Evening star., 1938-02-12
Your Income
Tax
No. 20.
DEDUCTION FOR TAXES.

Taxes on real estate and personal
property paid during the year 1887 are
deductible. So-called taxes. which are
assessed against local benefits, such
as streets, sidewalks. drainage and
other like improvements. are not de-
ductible. but are to be capitalized. as
they tend to increase the value of the
property and thus constitute cost Of
a permanent improvement. The Fed
The tax on unjust enrichment-a
Federal tax on incomes not de-
ductible. Income tax, however, paid
to the State by an individual on his
income. is an allowable deduction in
his Federal income tax return.
Customs duties paid by q 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 COL
lectors are deductible as taxes pro-
vided they are not added to and made
part Of the expenses Of the business
or the cost Of the articles of mer-
chandise with respect to which they
are paid, in which case they cannot
be deducted separately as a tax. Fed
eral taxes on admissions in excess of
40 cents are deductible, but the tax
payer 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.
Compensation Deductible.
Unemployment compensation con-
tributions, II officially classified as
taxes, are deductible as taxes and not
as business expenses.
The income tax imposed upon en-
ployes by section 80l Of the Social
Security Act may not be deducted by
the employees. But the excise taxes
imposed upon employers by sections
804 and 90l Of the Social Security
Act may be deducted by the en-
ployers. Also, if an employer pays the
income tax on employees under Sec
ton 801. the amount may be deducted
by the employer as an ordinary and
necessary business expense 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 . State or
city upon certain businesses are de-
ductible as taxes. Automobile license
fees are ordinarily taxes and deduct-
ible. Postage Is not q tax and is not
deductible. In general, taxes are de-
dutible only by the person upon whom
they are imposed.
Some Taxes Not Deductible.
Federal estate and gift taxes and
State inheritance. estate. legacy or
succession taxes are not deductible on
Federal income tax returns. The Fed
eral taxes on automobiles, gasoline,
cigarettes and liquor are imposed
upon the manufacturer and are not
deductible by the purchaser or con-
sumer. Whether or not the gasoline
tax or the sales tax levied by State
may be deducted by the individual
purchaser depends upon the terms Of
the State law imposing the tax: con-
sequently, the right to the deduction.
As between purchaser and seller,
varies in the different States.
Under the Revenue Act Of 1895 the
amount of excess-prof1ts tax paid or
accrued under the Revenue Act Of
1885 (as amended) is deductible In
computing net income Of corpora
ton for the purpose Of both the nor
NAL tax and the surtax on undis-
tributed pronb.