FACTS ON FIGURING 



FLORISTS' TAXES 



The revenue law passed last November adds to that already intricate 

 aggregation of puzzles, the income tax, by a series of patches on the ipi8 act. 

 Explanation of some points of particular application to florists is presented 

 in this article to aid readers in making out their returns. 



ESS than a month away is 

 T the time for filing the an- 

 I nual income tax return, 



I j except for those florists 

 who report on a fiscal year 

 that differs from the calen- 

 dar year. Such ones are 

 required to file their re- 

 turns on or by the fif- 

 teenth day of the third 

 month following the expiration of their 

 fiscal year; if, for instance, the fiscal 

 year ends June 31, the returns must be 

 filed on or by September 15. Most florists, 

 liowever, report on the calendar year 

 and their returns must be in the hands 

 of the local collector of internal rev- 

 enue by March 15. 



Although the federal income tax is 

 now a matter of eight years' standing, 

 there still arise questions on many 

 points in the returns. This year the 

 number of puzzling problems is greater 

 than usual, because the revenue law 

 passed last November amends the old 

 law in a considerable number of in- 

 stances, and the dates on which the 

 amendments take effect differ in va- 

 rious cases. The law of 1921 is indeed 

 a veritable scries of patches on the 

 law of 1918, and it is necessary in 

 many cases to study both laws, as well 

 as the treasury decisions and regula- 

 tions which govern, in order to arrive 

 ■ it a decision on some intricate points. 



Who Must File Returns. 



In this article only questions are con- 

 sidered which have a particular inter- 

 est for florists. Much general informa- 

 tion on income taxes has appeared in 

 the daily newspapers and routine mat- 

 ters are covered in the page of instruc- 

 tions attached to the income tax blank 

 supplied by the internal revenue office. 

 The scope of the subject is too broad 

 to attempt any exhaustive treatment in 

 this space, but a few suggestions are 

 liere offered that will be of benefit to 

 some florists. Some of these suggestions 

 represent answers already given to flo- 

 rists who have written to The Review 

 for help on this subject. Some have ap- 

 peared previously in these columns and 

 are repeated because of their impor- 

 tance. Any florist who finds himself in 

 doubt on any point, whether discussed 

 here or not, mav feel free to write The 

 Review for help. 



There should be no doubt by this 

 time who is required to file an income 

 tax return, but there frequently come 

 to light instances where florists who 

 receive only small incomes have neg- 

 lected this duty because of some mis- 

 conception on the subject. The instruc- 



tions of the internal revenue office state 

 explicitly "an income tax return must 

 be filed by every citizen of the United 

 States and every person residing in the 

 United States, though not a citizen 

 thereof, whose gross income for the 

 year amounted to $5,000 or more, or 

 whose net income amounted to (a) 

 $1,000, if the person is single or if 

 married and not living with husband or 

 wife, or (b) $2,000, if married and liv- 

 ing with husband or wife." It is im- 

 material whether allowable deductions 

 make the individual free from payment 

 of a tax or not. He must file a return, 

 if only to indicate that he need pay no 

 tax. 



This Is a New One. 



Among the odd provisions that are 

 to be found in the new revenue law, 

 there is one to the effect that in case a 

 ])erson has been in business for a period 

 of less than one year, the net income 

 should be figured on an annual basis. 

 In other words, if a florist started in 

 business July 1, 1921, and by December 

 31 had made $2,000, he would be in the 

 same boat as the man who had made 

 $4,000 in the entire year. Under the 

 old law a taxpayer who was in business 

 part of the year paid a tax upon his 

 net income calculated in the ordinary 

 manner. If a florist started in business 



This article discusses the 

 following points regard- 

 ing florists' income tax 

 returns: 



Who Must File 

 Part- Year Returns 

 Incorporating 

 Net Losses 

 Organization Dues 

 Bad Debts 

 Depreciation 

 Inventory 



Replies will be furnished 

 by The Review to ques- 

 tions from readers on 

 other phases of the tax. 



July 1 and filed a return December 31 

 showing net earnings of $2,000, his tax 

 would be no different from that of an- 

 other florist who had been in business 

 for the entire year and showed a net 

 income of $2,000 for the twelve months. 



Now his case comes under subsection 

 C of section 226 of the new law, which 

 reads, "In the case of a return for less 

 than one year the net income shall be 

 placed on an annual basis by multiply- 

 ing the amount thereof by twelve and 

 dividing by the number of months in- 

 cluded in such period; and the tax 

 shall be such part of a tax computed 

 on such annual basis as the number of 

 months in such period is of twelve 

 months." 



It should be remarked here that in- 

 come tax lawyers have questioned 

 whether the courts will uphold this 

 method of calculation, but until a ju- 

 dicial decision to the contrary is ob- 

 tained, those who file returns covering 

 periods of less than twelve months must 

 follow this method of calculation in com- 

 puting their taxes. 



Forming Stock Company. 



On the other hand, one of the con- 

 tested features of the old revenue law 

 has been eliminated by the act of 1921. 

 Under the old law, if a florist trans- 

 ferred his property to a corporation, 

 even though he received all the stock of 

 the corporation as consideration for the 

 transfer, there might be a taxable in- 

 come if the value of the property when 

 taken over by the corporation exceeded 

 the cost of it to the owner or its value 

 March 1, 1913, if it had been acquired 

 before that date. Although able law- 

 yers protested that they were unable 

 to see why a man is any richer through 

 owning the stock of a corporation which 

 has taken over his property than he was 

 when he owned the property itself, the 

 department adhered to its view of the 

 matter as stated above. Congress 

 amended the law last November, so 

 that now, when a florist transfers his 

 property to a corporation and immedi- 

 ately thereafter becomes the owner of 

 all the stock or at least eighty per cent 

 thereof, or when several owners of prop- 

 erty incorporate their holdings and be- 

 come the owners of at least eighty per 

 cent of the stock of the corporation 

 which takes over these holdings, no tax- 

 able income arises. 



If A started in the florists' business 

 five years ago with a capital invest- 

 ment of $10,000 and had prospered to 

 any extent, his business would be worth 

 considerably more than his original in- 

 vestment in case he wished now to in- 



