good the exhaustion thereof for which a deduction is claimed for repairs.

Lease

Where payment is made in advance for a lease running for a term of years, the amount paid divided by the number of years the lease is to run will give the amount to be deducted each year.

Investments of Capital

Expenditures such as payments for(a) plans for a new building;

(b) copyrights and plates which remain in possession of person making payment;

(c) defending title to real estate;

(d) assessments made, under a mutual agreement of bondholders or stockholders of a corporation, to be used in the reorganization of a corporation; and

(e) assessments on its capital stock by a corporation:

are held to be investments of capital and not allowable deductions for expenses.

Expenses of Administration of Estates

Expenses of administration of an estate, such as court costs, attorneys' fees and executors' commissions, are chargeable against the corpus

of the estate and are not allowable deductions in the return of a fiduciary.

It will be proper, however, for the fiduciary to enter all legitimate expenses incurred in managing the estate or trust. If the fiduciary holds and rents real estate and pays insurance, water rents, commissions for the collection of rents, or any other necessary expense in managing the estate or trust, it will be proper to enter same as an allowable deduction.

Salaries Paid to Employees in
United States Service

In case an employer continues to pay an employee his salary, or part thereof, during his service in the United States Army or Navy, it is held that the same will be considered a necessary expense of the operation of the business of the employer and as such will be an allowable deduction.

Interest on Personal Indebtedness

All interest paid within the year on the personal indebtedness of the taxpayer, may be deducted except interest incurred in the purchase of securities the income from which is exempt from taxation.

Under this provision it is held that interest paid on indebtedness incurred in the purchase of

Liberty 4% Bonds, may be deducted in determining net income subject to surtaxes and excess profits taxes but not the normal income tax.

Taxes

Taxes paid within the year, imposed by authority of the United States (except income and excess profits taxes), or of its Territories or possessions, or any foreign country, or under the authority of any State, county, school district or municipality, or other taxing subdivision of any State, not including those assessed against local benefits, may be deducted.

Customs Duties

Customs duties paid during the year by an individual are allowable deductions as taxes or as part of the cost price of goods and merchandise if the individual is engaged in the importation of goods and merchandise.

In the case of business, excise, license, or privilege taxes, they may be deducted either as taxes or items of expense, but not under both heads.

Excess Profits Tax

Although excess profits taxes may not be deducted as a general deduction, the law provides that credit may be allowed for excess profits taxes

assessed for the taxable year. By this provision, income for 1917 is credited with the excess profits tax assessed for that year, for the purpose of determining net income subject to income tax.

Taxes Assessed Against Stockholders

Taxes assessed against the stockholders of a bank and paid by the bank in behalf of the stockholders, constitute an allowable deduction for the individual stockholder. A corresponding increase should, however, be made in the amount of dividends reported.

Local Benefits

Taxes paid on account of assessments levied by special districts, such as irrigation, reclamation, drainage, districts, etc., for sidewalks in cities, street extension, grading, paving, etc., are held to be "taxes assessed against local benefits." Such taxes are not allowable deductions in a return of annual net income.

Losses Incurred in Trade or from Casualty

Losses actually sustained during the year incurred in the taxpayer's business or trade, or arising from fires, storms, shipwrecks, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise, are proper deductions.

Losses from casualty are deductible although not connected with the taxpayer's trade or business. If claim is pending for insurance, the loss shall not be taken as a deduction until the claim is settled.

Basis of Determining Loss

The loss sustained from the sale or other disposition of property, real, personal, or mixed, if acquired before March 1, 1913, is the difference between the fair market price or value of such property as of March 1, 1913, and the price for which sold; or if acquired on or after March 1, 1913, the difference between the cost and selling price.

Persons Engaged in More Than One Business

A person may have more than one business and may deduct losses incurred in all of them, provided that in each business it can be clearly shown that he is actually a dealer, or trader, or manufacturer, or whatever the occupation may be.

Losses Must Be Actual

Loss to be deductible must be an absolute loss, not a speculative or fluctuating valuation of continuing investment, but must be an actual loss, actually sustained and ascertained during the tax year for which the deduction is sought to be made.