Evening star., 1944-01-31
Your U. 5. Income Tax
(This Is No. % of Series.)

fIHtS Is NO. ~ OF SeTtE3.)
Individuals engaged In business
or profession report the net profit
Cor loss) In their individual income
tax return Form 1040. The net
profit Cor loss) is entered In item
of the return Form 1040 and the
entry must be supported by the in
formation called for in Schedule
e co or by another schedule par
ticularly adapted to the business or
profession.
In reporting income from busi-
ness or profession, all income so
derived must be shown in the
schedule. In arriving at net income
or loss, the taxpayer may use the
method Of accounting regularly en-
ployed in keeping the books, so long
as the method is reasonably con-
sistent and clearly reflects the
income.
In the case of farming operations,
If the taxpayer Is using the cash
basis, Form 1040F, Schedule of
Farm Income and Expenses" is re-
quired to be filled in and filed along
with Form 1040. Use of Form 1040F
is optional in the case OF farmers
who use the accrual method.
1t should be noted that incidental
transactions entered into for gain,
such as the buying and selling of
securities where one Is not In the
investment business, do not con-
stitute trade or profession" Gain
or loss from such operations are
reported in item and item of
return Form 1040.
Current Costs DeductibIe.
Expenses deductible in arriving at
net profit Cor loss) from business or
profession Gtem 8 of return Form
104O are the normal current costs
of running a business or producing
income. Such expenses must be
distinguished from those incurred
for the convenience, comfort, or
economy Of the individual pursuing
the business, or in the nature OF
loans, gifts. capital investments, and
the like. The distinction lies in the
purpose and nature Of the payment,
rather than in any account in which
it is charged.
Business expenses may include
salaries and wages paid (if not In
contravention of the Wage and
Salary Sterilization Act of October
2, 1912 interest on business indebt-
edness. taxes on business and busi-
ness property, loss arising from busi-
ness operation, bad debts arising
from sales or services, depreciation,
obsolescence or depletion, and rents,
repairs, and other expenses. Other
items includible are management
expenses, commissions, labor. sup
plies, advertising or other selling ex-
penseS, and insurance premiums.
Car Expenses Included.
In the case OF a professional man,
maintenance and repair expense of
an automobile used for professional
purposes Cor that portion of the
expenses applicable to professional
use) is allowable, as well as mem
bership in technical societies, sub
scriptions to technical journals and
current magazines used in the re-
ception room, cost of supplies, and
fees paid to other professional men
for professional assistance.
If a professional man uses his
residence as Office and home, he
may deduct the expense applicable
to that part used for professional
purposes
Cost of incidental repairs is de-
ductible provided the property ac-
count is not increased by such ex-
penditures. but repairs in the nature
OF replacements, betterments, and
improvements are regarded as CAPT.
tai expenditures.
Persons engaged In business or
profession may not claim large and
extraordinary deductions for busi-
ness expenses simply because the
earnings OF the business have rap
idly increased. Payments of man
agement salaries, employees bonuses,
and advertisement expenses, and the
like, will be carefully scrutinized by
the Bureau of Internal Revenue to
ascertain whether such expenses are
ordinary and necessary and If found
not to be so, are subject to disallow-
ance.
The squander bug will puff with
elation and cause imitation If you
don't buy Fourth War Loan Bonds.