day. His expenses when at home are $400 a month (the same as in example A). His individual average expense for meals and lodging when at home is $80 a month. His expenses for meals and lodging while on the road are $400 a month. He has traveled for nine months. ILLUSTRATION. Cost of meals and lodging away from home (9 months). $3,600 $2,160 Average expense for meals and lodging when at home (9 months) _ 720 Amount deductible___. 2, 880 $720 Salary of $12,000 should be included in gross income and $720 deducted from gross income. If he received a per diem of $15 per day his allowance ($4,050) would exceed actual expenditures for meals and lodging when away from home ($3,600). Considering, also, his average expense for meals and lodging when at home ($720) the computation under the second provision of subdivision (c) of the Treasury decision would be as follows: ILLUSTRATION. Per diem allowance (9 months). Cost of meals and lodging away from home (9 months). $4,050 $3, 600 2,880 Taxable income_. $1, 170 Both the salary of $12,000 and the $1,170 must be included in gross income. For convenience, computations are based on a month of 30 days, and only deductions for meals and lodging are considered. SECTION 215, ARTICLE 292: Traveling expenses. 8-21-1466 O. D. 819 Tresaury Decision 3101 (C. B. 3, p. 191), amending article 292, Regulations 45, relating to traveling expenses, is applicable to returns. for the taxable year 1920 and subsequent years. SECTION 215, ARTICLE 292: Traveling expenses. 14-21-1549 O. D. 864 The expenses incurred by a Congressman in making trips of a personal nature are personal expenses which are not deductible. Any excess of mileage allowance over the actual expenses for railroad fares in making trips for which such an allowance is made should be returned as income. Expenditures for meals and lodging incurred by a Member of Congress in coming to and returning from the sessions of Congress, in excess of any expenditures ordinarily required for such purposes when at home, are deductible. If a Congressman brings his wife or other members of his family with him their traveling expenses are personal expenses which are not deductible. If a Congressman makes a trip to or from Washington on official business by rail or otherwise, for example, by automobile, the actual expenses in excess of the expenditures ordinarily required for meals and lodging while at home are deductible provided he made the trip alone. If accompanied by one or more persons, his share of the cost of transportation, and the excess cost of his meals and lodging over their cost if he were home, are deductible. Inasmuch as Congress is in session the greater part of each year, it is held that a Member of Congress living in Washington during the sessions of Congress, is not during that time on a business trip within the meaning of article 292, Regulations 45, as amended by Treasury Decision 3101, and that his living expenses in excess of the ordinary living expenses if at home are not deductible as a business expense. Campaign expenses defrayed by a Congressman are not ordinary and necessary expenses incurred in carrying on a trade or business, within the meaning of the statute. Such expenses are held to be personal expenses which are not deductible. SECTION 215, ARTICLE 292: Traveling expenses. 14-21-1550 O. D. 865 Amounts expended during the taxable year by a secretary to a Member of Congress and by his assistants for railroad fares, in making trips from their homes to Washington and return in connection with their duties, may be claimed as a deduction in computing their net income. Such expenditures incident to trips made for purely personal reasons are not deductible. SECTION 215, ARTICLE 292: Traveling expenses. 17-21-1596 O. D. 893 Officers and employees of the Government when computing their net income subject to tax should follow the instructions set forth in Treasury Decision 3101 (C. B. 3, p. 191), in so far as they relate to the reporting of income and expenses in connection with trips on Government business. The instructions contained in Treasury Decision 2079 (not published in bulletin service), which are in conflict with those contained in Treasury Decision 3101, are to be disregarded SECTION 215, ARTICLE 292: Traveling expenses. 19-21-1621 O. D. 905 Living expenses paid by a single taxpayer who has no home and is continuously employed on the road may not be deducted in computing net income. SECTION 215, ARTICLE 292: Traveling expenses. 21-21-1650 O. D. 924 A commercial traveler should include under item 4 of the statement which must accompany his return in accordance with article 292 of Regulations 45 (1920 edition) not only the cost of meals for his family but the entire cost of maintaining his household. This will include, besides groceries, water rent, gas, light, and any other necessary expense incurred in maintaining the household. Rent of an apartment or a house should be included if the taxpayer actually pays rent. If he owns the dwelling in which he resides he will not be required to include the fair rental value of the house. SECTION 215, ARTICLE 293: Capital expendi tures. (See 7-21-1446; sec. 214(a) 1, art. 101.) Reference books of magazine correspondents. SECTION 215, ARTICLE 293: Capital expenditures. (See 8-21-1463; sec. 214(a) 1, art. 101.) penses of administration of decedent's estate. SECTION 215, ARTICLE 293: Capital expendi tures. (Also Section 214(a) 4, 5, 6, Article 141; Section 219, Article 343.) What constitutes ex 20-21-1640 O. D. 918 An estate in process of administration owned, among other assets, a certain amount of stock in a savings bank. For the purpose of covering a loss the bank levied an assessment of 100 per cent on the par value of its outstanding capital stock. The question presented is whether the assessment upon the estate may be treated by the executor as a loss, deductible from the gross income of the estate in determining net income subject to tax. Held, that the assessment paid by the estate as stockholder, by reason of its statutory liability, is not deductible from the income of the estate, for income tax purposes. The amount so paid should be added to the fair market value of the shares as at the date of the testator's death and the resultant sum used as a basis in determining gain or loss realized upon final disposition of the shares of bank stock by the executor. SECTION 215, ARTICLE 293: Capital expendi tures. (Also Section 214(a)4, 5, 6, Article 141.) 21-21-1651 O. D. 925 A taxpayer employed a contractor to build his house. The contractor absconded leaving certain bills for material used in the construction of the house unpaid, and the taxpayer was required to pay such bills. Held, that the additional amount paid represents additional cost of the building and is not deductible as a loss. SECTION 215, ARTICLE 293: Capital expenditures. (See 25-21-1691; sec. 213 (a), art. 31.) Legally declared dividends voluntarily returned by stockholders to corporation. SECTION 216.-CREDITS ALLOWED. SECTION 216, ARTICLE 302: Personal exemption of head of family. 3-21-1397 O. D. 775 A taxpayer who lived with his mother and was singie, claimed the personal exemption of $2,000 as head of a family, for the calendar year 1919. His mother had an income of her own which was stated as being less than $1,000. The taxpayer aided his mother financially, but the extent thereof was not disclosed. Held, that where an individual has income of his own sufficient in itself to constitute his chief support, the benefactor who supplies merely the additional means necessary to complete the support does not actually support and maintain a dependent within the meaning of article 302. In order to meet the test of actual support and maintenance within the purview of article 302, the benefactor must furnish more than one-half of the support and maintenance, and this position as benefactor must exist on the last day of the taxable year of the benefactor in order for the benefactor to occupy the status of head of a family for the respective taxable year. SECTION 216, ARTICLE 304: Credit for depend ents. 3-21-1398 O. D. 776 If a husband and wife both contribute to the support of a dependent, the credit of $200 must be taken by the one contributing the chief support and may not be divided between them. SECTION 216, ARTICLE 304: Credit for depend ents. (Also Section 223, Article 403.) 6-21-1436 O. D. 797 A is a married man with a son aged 17, and another 20 years of age. The earnings of each son for 1919 exceeded $1,000. Both sons are wholly dependent upon A for the reason that A appropriates their entire earnings, merely giving them spending money and car fare to take them to and from their work. It is assumed that both sons are under the statutory age of majority where they live. Held, that inasmuch as both sons are minors, and have not been emancipated, and their earnings for 1919 were appropriated by A, the entire amount of such earnings, together with A's income from all other sources, must be reported in A's return for that year. For the purpose of computing the normal tax, A is entitled to a credit of $200 for his 17 year old son, but in view of the specific language of section 216(d) of the statute, he is not entitled to a credit of $200 for his son aged 20 years, for the reason that the latter is not under 18 years of age and it does not appear that he is incapable of self-support because physically or mentally defective. SECTION 216, ARTICLE 304: Credit for depend ents. (Also Section 214 (a) 1, Article 101.) REVENUE ACT OF 1917. 26-21-1707 A. R. R. 551 Recommended that the action of the Income Tax Unit in disallowing an additional exemption of a dollars claimed by A for the year 1917 on account of a nephew and nieces, all under eighteen years of age, who resided in his own home and were dependent upon him for support and maintenance, be reversed and the exemption as claimed be allowed in full; that the deduction claimed by A to cover the expenses incurred in the operation of his automobile for business purposes and depreciation in its value for 1917 based on the time it was used in his business be allowed as an ordinary and necessary business expense for 1917, subject to verification by the Unit. x The Committee has had under consideration the appeal of A from the action of the Income Tax Unit in disallowing taxpayer's claim for exemption of a dollars for the year 1917 on account of a nephew and nieces who were dependent upon him for support during that year, and disallowing deductions amounting to 1x dollars claimed for that year on account of expenses of and depreciation on an automobile personally used by him in furtherance of the interests of the M partnership of which A was a member. The records in the case show that A took into his own home and assumed the control, maintenance, and support of a nephew and nieces, each of whom was under eighteen years of age and incapable of self-support on account of their youth. A bases his claim for an additional exemption of a dollars on articles 302 and 304 of Regula tions 45. Regulations 45 were issued under the provisions of the Revenue Act of 1918 and therefore articles 302 and 304 are not applicable in determining tax liability in the instant case, which covers tax liability for the year 1917 to be determined under the provisions of the Revenue Act of September 8, 1916, as amended by the Revenue Act of October 3, 1917. Section 7 of the Revenue Act of 1916 as amended provides: That if the person making the return is the head of a family there shall be an additional exemption of $200 for each child dependent upon such person if under eighteen years of age, or if incapable of self-support because mentally or physically defective, but this provision shall operate only in the case of one parent in the same family. Article 14 of Regulations 33, revised, provides: When the person making the return is the head of family and there are chilren of the family under 18 years of age, dependent upon such person, or if 18 years of age or over but incapable of self-support because mentally or physically defective and dependent by reason of that fact, there is an additional exemption for each child (to be claimed by person making return and supporting child). Regulations 33, revised, paragraph 155, states: The exemption of $200 for each dependent child provided by section 7, Act of September 8, 1916, as amended, is given in respect of the income tax and is, therefore applicable under both the Act of September 8, 1916, as amended, and the Act of October 3, 1917, under the same conditions of fact. The Committee understands the Income Tax Unit has consistently held that the qualifying clause of section 7, which provides that "this provision shall operate only in the case of one parent in the same. |
