Masonry Magazine September 1970 Page. 30
Taxes
(Continued from page 29)
SMALL BUSINESSES
The Chairman of the Senate Small Business Committee, Senator Alan Bible of Nevada, has introduced a bill (S. 4039) that is aimed at reforming the taxing of small businesses.
The bill proposals include a five-year federal tax exemption for new industrial-commercial small businesses, a limited reinstatement of the investment tax credit, reforms in depreciation schedules, and some liberalization of tax-option corporations and also of some partnership rules. The bill also provides for a tighter control of interest deductions to discourage mergers and buy-outs of independent businesses.
POLITICAL CONTRIBUTIONS
Perhaps for obvious reasons, some of our legislators keep trying to make political contributions a deductible expense. Now again a bill has been reported out by the Senate Committee on Rules and Administration that would provide tax deductions for an individual who makes contributions to candidates for election to federal office. According to the provisions of this bill, an individual would be allowed either a tax credit of up to one-half of his contributions but not more than a total credit of $25, or, a tax deduction not to exceed $100 for the taxable year.
EDUCATION EXPENSES
For some reason, the education expense deduction allowed since January 1, 1968, is repeatedly misinterpreted. The latest case involved a "projects coordinator engineer." The engineer's duties consisted of meeting with various U.S. officials to discuss the technical engineering specifications and adjustments on government contracts. The engineer entered law school and later sought to deduct as a business expense the cost of his tuition and books while attending law school.
However, the court found that the courses taken by the taxpayer had almost no relation to his engineering job. The court pointed out that "his work had nothing to do with the legal aspects of government contracts." Therefore, the court concluded that the expenses for books and tuition were not deductible as ordinary and necessary business expenses. Morrison v. Commissioner, T.C. Memo, 1970-169.
According to the Regulations, the general rule is that a taxpayer can deduct expenses for education undertaken for the purpose of (1) maintaining or improving skills required in his employment or other trade or business or (2) the express requirements of his employer, or the requirement of applicable law or regulations imposed as a condition to the retention by the taxpayer of an established employment status or rate of compensation. On the other hand, education expenses that are intended to qualify the taxpayer for a new trade or business are not deductible.
Another case of misinterpretation of the law concerned an engineering manager who deducted the expenses of courses taken in the field of philosophy. The taxpayer argued that the education gave him "a new awareness which improved his ability to communicate with his subordinates." The Tax Court said that while this education may have increased the engineer's general level of competence it was not sufficiently helpful in his employment so as to meet the practical requirements of the regulations. It seems that there was no proof that his education improved the skills required by his occupation. Mullen v. Commissioner, T.C. Memo 1970-211.
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STUDENTS
Did you realize that by 1973 a student who earns less than $1750 a year will not have any tax liability. For the taxable year 1969, a student who earned $1750 would have had to pay $124 in taxes. This is the result of the new low income allowance and higher personal exemption provisions contained in the Tax Reform Act.
LIVING WITH PARENTS
The Tax Court recently handed down a decision that in some regards seems to be a harsh rule for anyone who lives at home with their parents and pays no rent.
A taxpayer, who was a resident of Philadelphia, took a position with an oil firm which required that he attend a three month marketing training program in Baltimore. When he completed his training program the taxpayer was transferred to Philadelphia. His duties consisted of traveling to service stations to check on service eleanliness and courtesy of the various service stations.
The taxpayer was not reimbursed for any expenditures he incurred in Baltimore. The IRS disallowed all of the deductions that the taxpayer claimed for expenses incurred while in Baltimore. The IRS was of the opinion that Baitimore was the taxpayer's home while he worked for the oil company and therefore none of the expenditures were incurred while away from home.
The Tax Court agreed with the IRS. The Court explained that the deduction contained in Section 162 was designed to compensate a taxpayer against a duplicate of substantial living expenses at a permanent residence and to make allowance for the increased costs of meals and lodging incurred while traveling. This taxpayer was unable to show that he incurred any duplicate or substantial living expenses since he lived with his parents and paid no rent. Thus, he was not entitled to deduct the expenses he incurred while in Baltimore. Rosenblum v. Commissioner, Т.С. Мето 1970-111.
Washington Wire
(Continued from page 8)
seat on the five-man body. The nomination should please many of the businessmen who have felt that NLRB has favored labor in handling unfair-practice cases. There is still some hope that a more conservative Congress will remove such cases from the NLRB's purview in 1971. But the goal may be less urgent now.
A POLLUTION TAX IS GETTING SERIOUS ATTENTION
from one U.S. agency the President's Council on Environmental Quality. The idea would be to put effluent charges on those pouring polluting wastes into the nation's streams. A government agency would monitor abuses and vigorously police regulations. The consumer would end up paying much of the tax or the cost of any plants to treat the waste because industry would have to pass on the added costs. But it has become increasingly clear that clean environment won't come cheap.
CONGRESS IS INVITING U.S. EXPORTERS TO COMPLAIN
about restrictive practices by other countries that unfairly limit access to foreign markets. In the foreign trade bill now making its way through the legislative mill. the President would get power to retaliate against curbs on a wide range of products-not just farm exports, as now. Indeed, he could act against countries that subsidize exports to third markets, doing harm to American sellers. The aim would be to force abandonment of restrictive practices.
masonry • September, 1970