INDIVIDUAL INCOME TAX TABLE Rate of 1% 16% 18% This table shows the total Income Tax, under the Revenue Act of 1921, payable for the year 1922 by the head of a family or a married person living with husband or wife and with no other dependents. 0 Percentage NET Rate of Amount of Amount of TOTAL TAX Total Tar to CINCOME Normal Tat Surtat Normal Tat Surtas Columns D and E Net Income B F G 10 $3,000 4% $20 $20 .006 4,000 60 60 .015 t 5,000 100 100 .020 6,000 160 160 .026 8,000 320 340 .042 10,000 1% 520 .052 12,000 29% 720 .060 14,000 3% 940 .067 16,000 4% .073 18,000 6% 320 .080 20,000 6% 440 .086 22,000 87 600 .092 24,000 go 780 .099 26,000 10%. 980 .105 28,000 11% 3,120 .111 30,000 12% 3,520 .117 32,000 139 3,940 .123 34,000 15% 4,400 .129 36,000 15% 4,860 .135 38,000 2,720 5,340 .140 40,000 17% 6,840 .146 42,000 3,040 6,360 .151 44,000 19% 6,900 ES .156 46,000 20% 7,460 .162 48,000 217 8,040 .167 50,000 3,680 8,640 .172 52,000 3,840 9,260 .178 64,000 24% .183 66,000 252 .188 68,000 267 .193 60,000 27 .199 62,000 28 .204 64,000 89 29 .209 66,000 8% 309 4,960 9,200 14,160 .214 68,000 31 .219 70,000 329 .224 72,000 . 227 23% 87 33 .230 74,000 8% 34 5,600 11,800 17,400 70,000 89 35 .240 78,000 369 .245 80,000 37 250 3 82,000 38% 256 84,000 87 6,400 .260 86,000 87 40% .265 88,000 8% 41% .270 3 90,000 427 .276 92,000 43% .281 94,000 44% .286 . 96,000 45% .291 98,000 469 .296 100,000 47% .301 150,000 489 .387 200,000 8% 49% 15,680 70,960 .433 300,000 8% 50% 23,680 120,960 .482 600,000 8% 50% 39,880 220,960 .521 1,000,000 8% 50% 550,640 .350 more than 1,000,000 8% 80% .235 1 39% Q. Arthur Graham, in making up his tax report for the calen. dar year 1922, finds that he had ordinary net income from salary, rent and interest of $8,000; a profit of $108,000 from the sale of an office building which he had bought in 1919; and a loss of $6,000 from the sale of some securities which he had acquired in 1917. His personal exemption is $2,000. What is the amount of tax he must pay? A. Mr. Graham may add the net profit from the sale of his office building and securities to his ordinary net income of $8,000 and compute the tax in the usual way at the regular normal and surtax rates; or he may figure a tax of 127/2 per cent on the net gain from the sale of the capital assets and add to it the tax on his ordinary net income of $8,000 computed in the regular way, whichever is to his advantage. If the second method is used, his total tax cannot be less than 1272 per cent of his total net income. To illustrate: Option I 6,000 $102,000 Ordinary net income. 8,000 Total net income (subject to surtax) $110,000 Personal exemption.. 2,000 Balance (subject to normal tax). $108,000 At 4% 160 At 8%. $104,000 = 8,320 = Surtax on $110,000. 27,260 Total tax by Option I. $35,740 Option II Ordinary net income. $8,000 Exemption.. 2,000 Balance (subject to normal tax) $6,000 At 4%. 4,000 = $ 160 At 8%. $2,000 = 160 Surtax on $8,000... 20 Tax on ordinary net income. $ 340 Tax on capital net gain (1272% of $102,000).. = 12,750 Total tax by Option II. $13.090 4,000 = $ Limitation on Tax 1242 per cent of total net income ($110,000).. $13,750 This amount, $13,750, being less than the $35,740 arrived at by the first option, is Mr. Graham's total tax liability. The $13,090 arrived at by Option II cannot be used since it is lower than the minimum limitation set in Section 206 (b) of the Statute (page 62). EXEMPT INCOME Q. What income is exempt from tax? A. Section 213 (b) of the Act, which may be found on page 67, enumerates certain items of income that are free from tax. These items may be disregarded and eliminated in computing gross taxable income, as no report need be made of them. The exclusion of this income should not be confused with the reduction of taxable income by the application of allowable deductions, for which see pages 22 and 69. Q. The life insurance company in which I am insured pays a dividend annually on my policy, which has not yet matured. Is this dividend taxable income? A. Dividends on life insurance policies that have not matured, whether drawn in cash or applied to the payment of the annual premium, are not taxable income. Dividends on paidup insurance policies, however, are considered income for surtax purposes, just as other corporate dividends are. Q. Is alimony taxable income? A. Neither alimony nor an allowance based on a separation agreement is taxable income to the recipient. The payor, on the other hand, cannot claim either as a deduction. Q. I am a notary public commissioned by the State of New York. Are the fees I receive taxable? A. Fees received by notaries public commissioned by States, or by persons serving on the jury of a State, County or Municipal Court, and commissions of receivers appointed by State Courts are not taxable income. a Q. What is the maximum amount of Liberty Bonds an individual may hold exempt from tax? A. Interest on all Liberty Bonds, including the Treasury Bonds of 1947-52 issued October 16, 1922, Victory Notes, War Savings Certificates and Treasury Certificates of Indebtedness is entirely exempt from normal income tax. * In addition, interest on Liberty 3/4's and Victory 334's (not 434's) is exempt from individual surtaxes for the life of the obligations, and Liberty 4's and 474's of the Second, Third and Fourth loans, Treasury Bonds of 1947-52, Certificates of Indebtedness and War Savings Certificates are exempt from individual surtaxes in the amounts specified for the following periods, regardless of whether they were originally subscribed for or subsequently purchased: Period Holdings For life of obligation. Aggregate holdings of $5,000 par value of Liberty 4's and 474's, including Treasury , Bonds of 1947-52; Certificates of Indebtedness, and War Savings Certificates; plus For two years after date of ter- $30,000 par value of 1st-2nd mination of war, i.e., until converted 4/4's of the issue of July 2, 1923 October 24, 1918; plus an aggregate holding of $125,000 par value of any Liberty 4's and 474's. For three years after the expira- Aggregate holding of $50,000 tion of the two-year period, par value of any Liberty 4's i.e., from July 3, 1923, to and 474's. July 2, 1926. Q. I am a public school teacher employed by the City of New York. Is the salary I receive taxable? A. No. Compensation paid its officers and employees by a State or political subdivision thereof is not taxable. GROSS INCOME Q. What items must I report as gross income? A. All that you received during the taxable year in gains or profits or as compensation for services performed (not including exempt income provided for in Section 213_(b), page 67, and explained by Questions and Answers under "Exempt Income"). This includes salaries, wages, professional fees and commissions, profits from business operations or the sale of property, income * It should be remembered that the interest on Victory 4%'s is fully subject to individua) surtaxes. from stocks and other securities, interest on notes, mortgages and bank accounts, rents, royalties, etc. Q. How do I determine the amount of gain or loss returnable for income tax purposes resulting from a sale of property? A. Where property acquired on or after March 1, 1913, is disposed of, the basis for determining gain or loss is the cost of the property, except that where the property should be included in an inventory, the basis is the last inventory value. Where property acquired before March 1, 1913, is disposed of, and the selling price is a figure between its original cost and its fair market value as of March 1, 1913, there is no gain or loss for tax purposes, even though there be an actual gain or loss. Thus: Taxable Deductible Cost of Acquisition Value 1922 Case Before Mar. 1, 1913 Mar. 1, 1913 Selling Price I $5,000 $2,000 $3,000 II 2,000 5,000 3,000 In both illustrations the selling price is a figure between the cost and the March 1, 1913, value; hence there is no gain or loss. In all other cases where property acquired before March 1, 1913, is disposed of, the taxable gain or deductible loss is the difference between the original cost and the selling price, or between the March 1, 1913, value and the selling price, whichever difference is the smaller. To illustrate: Cost of Acquisition Value 1922 Case Before Mar. 1, 1913 Mar. 1, 1913 Selling Price III $2,000 $3,000 $5,000 IV 5,000 3,000 2,000 V 3,000 2,000 5,000 VI 3,000 5,000 2,000 Taxable Deductible Profit Loss $2,000 $1,000 2,000 1,000 Q. In 1908, I bought an office building at a cost of $100,000 for th building and $25,000 for the land on which it stands. During 1912 I made some improvements to the building at a cost of $10,000 and in. 1920 additional improvements costing $8,000. This property I sold in 1922 for $150,000. How do I compute my profit for tax purposes? A. Since you acquired the property before March 1, 1913, it is necessary, before applying the rule given in the answer to the preceding question, to compare the selling price, $150,000, |
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