Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1957-01-17

anu pay TIE TAX Oh OF before
report by either methods, the lat
There are three forms which
most farmers will file. They are:
1. Schedule + farm income,
expenses and net farm profit
and seIf-empIoyment taxi.
2. Form 1910 farm profit as
figured on Schedule f and
Schedule ID is transferred to this
form. 1t also provides for re.
porting non-farm income, per.
sonal deductions and exemp.
tiOns).
3. Schedule ID FUSED to figure
gain or loss from sale of capital
and business assets).
A fourth form, Form 1865, is
filed where a partnership is in
volved.
The new 1856 Farmers Tax
Guide is now available at county
agent offices and win prove very
helpful in aiding farmers to fill
out their 1856 income tax.
Failure by some farmers to re-
port all their allowable deprecia-
ton causes many to pay more tax
than required. The law requires
that all depreciation be deducted
when calculating self-employment
income for Social Security cover
age. Depreciation is an operating
expense and is subtracted directly
from income. For example: a
tractor costing $4,000 with life
of 10 years would be deprecated
at $500 each year for 10 years
When this depreciation is not
claimed, the taxable income be-
comes higher thus higher taxes.
1t also means the farmers self
employment income will be incor-
rect.
Depreciation may be claimed on
all machinery, equipment, build
ings Except dwelfng) fences,
trucks and similar property used
in farming. Farmers reporting on
the cash basis may also take de-
probation on dairy, breeding and
work animals which are pur-
chased during the year. These
same farmers cannot claim depre-
citation on any animals raised.
Farmers reporting on the accru-
al basis may treat these animals
as either business assets and
claim depreciation or as inven.
tory. Methods of figuring depre-
citation are discussed on page 20
of the Farmers Tax Guide.
Certain expenses for soil and
water conservation may be re-
ported as operating expenses rath-
er than capital expenses as in the
past. These expenditures include
leveling, grading, terracing and
contour furrowing; construction
of diversion channels, drainage
bitches, earthen dams, water
course, outlets and ponds; remov-
al of brush and planting wind
breaks. These deductions may not
exceed Is per cent of the farmers
gross income derived from farm
ing during that year. This subject
is covered in more detail on page
81 of the tax guide.
1t is important that farmers
use Schedule d for reporting in
come from the sale of business
and capital assets. Many farmers
report this income as ordinary in
come on Schedule f, thereby
cheating themselves. For exam.
pie: farmer receives $50 from
the sale of a dairy COW he has
raised. BY reporting this as oldi.
nary income the entire sum is
taxable. If the sale is reported on
Schdule ID as the sale of a bust
ness asset, only one-half, or SIS,
would be taxable. The COW quail
fled as such because the farmer
kept her for dairy purposes and
had owned her for u months or
more.
Income from the sale of ami
mails held for dairy, breeding or
work purposes should never be
reported on Schedule F. When
this is done, the farmers taxable
income is inflated and gives an
incorrect self-employment income
for Social Security purposes.
Next week. How to fill out
Schedule F.)