26 



HARDWOOD RECORD 



Octohcr 2.-,. 1920 



Manufacturers 



SOUTHERN HARDWOODS 



Ash 



Poplar 



Red Gum 



Mixed Oak 

 Elm 



Sap Gum 



Soft Maple 



Tupelo 



CUMMER LUMBER COMPANY 



SALES OFFICE: 



280 MADISON AVENUE 



NEW YORK, N. Y. 



MAIN OFFICE 



JACKSONVILLE, FLORIDA 



New Rules for Computing Income Tax 



The Bureau of Internal Eeveuue has promulgated at Washington 

 new rules governing the reporting of income and profits in the lum- 

 ber industry. They cover the subjects of timber depletion, expenses, 

 capital charges, and other principles that figure in computation of 

 costs and profits. The full text of the rules is as follows: 



Articles 228, 229, 230. 231, 233. 234 and 235 of Regulations 45 are 

 hereby amended, and Articles 236 and 237 are promulgated, as follows ; 



Art. 228. Capital recoverable through depletion allowances in the case 

 of timber. — In general, the capital remaining in any year recoverable 

 through depletion allowances may be determined as indicated in Articles 

 202 and 203. In the case of leases the apportionment of deductions 

 between the lessor and lessee will be made as specifled in Article 204. 

 The cost of timber properties shall be determined in accordance with the 

 principles indicated in Article 205. For method of determining fair mar- 

 ket value and quantity of timber, see Articles 234, 235 and 236. For 

 depletion purposes the cost of the timber shall not include any part of the 

 cost of the land. 



Art. 229. Computation ot allowances for depletion of timber for given 

 year. — The allowance for depletion of timber in any taxable year shall be 

 based upon the number of units of timber felled during the year and the 

 unit value of the timber in the timber account or accounts, pertaining to 

 the timber cut. The unit value for a given timber account in a given 

 year shall be the quotient obtained by dividing (a) the total number ot 

 units of timber on hand in the given account at the beginning of the year 

 plus the number of units acquired during the year plus (or minus) the 

 number of units required to be added (or deducted) by way of correcting 

 the estimate of the number of units remaining available in the account 

 into (b) the total fair market value as of March 1, 1913, (and/or cost) 

 ot the timber on hand at the beginning of the year, plus the cost of the 

 number of units acquired during the year, plus proper additions to capital 



(See Art. 231). The amount of the deduction for depletion in any tax- 

 able year with respect to a given timber account shall be the product of 



(a) the number of units of timber cut from the given account during the 

 year multiplied by (b) the unit value of the timber for the giveu account 



fur the year. Those taxpayers, who keep their accounts on a monthly 

 basis, may, at their option, keep their depletion accounts on a monthly 

 basis, in which case the amount deductable on account of depletion for a 

 given month will be determined in the manner outlined above for a given 

 year. The total amount of the deduction for depletion in any taxable year 

 shall be the sum ot the amounts deductible for the several timber accounts. 

 For description of timber accounts, see Articles 235 and 236. 



The depletion ot timber takes place at the tune the timber is felled. 

 Since, however, it is not ordinarily practicable to determine the quantity 

 of timber immediately after felling, depletion for purpose of accounting, 

 will be treated as taking place at the time, when in the process ot exploita- 

 tion, the quantity of timber is first definitely determined. 



Art. 230. Revaluation ot timber not allowed. — In the case of timber 

 acquired prior to March 1, 1913, the fair market value as of that date 

 shall, when determined and approved by the commissioner, be the basis 

 for determining the depletion deduction for each year during the con- 

 tinuance of the ownership under which the fair market value of the tim- 

 ber was fixed, and during such ownership there shall be no redetermina- 

 tion of the fair market value of the timber for such purpose. However, 

 the unit market (or cost) value of the timber will subsequently be changed 

 if from any cause such unit market (or cost) value, if continued as a basis 

 of depletion, shall upon evidence satisfactory to the commissioner be 

 found inadequate or excessive for the extinguishment of the cost, or fair 

 market value as of March 1, 1913, of the timber. 



Alt. 231. Charges to capital and to expenses in the case of timber. — 

 In the case of a timber property held for future operation by an owner 

 having no subsequent income from the property or from other sources, all 

 expenditures for administration, protection and other carrying charges 

 prior to production on a normal basis shall be charged to capital account ; 

 after such a property is on a normal production basis such expenditures 

 shall be treated as current operating expenses. In case a taxpayer, who 

 has a substantial income from other sources owns a timber property 

 which is not yet on a normal production basis, he may. at his option, 

 charge such expenditures with respect to such timber property to capital, 

 (Oontirvued on page 28) 



