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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
с
D

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
$20

340

.042 10,000

1%
480
40

520

.052 12,000

29%
640
80

720

.060 14,000

3%
800
140

940

.067 16,000

4%
960
220
1,180

.073 18,000

6%
1,120

320
1,440

.080 20,000

6%
1,280

440
1,720

.086 22,000

87
1,440

600
2,040

.092 24,000

go
1,600

780
2,380

.099 26,000

10%.
1,760

980
2,740

.105 28,000

11%
1,920
1,200

3,120

.111 30,000

12%
2,080
1,440

3,520

.117 32,000

139
2,240
1,700

3,940

.123 34,000

15%
2,400
2,000

4,400

.129 36,000

15%
2,560
2,300

4,860

.135 38,000

2,720
2,620

5,340

.140 40,000

17%
2,880
2,960

6,840

.146 42,000

3,040
3,320

6,360

.151 44,000

19%
3,200
3,700

6,900 ES

.156 46,000

20%
3,360
4,100

7,460

.162 48,000

217
3,520
4,520

8,040

.167 50,000

3,680
4,960

8,640

.172 52,000

3,840
5,420

9,260

.178 64,000

24%
4,000
6,900
9,900

.183 66,000

252
4,160
6,400
10,560

.188 68,000

267
4,320
6,920
11,240

.193 60,000

27
4,480
7,460
11,940

.199 62,000

28
4,640
8,020
12,660

.204 64,000 89

29
4,800
8,600
13,400

.209 66,000 8% 309 4,960 9,200 14,160

.214 68,000

31
5,120
9,820
14,940

.219 70,000

329
5,280
10,460
15,740

.224 72,000

.

227

23%

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33
5,440
11,120
16,560

.230 74,000 8% 34 5,600 11,800

17,400 70,000 89

35
5,760
12,500
18,260

.240 78,000

369
5,920
13,220
19,140

.245 80,000

37
6,080
13,960
20,040

250 3 82,000

38%
6,240
14,720
20,960

256 84,000 87

6,400
15,500
21,900

.260 86,000 87

40%
6,560
16,300
22,860

.265 88,000 8%

41%
6,720
17,120
23,840

.270 3 90,000

427
6,880
17,960
24,840

.276 92,000

43%
7,040
18,820
25,860

.281 94,000

44%
7,200
19,700
26,900

.286 . 96,000

45%
7,360
20,600
27,960

.291 98,000

469
7,520
21,520
29,040

.296 100,000

47%
7,680
22,460
30,140

.301 150,000

489
11,680
46,460
58,140

.387 200,000 8% 49% 15,680

70,960
86,640

.433 300,000 8% 50% 23,680

120,960
144,640

.482 600,000 8% 50% 39,880

220,960
260,640

.521 1,000,000 8%

50%
79,680 470,960

550,640

.350 more than 1,000,000 8%

80%

.235

1

39%

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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
Capital gain on sale of office building.. . $108,000
Capital loss on sale of securities..

6,000
Capital net gain...

$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
Profit Loss

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

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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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