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Show The Inventory Method A Boon To Tax Payers Witl tin- burden of making' out (ho income tax rcl!ui-ns upon the farmer at this time and inasmuch as much difficulty has liccn experienced experienc-ed in the compilation of the several reports, the News is herewith reproducing repro-ducing n schedule, compiled and submitted by Russell C. Enborg in Successful Suc-cessful Farming: After several years' experience wi5h the income tax, farmers 'are going to look with more friendly eyes on the inventory method of fig-' wring their net farm income. Many farmers, who never suspected that thev would have any tax at all to lowing year, and so on until everything every-thing is on the inventory basis. This could be done in years when there is nothing on hand but the breeding breed-ing stock and in that way there would be nothing to leave out. It has been necessary to give thirty nay, found that because they held last year's oat crop or pig crop too long and sold it after the first, of the year, they had a nice, big tax to pay. The collector figured their return re-turn on the cash receipts basis. Others, who assumed that their average av-erage income was only two or three thousand dollars, were figured up to an income around seven or eight thousand because they had sold off a number of purebred cattle at a sale. Their return, also, was computed comput-ed on the cash basis. The inventory method takes care of such cases in a more equitable way. It shows as net- income, only that which was accumulated 'since the time the inventory was taken. Compare the two methods in the table showing the two methods in the average faim figured on both the inventory and the cash receipts plan. The receipts from the sale of farm products and the general farm expenses ex-penses are the same, of course, under the two plans. There might have been some extra deduction in the cash plan if some of the stock which was sold had been purchased (the cost price is deductible), but in this case it was all raised on the farm. The depreciation also is the same under both methods. The difference dif-ference lies in the fact that the addition ad-dition of an inventory makes some extra receipts and frequently many more expenses. In this particular caso, the hogs, cattle- and poultry showed an increase but the sheep showed a decrease almost as large sc that made no particular difference. But the large decrease in the horses and grain and hay is whac made the difference. He sold a team of horses which had been raised on the farm and ho also lost two that season The cash basis would show no loss for the two that died since thev were days notice prior to time of filing returns, if one wishes to change from one method to tho other. This is not necessary, however, if one complies com-plies with the requirements just noted above, namely, the keeping of the nccssary records and omitting from the opening inventory the crops and stock held for sale. The question ' is sometimes raised as to whether it is desirable to include in-clude the farm in the inventory. Generally Gen-erally speaking, it is not unless one expects to sell that farm later on. Probably tho most desirable time to include tho farm in the inventory would be where a farm has been acquired ac-quired very recently and where the owner expects to sell it again. Then, the tax on the increase in value can be distributed over the years rather than having it all come when the farm is sold. Those who did not take an inventory inven-tory last January can think back and still make a fairly accurate inventory. inven-tory. It is not to late. That will at least be a start toward getting on a better basis of making income tax returns. It will also afford a means of determining what the farm as a business is returning to the operator. Inventory Plan Items ;Receiptsi Expenses Receipts Livestock sold ..$3,870.00! Crops sold 3,722.01)1 Miscellaneous ... Receipts 207.00! Increase in Inventory; Hogs 97.00 Cattle 105.00 Poultry 9.00 Expenses j General farm I 'expenses : .,. $1,928.00 Depreciation on ki j j? raised on the farm. But it would show the sale of the other two and all the growth or gain those horses had made since they had been foaled would be taxed in the same year. The large decrease in grain and hay is due to the fact that at the be-ginnng be-ginnng of the year he had a fairly larffe quantity of the oat crop left which he soon sold, thereby selling two oat crops in the same year. The cash basis made no allowance for this. The addition of an inventory, however, adjusted the receipts and expenses so that the true gain was shown. Most of the returns made by fa mi ers have been made on the cash basis. The principal reason for this is that very few farmers have been making an inventory at the end of each year and where the fanner has not done this, the collectors have not permitted them to make a return on the inventory basis. Where a farmer has kept no record at all or merely a record of receipts and expenses, ex-penses, he must make a return on the cash basis. There is one other requirement of the farmer who desires to start on V.o inupTitni'u nlan Up must leave machinery I 350.00 Decrease in Inventory Horses I I 540.00 Grain and hay . . 846.00 Sheep I I 200.00 I 1 Totals !$8,016.00i $3,804.00 Net income 4,152.00 Personal Exemp- tion .......I 2,200.00 Taxable income .1 1 1,952.00 Tax at four percent 78.08 Surtax one i I p cent Tax to pay 78.80 Cash Basis Items Receipts Expenses Receipts Livestock sold . . $3,876.00 Crops sold 3,722.00 Miscellaneous receipts . 207.00 Increase in Inventory . Hogs Cattle Poultry Expenses General farm expenses - $1,928.00 Depreciation on bldgs, fences, machinery 350.00 r I i ,. out of his opening inventory the crops and stock that he is holding for saleJ That will mean that the inventory will include only the work and breeding breed-ing stock and the feed. If any of the stock or crops, which is being held for sale, had been purchased that part can be placed in the inventory in-ventory at cost price. This procedure proced-ure is necessary for the first year only. After the first year, all the livestock and crops are put in the inventory. in-ventory. This provision is necessary utii ease in . . Inventory Horses Grain and hay . Sheep Totals $7,805.00 $2,278.00 Net income . 5,527.00. Personal exemption exemp-tion 3,327.00 Tax at four percent I 133.08 Surtax one per- cent I I 5.53 Tax to pay 138.61 Successful Farming. because otherwise a farmer could accumulate ac-cumulate a large herd of cattle or horses and when he was ready to dispose of them, might suddenly change over the inventory system and thereby avoid paying a tax on all that accumulation. This ruling will ordinarily make it somewhat expensive the first year that the return is made on the inventory in-ventory plan. The opening inventory will usually be small 'if only the work horses, breeding stock and feed is included and if the opening inventory is small and the closing inventory fairly large, a huge net income will naturally result. It has been suggested sug-gested that the best way to get started on the inventory method is to start gradually. One might start with cattle one ycor, hogs the fol- |