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Show Net Income Must Be Computed Before Reductions Are Made In the eyes of the Utah individual income tax law, net income must be computed before deduction is made for personal, living or family fam-ily expenses. All residents are in the same class in this respect, whether they be wage earners, salaried employees, farmers in fact, no matter what their occupation, occu-pation, or from what source their income is derived. May Be Complicated For some farmers the preparation prepar-ation of his 1942 tax return for filing with the state tax commission com-mission may be somewhat complicated com-plicated for two reasons: First, the farm provides the family directly di-rectly with many living necessities, necessi-ties, such as vegetables, fruits, eggs dairy products and, to some extent, meat, while occasionally other items of family expense are obtained through barter; second, the farmer, too often for his own good, abhors bookkeeping and maintains inadequate or inconvenient incon-venient records. To assist the farmer in preparing prepar-ing a proper return, the state supplies sup-plies a form known as "Schedule of Farm Income and Expenses". Some people refer to it as "S. T.C. 40 F". This form is for the use of all persons having income in-come from farm or livestock operations. oper-ations. It, and the instructions that go with it, will steer the average farmer safely through all the intricacies of distinguishing between "business "and" living" expenses, ex-penses, and between "capital expenditure" ex-penditure" and "maintenance and operation expenses". Two regulations make the farm taxpayer's task much easier than it would be otherwise. They read: "The value of farm produce which is consumed by the farmer and his family need not be reported re-ported as income, but expenses incurred in-curred in raising produce thus consumed must not be claimed as deductions", and "the value of products furnished by the farm and used in the board of hired labor is not a deductible expense". Report Produce Sales When it comes to actual sale of farm produce, whether for cash or for payment in other goods of value ,the income is to be reported, re-ported, since it involves a business transaction rather than a living expense. "The market value of groceries, merchandise and the like, received in exchange for butter, eggs, and other farm products, must be reported re-ported as income." The schedule instructs the farmer farm-er how to take depreciation on his farm equipment, - such as machinery, ma-chinery, tools, fences and buildings. build-ings. Incidentally, the home of the family is part of the living expense ex-pense and the farmer may not take depreciation on it, though he may on his barn and sheds. When a piece of equipment is used partly for the farm business and partly for family purposes as is often the case with the passenger pas-senger automobiles maintained on the farm only such part of depreciation and cost of gasoline, oil, and other repairs may be deducted, de-ducted, as the use on farm business busi-ness bears to the entire use. Other Instructions Other instructions relating to the distinction between living expense ex-pense and business expenses include: in-clude: "Do not include," as a deductible deduc-tible farm business expenditure, "any amounts paid to your wife or minor children for the value of their services or for your own services. Do not include interest to yourself on capital invested in the farm." "Amounts paid to persons engaged en-gaged in household work should not be included except to the extent ex-tent that the services of such employees em-ployees are used in boarding or otherwise caring for farm laborers." labor-ers." The farmer should read carefully care-fully the instructions accompanying accompany-ing the farm schedule. If, after doing so, he is in doubt as to how they apply to his circumstances, circum-stances, inquiry of the state tax commission through the mails or in person at any of its offices will bring definite and correct answer. |