Masonry Magazine May 1970 Page. 40
Taxes
(Continued from page 16)
Federal income tax return on the ground that it was an ordinary and necessary business expense. The Commissioner denied the deduction on the ground that the assessment was not a deductible business expense but was rather a nondeductible capital expenditure that increased the value of the property assessed.
The jury sitting on this case had to answer two questions. One were the assessments paid for local benefits of a kind tending to increase the value of the taxpayer's property? Secondly, were these assessments ordinary and necessary expenses paid either in carrying on a trade or business or for the management of property held for the production of income?
What the jury handed down is a real puzzler. Their verdict was that, 1) the assessment was paid for benefits that would tend to increase the value of the taxpayer's property. But, then the jury found that these expenses or assessments were ordinary and necessary business expenses. Perhaps the case will be reversed on appeal, but, if not, this taxpayer has really introduced a new idea into deductible business expenses. Brecklein v. Bookwalter (D.C. Mo. 1970).
EMPLOYMENT AGENCY FEES
Once again a distinction has been drawn between a fee paid to an employment agency that leads to a position and one that does not. While there have been rumblings that there should be no such distinction in the deductibility of this expense, the 9th Circuit Court of Appeals does not think so. It was the court's ruling that expenses incurred in seeking and preparing for new work are not deductible. On the other hand, expenses incurred in securing and performing such work are deductible. Morris v. Commissioner (9th Cir. 1970).
TAX FREE INCOME
Did you realize that since the passage of the new Tax Act, as much as $1,825 of dividend income to a child of a taxpayer could escape taxation? For instance, a short-term trust of securities could be set up in 1970 to pay dividends of not more than $1,825 to a dependent child, and the entire amount could escape taxation. That figure is arrived at by adding together the personal exemption that has been increased to $625, then the new low-income allowance ($1,100 for 1970), and finally the $100 dividend exclusion. All adding up to permit such a beneficiary to receive $1,825 of income without incurring any tax liability. See 701 CCH1204,
COMMUTING DEDUCTION
Evidently the Tax Court agrees with the Commissioner of Internal Revenue Service that the nondeductibility of a commuting expense is so well established that a negligence penalty may be assessed against a taxpayer who claims it without justification. In the case before the court, the taxpayer lived in West Lafayette, Ind., and obtained work in Indianapolis, about 21 miles away. After three months of making a daily round trip, the taxpayer moved to Indianapolis. On his Federal income tax return, the taxpayer deducted some $700 for his daily travel and meals for a three month period.
Not only did the Commissioner disallow the deduction, he also assessed the taxpayer a 5% negligence penalty. When the matter was presented to the Tax Court for determination, the Commissioner's position, both as to the tax deficiency due by the taxpayer and the negligence penalty assessed against him, was upheld. "To support travel expense deductions, a taxpayer must show that the exegencies of business rather than personal preferences as to a place of residence required the travel." Barton v. Commissioner, (7th Cir. 1970).
UNSIGNED RETURNS
"Did you sign your return?" We so often hear or read that warning, but did you realize what the results are of not signing? The filing of an unsigned form is the same as not filing a return, says the IRS. Thus, if a taxpayer fails to sign his return he is liable for additions to his tax. And, the fact that a taxpayer inadvertently failed to sign is no excuse. Even though an unsigned return is accompanied by a signed check and the check is accepted by the Commissioner, this still does not stop the assessment of an addition to the tax for late filing.
WITHHOLDING TABLES
The IRS now has available the withholding tables that will be effective July 1, 1970. These tables reflect the changes made by the Tax Reform Act of 1969-the elimination of the surcharge, the increase in the personal exemption to $650, and the $1,100 low income allowance (with phase out).
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AA Wire Products Co.
Anchor Manufacturing Co.
AVCO Felker Corporation
Bluff City Manufacturing Co.
Champ Corporation
Clipper Manufacturing Co., Inc.
Norton Construction Products Dir.
Dur-O-Wal National, Inc.
Essick Manufacturing Company, Div. of A-T-O Inc.
Robert G. Evans Co. (Target)
Felker Mfg. Co. (See AVCO Felker Corp.)
Lull Engineering Co.
Massey Ferguson, Inc.
Melroe Div., Clark Equipment Co.
Morgen Manufacturing Co.
National Concrete Masonry Association
Ohio Lime Co.
Oury Engineering Co., Div. of Hanco Corp.
Pfizer Minerals, Pigments & Metals Div.
Pittsburgh Corning Corp.
Prime-Mover, Div. of Hon Industries
Thomsen Div., Royal Industries
Trinity White, General Portland Cement Co.
Western Products, A Div. of Douglas Dynamics Corp.
masonry May, 1970