at
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