Evening star. [volume] (Washington, D.C.) 1854-1972, 1962-10-25
YOUR MONEYS WORTH
New Tax Luws-IV
Investment Credit
By SYLVIA PORTER

sions and trades who buy de-
preciable equipment for t he
production of income also are
entitled to the credit.
Happy Windfall
For the majority of business
and professional men it will be
just a happy windfall sine e
they would have made their
purchases whether or not the
credit was available.
The Treasury estimates the
tax savings created for those
who buy machinery and equip
ment will come to 81 billion
a year - and it's available for
| all qualified purchases starting
with 1862.
The new investment credit is,
in effect, a tax rebate on the
purchase of depreciable tang
ible personal property such as
autos, equipment, furniture,
etc., used in a business or for
the production of income cit
doesn't apply to livestock or
buildings.)
But instead of sending the
rebate in cash, the Treasury
let's you take a credit as a di-
rect tax reduction. Thus, if
your 1862 tax is 81, 500 and your
credit is 5000. you will send
the Internal Revenue Service
81, 300.
Since the credit is in the
nature of a rebate, it reduces
the cost of your assets in fig
uring depreciation. For exam
pie, if you buy equipment for
$4,000 and are allowed $500
credit, you can deduct $4,000.
not $4,000, as depreciable over
the life of the asset.
The credit isn't above d
equally on all depreciable tan
gible personal property. The
odd result of this is that al
though the credit is designed
to spur replacement of assets,
you get the biggest credit the
longer you intend to hold the
assets.
If you plan to hold the as
sets for eight years or more,
your credit is 7 per cent of the
cost; for six to under eight
years, the credit is 4 and two
thirds per cent and for four to
under six years, 2 and one
third per cent. Thus, if you
bought a $4,000 business auto
this year which you will keep
for three years, you get no
credit. But if you expect to use
it four years, you get a credit
of 2 and one-third per cent of
$4,000 against your 1862 tax
bill.
Example Offered
The credit is allowed in full
in the year that you buy the
asset, based on your estimate
at that time on how long you
expect to use it in the bust
ness. Say you buy $4,000 of
business equipment on Deem
Der 80, 1862, and place it in
service on that date, estimat-
ing that the equipment will be
used for more than eight years.
You can get an immediate cred
it of $1,400 to be used against
your 1862 tax due in March or
April 1868 - even though you
hold the equipment only on e
day in 1862.
But if you miss on your eS-
innate - get rid of it before
eight years - you will have to
return part or all of the credit
| you took. In brief, you would
have to refigure the credit
based on how long you actual
| ly kept the asset and pay back
the difference to the Treasury.
Say in the above example,
you sold the equipment in the
sixth year of use. You would
be entitled to a credit of only
4 and two-thirds per cent of
$4,000 or 1894, Since you had
claimed 81, 400, you would have
to add $466 to the taxes you
pay in the year you sold the
equipment.
Sunday: Specific hints on
how to use the tax credit.
Distributed, 1862, by the Hall Syndicate,
Inc. All Rights Reserved