The Waterbury Democrat., 1943-02-02
YOUR INCOME TAX
NO. 2S
DEPRECIATION CART D.

Among the deductions allowed in arriving at net income for Federal income tax purposes is depreciation Depreciation may be sustained in connection with property giving rise to rental income shown in item 6 of return, Form 1040, or property used in business or profession, the net profit Cor loss) from which Is shown in item 9. The property must, of course, be owned by the taxpayer.
 As relates to Federal income taxes, depreciation is an allowance for exhaustion, wear and tear of property used in Q trade or business, or of property held for the produc- ton of income. The purpose vr1. deriving allowances for depreciation is to permit the taxpayer to recover over the useful life of the property the capital sum invested therein. The terms fused in trade or busi- ness" or "held for the production of income" would include property held for such, purposes though actu- ally not in use during the taxable year. Depreciation deductions are not allowable on property used for personal purposes, such as ones reS- idence or its furnishings, or ayto- mobile or pleasure craft. However, if a taxpayer moves out of his house and rents 1t, 1t would become a rental property upon which a depre- ciation deduction would be allow able; or if a taxpayer used his car in part for business purposes, then a portion of the depreciation on the car, depending upon the relative use for business purposes, would be allowable.
 A distinction must be made be- tween depreciation and what may be called fiuctuation in value. In the case of an automobile, 1t is commonly said that once, Q car has been driven from @ dealers show room 1t becomes 8 secondhand car, and by that fact may lose consid- erable amount of it's value. How ever, only that part of the loss in value which is due to actual ex- llaustion, wear and tear in business use, during the year, may be de- ducted as depreciation.
 A further requirement. in deter mining depreciation is that the property must have Q limited and determinable useful life in the trade or business. Land, for instance. upon which a building is erected, is not depreciable, since 1t has no determinable life, and in setting up depreciation on real estate, Q Seg- regation must be made between the cost or other basis for the land, and the cost or other basis for the build ingS.
 The length of useful life of e property is often a difficult matter of estimation. The useful life of a building, or a machine, the furniture used in a physician's ofiice, law yer's professional library, or a trac- tor on a farm, depends on particular circumstances. including the char acter of the property and the char acter of its use. A well-built brick building may have Q useful life of 50 years and a frame house 2S years, e piece of machinery to 70 years, but in particular instances the lise- ful life may vary considerably.
 Tn depreciation deductions. the amount claimed must be supported by the data called for iu Schedule ]. Of the return Form lo1O. This schedule requires Q statement og the kind of property being depre- ciated, the date acquired. the cost or other basis used in computing depreciation. the depgeciated value at the end Of the year. the depreclR- ton allowed e allowable in prior years, and the remaining cost oE other baGis t0 Do recovered, es well as the estimated life used ln accun- uiailng depreciation end the este mated remaining lie at the begln- ning Of ths year.