Gold Hill Daily News

Having been requested to prepare an abstract of what is required by law in reference to the Income Tax, and of the decisions by the Department at Washington upon various questions that have arisen, we present the whole subject, under its several distinct heads:

STATEMENT SHOULD BE MADE—WHERE, WHEN, AND BY WHOM.

1. The law requires every person of lawful age, residing in the United States, to render to the Assistant Assessor of the sub-district in which he or she may be residing on the 1st day of May, a written statement, according to a prescribed form, of the amount of his or her income, gains and profits during the previous year, from January 1st to December 31st, both days inclusive. A printed blank containing this form can be obtained from the Assistant Assessor. A person having no fixed residence, should make a statement wherever he or she may happen to be; and, in case of removal to another district, should take a certified copy of such statement to show any other Assistant Assessor, who otherwise might make a second assessment.

2. The statement must be rendered on or before the 1st day of May, or within ten days after a written or printed notice requiring it, has been left at the place of residence or of business, or deposited in the nearest Post Office.

3. The annual income tax is a personal tax, and it cannot be assessed against any corporation, company, or partnership, as such. Every individual member must make a statement of his or her share of or interest in the gains and profits of such company, etc., whether such gains and profits are divided or not, and must also state separately his or her income from all other sources.

EVILS OF NEGLECT TO MAKE OUT OR VERIFY STATEMENTS

5. If any person neglects or refuses to render a written statement, the Assistant Assessor is requested to fill out a blank with such person's name, and taxable income estimated according to the best information that can be obtained, and upon this estimated income to assess the tax, and then to add 25 per cent. to such tax as a penalty for neglect or refusal.

6. An Assistant Assessor may be misled in making this estimate, by being misinformed as to money received, or not informed as to money paid. He must assess, however, according to the best information within his reach. The only person capable of giving absolutely correct information is frequently the one who refuses or neglects to make a statement. If such person will not take the trouble to inform the Assistant Assessor, there is no bar to all complaint, should the assessment prove incorrect, and a heavier tax be levied than would otherwise be charged. Moreover, after an assessment has once been made, if erroneous, it is always troublesome to the party interested to have it corrected. All persons, therefore, but especially such as have no taxable income, should not fail to render the required statement, upon the proper blank, so as to avoid undue tax.

7. Every statement must be verified by oath or affirmation. When this is not done, the Assistant Assessor is required to estimate the income and to add 25 per cent. to the tax.

Evils of making a false statement

9. An Assistant Assessor has power to increase the amount in any statement, after giving due information to the party interested. He is required, also, to add 100 per cent. to the tax when a false statement has been rendered; and the party making the false statement becomes liable, not only for this additional tax, but likewise to two distinct prosecutions before the United States Courts—one for making a false statement with intent to defraud the Government, and the other for perjury.

MANNER OF MAKING UP STATEMENT OF INCOME

By the 11th section of the law, the Commissioner of Internal Revenue is empowered to prescribe the form and manner in which the statement of income must be made up. This he has done in a printed blank used by the Assistant Assessor, and in various circulars and rulings. The following is a summary of what has been prescribed:

1. Each of the great classes into which the pursuits of life and the investments of capital have been divided must be returned separately—losses in one not being allowed to offset gains in another. Thus a merchant who engages in farming or in speculations not belonging to his legitimate business cannot offset gains in the one by losses in the other.

2. The expenses incident to each business are deductible from the receipts of that business.

3. Speculations ordinarily belonging to any business, and those alone, may be carried into its profit and loss account. Thus a broker may speculate in stocks, a dry goods merchant in cotton, a hardware man in iron, etc. And such speculation may affect the gain and loss of such legitimate business.

A merchant also may gain or lose by exchange or the kind of money paid for his merchandise, and this gain or loss belongs to his merchandise account. But if he buys sold, uncurrent money, United States Treasury notes, or any other thing not one of the articles of trade, belonging to his regular business, for the purpose of speculation, the profit or loss from such speculation will not be allowed to affect the profit or loss from his regular business.

A Boston firm placed $10,000 in the hands of a New York broker, instructing him to use it to the purchase and sale of gold, on their account; and having lost $1,750 in this venture, they claimed that $1,750 should be deducted from their profits in buying business. Commissioner Lewis disallowed the claim, and said the uniform ruling had been that loss is made in any particular business, against which there are no gains to offset, it is considered a dead loss of capital invested in that business.

A raid, loss of capital cannot be deducted from income.

The return of income must be made on the basis.

4. How different kinds of business must be returned separately is shown by the following: rulings of Commissioner Rollins:

(a)—"Loss incurred in the prosecution of one kind of business cannot be deducted from gain in business of an entirely different character, nor from salary, rents, dividends, etc.

(b)"Losses incurred in the prosecution of one branch of business cannot be deducted from gain in another, since an absolute loss incurred in the prosecution of a single business is indispensably a loss of capital."

(c)—"Losses in merchandise can be deducted only from gains in merchandise; but, in this case, particular branches of merchandise need not be separated. So in speculation, the loss or gain from stocks may offset loss or gain from produce speculated in."

(d)—"Merchants must make return of their profits from merchandise without regard to their losses in speculation, or gains from interest, dividends, rents, or any other source.

(e)" Losses in speculation cannot be deducted from salaries, nor from gains in merchandise. When losses are sustained in one speculation and gains made in another speculation, such losses may be deducted from such gains. Losses in one branch of merchandise may be deducted from gains in any other branch of merchandise."

6—"Where stocks, etc., are bought as a permanent investment, and sold again merely to change the investment, a loss sustained in the sale may be deducted from the dividends from each stock. But where the purchase is made for the purpose of selling again on speculation, the loss sustained by the sale cannot be deducted from dividends, but may be deducted from gains derived from the purchase and sale of stock, etc., in the same year.

INCOME FROM RENTS OF BUILDINGS.

From the total amount of such rents received within the year for which income is estimated, or due and collectable on the 31st day of December of said year, should be deducted:

1st, The amount paid or due, by the owner, for repairs made within the year, not exceeding the yearly average paid out for such purposes for the preceding five years, and not including any amounts paid or due for new structures, or for new and permanent improvements.

2d. Insurance for the year paid by the owner upon the buildings rented or offered for rent, not including insurance paid upon any other property, real or personal.

3d. Interest which accrued for the year on incumbrances upon the buildings rented or offered for rent, or upon the lands on which they stand, whether such interest has been paid or remains due.

All buildings offered for rent will be regarded together, no segregation being required. Repairs, insurance and interest paid on account of any and all such buildings, whether occupied or not, will be deducted from the total amount of rents. Taxes will not be deducted from rents, but from gross income from all sources.

By the law of June 30, 1864, in estimating income from rents, no account is taken of the rental value of a homestead occupied by the owner. Payments for repairs, insurance and interest, on account of a homestead, will be considered hereafter, when treating of general deductions from gross income.