The Waterbury Democrat., 1944-02-10
INTEREST DEDUCTIONS
 PART 1)
By s. BURTON HEATH

Interest on indebtedness, with cer- tain exceptions, is an allowable de- duction from income for Federal income tax purposes. In comput- ing normal tax and Surtax, deducti- ble interest includes both interest incurred in connection with busi- ness or profession, and interest on personal indebtedness. In computing victory tax, however, interest on personal debts is not allowable, and deduction for interest is allowable only if the debt was incurred (a) in carrying on any trade or business, or (b) for the production or collection of income, or Co for the manage ment, conservation, or maintenance of property held for the production of income.
 Interest on business debts should be shown either in Schedule C(D on page 2 of the return Form 1040, to the net amount of rents and roy- alties entered as item of the re- turn, or in Schedule C(O to ar- rive at the net profit Cor loss) shown in item of the return. Interest on personal debts should be includ- ed in item 12, under Deductions. |" and supported by an explanation Gin Schedule E) of : the deduction. On short Form 1040A, no deductions should be entered for interest, be- cause the tax table on this form already allows the benefit of an average amount for such deduc- tions. -..-
 Interest on personal indebtedness may include interest on a mortgage home, interest on the price of house. hold goods purchased on the install ment plan, as well as interest on personal loans. Interest paid on a judgment or on unpaid taxes is also deductible. It is not necessary that the indebtedness be secured by lien or mortgage for the interest to be deductible, but there must be a legal obligation on the taxpayer to pay the interest.
 In entering interest deductions, several distinctions and qualiflca- tions must be kept in mind. In the case of a mortgage loan on ones home, the contract frequently calls for a monthly payment covering both interest and amortization ot tine loan. Since only the interest is deductible, 1t is necessary to sep- arate the two amounts to find the interest paid during the year. 1n- terest on a mortgage also must be distinguished from other items often included in home payments, as loan insurance, accrued taxes, and fire insurance. Some of these items may also be deductible, but not under the heading of interest. Ordinar- fly the institution holding the mort- gage will supply the mortgagor with @ statement of the interest paid during the year.
 Tenant-stockholders of coopera- tive apartments may also include as interest deduction the proportion of interest paid or incurred by the apartment corporation on any out- standing indebtedness which was contracted for the purpose of ac. quiSition, construction, alteration rehabilitation, or maintenance oi the apartment building, or in the acquisition of land on which it is located.
 Likewise, in the case of personal loans and installment purchases, a portion of the payments frequently represents insurance" and finance charges" Tn these cases, it is ad- viSable to obtain statement from the store or finance company as to the amount of the payments which represents interest. Where the cor- tract of purchase provides only for payment by a series of payments, with no mention of interest, no in- terest would be deductible.
 Frequently, interest is in the form of discount At that is, the amount of the interest is deducted from the proceeds nf the loan to the borrower