The Waterbury Democrat., 1944-02-04
YOUR FEDERAL INCOME TAX
DEPRECIATION .(Part 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 2 of return, Form 1040, or property used in business or profession, the net profit GOT loSs) from which is shown in item 8. The property must, of course, be owned by the taxpayer.
 AS relates to federal income taxes, depreciation is an allowance for ex- haustion, wear and tear of property used in trade or business, or of property held for the production of income. The purpose underlying al- lowances for depreciation is to per- init the taxpayer to recover over the useful life of the property the cap ital sum invested therein. The terms used in trade or business" or "held for the production of income" would include property held for such pur- poses though actually not in use during the taxable year. Deprecia- tion deductions are not allowable on property used for personal pur- poses, such as a residenrce or its furnishings, or automobile or pleas- ure craft. However, if a taxpayer moves out of his house and rents 1t, it would become a rental property upon which depreciation deduc- tion would be allowable; or if taxpayer used his car in part for business purposes then 8 portion of the depreciation on the car, de- pending upon the relative use for business purposes, would be allow able.
 A distinction must be made be- tween depreciation and what may be called fluctuation in value. In the case of an automobile, 1t is com- monly said that once car has been drivein from a dealers show room 1t becomes a 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- hauStion, 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 8 limited and determinable useful life in the trade or business. Land, for instance, upon which a building is erected, is not depreciable, since it has no determinablel fife, and in setting up depreciation on real estate, 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 a property is often 8 difficult matter of estimation. The useful life of building, or 8 machine, the furni- ture used in a physicians office, lawyers professional library, or tractor on a farm, depends on par ticular circumstances, including the character of the propuerty and the character of its use. A well-built brick building may have a useful life of 50 years and 8 frame house % years, 8 piece of machinery to 10 years, but in particular instances the useful life may vary consider ably.
 In depreciation deductions, the amount claimed must be supported by the data called for in Schedule o CD and c CD on page 2 of the return Form 1040. This schedule requires statement of the kind of property being depreciated, the date acquired, the cost or other basis used in computing depreciation, the depreciated value at the end of the year, the depreciation allowed or allowable in prior years, and the remaining cost CT other basis to be recovered, as well as the estimated life used in accunsilating deprecia- ton and the estimated remaining lito at tho beginning of the, year.