The Waterbury Democrat., 1938-02-17
Your Ineom Tax
DEDUCTION FOR TAXES

Taxes on real estate and personal property paid during the year 1897 are deductible. So-called taxes, which are assessed against local benefits, such a. streets, sidewalks, drainage, and other like improve mentS, are not deductible but are to be capitalized, as they tend to increase the value of the property and thus constitute cost of 8 per- manent improvement. The federal income tax may not be deducted. The tax on unjust enrichment-a federal tax on income-is not de- ductible. Income tax, however, paid to the state by an individual on his income is an allowable de- duction in his federal income tax return.
 Customs duties paid by a person on articles imported for his own use are deductible. Import or tariff duties paid to customs officers; and business, license, privilege, excise, and stamp taxes paid to internal revenue collectors are deductible as taxes provided they are not added to and made a part of the expenses of the business or the cost of the articles of merchandise with respect to which they are paid, in which case they cannot be deducted sep arately as 8 tax. Federal taxes on admissions in excess of 40 cents are deductible, but the taxpayer must show that account has been kept of the amount paid. Taxes on club dues are deductible by the member paying them. An individual may deduct the tax on his telephone conversations, radio messages, tele- grams, and cables, and on the rent of his safe-deposit box.
 Unemployment compensation con- tributions If officially classified as taxes are deductible as taxes and not as business expenses.
 The income tax imposed upon em- ployes by section 801 of the Social Security Act may not be deducted by the employee. But the excise taxes imposed upon employers by sections BOA and 901 of the Social Security Act may be deducted by the em- ployers. Also, if an employer pays the income tax on employees under section 801, that amount may be deducted by the employer as an ordinary and necessary business ex- pense and the employees are required to report as additional income in their federal income-tax returns the amounts of the tax so paid for them.
 License fees exacted by a state or city upon certain businesses are de- ductible as taxes. Automobile license fees are ordinarily taxes and de- ductible. Postage is not a tax and is not deductible. In general, taxes are deductible only by the person upon whom they are imposed.
 Federal estate and gift taxes and state inheritance, estate, legacy, or succession taxes are not deductible on federal incomc-tax returns. The federal taxes on automobiles, gaso- line, cigarettes, and liquor are im- posed upon the manufacturer, pro- ducer, or importer, and are not de- ductible by the purchaser or con- sumer. Whether or not the gasoline tax or the sales tax levied by a state may be deducted by the individual purchaser depends upon the terms of the state law imposing the tax; consequently, the right to the de- duction, as between purchaser and seller, varies in the different states.
 Under the Revenue Act of 1886 the amount of excess profits tax paid or accrued under the Revenue Act of 1935 Gas amended) is de- ductible in computing net income of a corporation for the purpose of both the normal tax and the srlr- tax on undistributed profits.