a 
FOREST TAXATION IN THE UNITED STATES 465 
tion) in determining income from extraordinary cuttings. Therefore 
such cuttings, by bringing so much income into a single tax year, 
might cause hardship through the effect of the progressive rates. 
This hardship was mitigated by allowing the income from extraor- 
dinary cuttings to be treated for calculation of the tax as a separate 
income, but without benefit of the ordinary exemptions for family, 
etc., except to the extent that these exemptions might exceed the 
ordinary i income. This provision lightened the burden of the progres- 
sive tax by reducing the amount of income in the higher brackets. 
Income from salvage operations (so-called ‘‘calamity fellings’’) was 
given a similar favor, and in addition the tax on this part of the total 
Income was calculated at one-half the regular rates. Salvage opera- 
tions are those which occur as a result of damage by accident or 
disease, as, for example, by ice, snow, insects, windfall, or fire. Such 
operations are placed in a special category on the theory that, al- 
though they may increase current income, they involve an ultimate 
loss to the taxpayer. 
The above method of treating income from extraordinary fellings 
was upset by the National Finance Court in a decision dated Decem- 
ber 11, 1929, which established the principles that the amount of 
taxable gain for extraordinary fellings may be determined by the 
inventory method, which is equivalent to granting a depletion allow- 
ance, and that capitalization of expenses above ordinary current 
expenses is admissible. This decision, together with a number of 
others of similar tenor which were handed down a little later, left 
unsettled numerous questions affecting the calculation of income from 
forest properties by the inventory or depletion method. 
To avoid the administrative difficulties involved in carrying out the 
principles laid down by these decisions, the minister of finance, with 
the approval of the Reichsrat, issued a regulation (258) dated Novem- 
ber 16, 1930, under a provision of the general tax law * which gives 
the minister of finance broad authority to eliminate or reduce taxes in 
special cases. This regulation (sec. 2) authorizes the taxpayer to 
request the application of lower than normal rates to income from 
extraordinary cuttings, namely, 10 to 15 percent if, considering the 
forest alone, gross income does not exceed expenses by more than 
30,000 Reichsmarks ($7,150) and 15 to 20 percent if gross income 
exceeds expenses by more than 30,000 Reichsmarks. In the case of 
salvage operations, one-half of the foregoing rates may be applied. 
If the taxpayer chooses to take advantage of this regulation, he is 
debarred from claiming the benefit of the inventory method or allow- 
ance of depletion. Thus, while the income tax law has been construed 
to permit the deduction of depletion allowances from income derived 
from extraordinary cuttings, in practice such deductions are not 
ordinarily claimed, since a more attractive alternative method of 
determining the tax is allowed. 
The same regulation contains a provision (sec. 3) designed to pre- 
vent hardship in the case of farm wood lots and other small properties 
which are cut intermittently and for which no regular books of account 
are kept. Insuch cases, if the forest area does not exceed 150 hectares 
(370 acres), the taxable income from an extraordinary cutting may be 
determined by considering 40 percent of the gross income as deductible 
38 Reichsabgabeordnunung vom 13. Dezember 1919, sec. 108, abs. 2 (246, p. $3). 
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