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Amounts expended by the purchaser of a building in repairing injuries which occurred thereto prior to his purchase are, so far as he is concerned, “betterments made to increase the value ” of the property, and should not be allowed as deductions from his income. Int. Rev. Ruling, Series 4, No. 4.

When land is leased for a term of years under a contract that the lessee shall erect a building thereon, the title to which, subject to the use of the lessee during the term, immediately vests in the lessor, the expense of erecting the building is in the nature of rent, and is returnable as such in the income return of the lessor. Int. Rev. Ruling, Series 4, No. 4.

Expenses for ditching and clearing new land are plainly expenses for permanent improvements and not deductible, Int. Rev. Ruling, Series 4, No. 4.

When a person cultivates the land of another under a contract, either written or oral, to pay for the use of the same in the produce thereof, the produce thus paid is in the nature of rent, and should be returned as income by the party receiving it. The expenses of carrying on premises so leased are to be deducted from the income of the lessee only. Int. Rev. Ruling, Series 4, No. 4.

National, State, county, and municipal taxes not actually paid until 1868, should not be deducted from the income of 1867, even though they may have been due and payable in the year last named. Int. Rev. Ruling, Series 4, No. 4.

The amount paid for “the good-will”. of a business is capital invested, and not a loss to be deducted from income. Int. Rev. Ruling, Series 4, No. 4.

The expenses of conveyance necessarily incurred in traveling from place to place in the prosecution of business may be deducted in making a return of income ; but no deduction should be made on account of hotel bills, or other expenses of living. Int. Rev. Ruling, Series 4, No. 4.

Where physicians are obliged to keep a horse for the transaction of business, they may deduct so much of the expense so incurred as is fairly referable to the business done. Int. Rev. Ruling, Series 4, No. 4.

A sale of underlying coal should be treated as a sale of real estate ; but if A pay to B (who owns underlying coal) so inuch for every ton mined, or buys the same after it is brought to the surface, A should be regarded as purchasing and B as selling personal estate. Int. Rev. Ruling, Series 4, No. 4.

The profit realized on the sale of mined coal by the miner is the difference between the amount received for the coal and the actual expense of producing the same (excluding all deductions for the personal service of the miner or his family), plus the actual or estimated cost of each ton as paid to the lessor or owner. The lessor or owner, receiving pay for his coal only when mined, would be liable on the difference between the amount received for each ton and the estimated amount which he paid for each ton originally. Int. Rev. Ruling, Series 4, No. 4.

A farmer should make return of all his produce sold within the year, but a mere executory contract for a sale is not a sale; delivery, either actual or constructive, is essential. The criterion by which to judge whether a sale is complete or not is to determine whether the vendor still retains in that character a right over the property, — if the property were lost or destroyed, upon which of the parties, in the absence of any

other relation between them than that of vendor and vendee, would the loss fall. Int. Rev. Ruling, Series 4, No. 4.

The farmer's profits from sales of live stock are to be found by deducting, from the gross receipts for animals sold, the purchase-money paid for the same. Int. Rev. Ruling, Series 4, No. 4.

No deduction can be made by the farmer for the value of services rendered by his minor children, whether he actually pays for such services or not. If his adult children work for him and receive compensation for their labor, they are to be regarded as other hired laborers in determining his income. Int. Rev. Ruling, Series 4, No. 4.

Farmers will not be required to make return of produce consumed in their own immediate families. Int. Rev. Ruling, Series 4, No. 4.

Money paid for labor, except such as is used or employed in domestic service, or in the production of articles consumed in the family of the producer, may be deducted. Int. Rev. Ruling, Series 4, No. 4.

No deduction can be allowed in any case for the cost of unproductive labor. If house servants are employed a portion of the time in productive labor, such as the making of butter and cheese for sale, a proportionate amount of the wages paid them may be deducted. Int. Rev. Ruling, Series 4, No. 4.

The whole amount expended for fertilizers applied during the year to the farmer's lands may be deducted, but no deduction is allowed for fertilizers produced on the farm. The cost of seed purchased for sowing or planting may

be deducted. Int. Rev. Ruling, Series 4, No. 4.

Marriage fees, gifts from members of a congregation to their pastor, etc., are taxable as income when the gifts or donations are in the nature of compensation for services rendered, whether in accordance with an understanding to that effect at the time of settlement, or with an annual custom. Int. Rev. Ruling, Series 4, No. 4.

Lawyers and physicians may return either the actual fees received during the year, without regard to the time when they accrued, or the amounts due to the business of the year. But when the taxpayer has heretofore adopted one method, he cannot be allowed to make use of the other. Int. Rev. Ruling, Series 4, No. 4.

Amounts received on life insurance policies and damages recovered in actions of tort are exempt from income tax. Int. Rev. Ruling, Series 4, No. 4.

So far as insurance moneys are paid as an expense of business, they are deductible from income ; but no insurance on homestead of taxpayer, nor on his life or other lives, nor on his rented property (if paid by tenant), can be allowed. Int. Rev. Ruling, Series 4, No. 4.

No so-called loss incurred by gift of property can be allowed as a deduction from income. Int. Rev. Ruling, Series 4, No. 4.

If an inventor sells his invention at once for a gross sum, he should return as income the whole amount, less the expenses actually incurred in perfecting the invention, or in procuring a patent right. But no allowance can be made for the labor or personal expenses of the inventor. If he sell only a portion of his right during the year, he may deduct a proportionate amount of such expense. Int. Rev. Ruling, Series 4, No. 4.

Wherever the salary or pay received by any person in government employ does not exceed the rate of $1,000 per annum, or is made up of fees, or is uncertain or irregular in amount or time, and has not theretofore been subjected to salary tax, it should be included with other taxable income. Where such salary exceeds the rate of $1,000 per annum, the amount of salary from which the tax has been deducted may be deducted from the gross income. Int. Rev. Ruling, Series 4, No. 4.

If a taxpayer has a minor child in the service of the government receiving a salary, such parent should include in his income return so much of the salary of his child as is not subject to salary tax. Int. Rev. Ruling, Series 4, No. 4.

If a person sells timber standing, the profits are to be ascertained by estimating the value of the land after the removal of the timber, and adding thereto the amount received for the timber, and from the sum thus obtained deducting the estimated value of the land on the first day of January, 1862, or on the day of purchase, if purchased since that date. Int. Rev. Ruling, Series 4, No. 4.

Promissory notes, book accounts, etc., due during the year, are the evidences of debts. Whether or not they are gains, profits, or income for that year, within the meaning of the internal revenue law, depends upon their value intrinsically or their convertibility into money, property, or available assets. If they have only a nominal and not a real value or convertible quality, and a man has realized nothing from them, and therefore does not return them as a part of his income, because he fairly and honestly believes they are not real gains or profits, he cannot be convicted of an untrue re

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turn. The United States v. William E. Frost and William E. Hall, Drummond, J., U. S. District Court N. D. III.

A lease for years or for life is personal estate, and any profits on the sale of such lease are taxable as income for the year of sale. Int. Rev. Ruling, Series 4, No. 4.

Expenses for medical attendance, store bills, etc., are not proper subjects for deduction. Expenses for repairs of implements, tools, etc., used in business, may be deducted. Int. Rev. Ruling, Series 4, No. 4.

Act March 2, All persons of lawful age to make return, etc.

Guardians, etc., to make return.

Sec. 118. And be it further enacted, That it shall

be the duty of all persons of lawful age to 1807, Sec. 13. make and render a list or return, on or be

fore the day prescribed by law, in such form

and manner as may be prescribed by the Commissioner of Internal Revenue, to the assistant assessor of the district in which they reside, of the amount of their income, gains, and profits, as afore

said ; and all guardians and trustees, execu

tors and administrators, or any person acting in any other fiduciary capacity, shall make and render a list or return, as aforesaid, to the assistant assessor of the district in which such person acting in a fiduciary capacity resides, of the amount of income, gains, and profits of any minor or person for whom they act; and the assistant assessor shall require every

list or return to be verified by the oath or

affirmation of the party rendering it, and may increase the amount of any list or return, if he has reason to believe that the same is understated; and in In case of neg- case any such person shall neglect or refuse

to make and render such list or return, or

shall render a false or fraudulent list or return, it shall be the duty of the assessor or the assistant assessor too make such list, according to the best in

Return to be verified by oath.

lect to make return, fifty per cent to be added.

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