The screen writer (Apr-Oct 1948)

I deducted by a member of the writing profession ? Rent paid for office or studio. A proper place to work in is naturally a requirement of every writer, and if the office or studio is used in connection with the writers' business, the rent paid therefor is deductible. If a portion of a writer's home is used as an office or studio in connection with the writer's business, a reasonable proportion of the home expenses applicable and allocable to the upkeep of the office or studio may be claimed as an expense. Likewise, if a writer owns his own home, and if a portion of his home is used as an office or studio in connection with the writer's business, a percentage of depreciation of the cost of the building may be deducted as an expense. Office and Studio Expenses. The cost of fuel, light, water, cleaning service and telephone used in the office or studio, and compensation to office assistants are deductible items. If some of these items are paid out at home expenses because a writer uses part of his home as an office or studio, then he may deduct a portion of such payments as an expense. Agent's Cormnissions. Commissions paid to agents are fully deductible. Most writers prepare their returns on the cash basis, that is, they report income in the year received and deduct expenses in the year paid. For those on the cash basis who have highly fluctuating incomes, and who make direct payments to agents, it is especially important to exercise extreme caution to make the payments in a year when they can get the greatest benefit. Delay in payment of a commission may result in losing the deduction in the year when income was high and getting the allowance in the year when income was low. Compensation Paid. Compensation paid to secretary and assistants and stenographic fees expended in connection with the writer's business are deductible and so are all unemployment and social security taxes paid by the writer in connection with salaries paid to his employees. Books, Periodicals and Recordings. Cost of books and recordings of short life, newspapers, magazines acquired for use in connection with the writer's profession are allowable expenses. Stationery, Postage and Supplies. Expenditures for manuscript paper, binders, mimeograph materials, printing, postage, typewriter machine rental, typewriter supplies and repairs, etc., are fully deductible if the expenses are in connection with the writer's professional duties. A writer office equipment, such as typewriters, desks, files, chairs and other office furnishings that are not of short life. Telephone and Telegraph. Telephone and telegraph expenses in connection with a writer's business are deductible. If a writer uses his home telephone for business purposes he may deduct the proportion applicable to his business. It is all a matter of proof and if the home telephone is used substantially for business purposes some adequate record should be kept to justify the deduction if called upon to do so. Traveling Expenses. Traveling expenses of a writer in connection with his business are deductible. As obvious as this statement may appear to be on the surface, there are obstacles that, at times, make it difficult to determine how the Bureau of Internal Revenue will ultimately rule on a particular item. In the average case, however, it should be comparatively easy for a writer to determine whether his expenditures for traveling expenses are deductible especially after he reads a portion of what the United States Supreme Court had to say on January 2, 1946 in Comm. v. J. M. Flowers (66 S.Ct.250). In that case, Mr. Justice Murphy, who wrote the Court's majority opinion, stated as follows: "It (Sec. 23(2) (1) (A) authorizing the deduction for traveling expenses) is to be read in light of the interpretation given it by . . . Treasury Regulations. . . . This interpretation, which is precisely the same as that given to identical traveling expense deductions authorized by prior and successive Revenue Acts, is deemed to possess implied legislative approval and to have the effect of law. . . . This interpretation states that 'Traveling expenses, as ordinarily understood, include railroad fares and meals and lodging. If the trip is undertaken for other than business purposes, the railroad fares are personal expenses and the meals and lodging are living expenses. If the trip is solely on business, the reasonable and necessary traveling expenses, including railroad fares, meals and lodging are business expenses. . . . Only such expenses as are reasonable and necessary in the conduct of the business and directly attributable to it may be deducted. Commuters' fares are not considered as business expenses and are not deductible.' ' The Court then laid down the following three conditions, all of which must be present, before a traveling expense deduction may be made under Section 23(a) (1) (A) of the Internal Revenue Code : " ( 1 ) The expense must be a reasonable necessary traveling expense, as that term is generally understood. This includes such items as transportation, fares and food and lodging expenses incurred while traveling; (2 The expense must be incurred 'while away from home' ; (3) The expense must be incurred in pursuit of business. This means that there must be a direct connection between the expenditure and the carrying on of trade or business of the taxpayer or of his employer. Moreover, such an expenditure must be necessary or appropriate to the development and pursuit of the business or trade." IT will be noted that the second condition is that the expense must be incurred "while away from home." There is much law on what constitutes being away from home. If a writer is employed permanently in Los Angeles and he chooses to live elsewhere few personal convenience the likelihood is that his expenses in Los Angeles would not be considered deductible traveling expenses. If however, his residence elsewhere is coupled with a business reason for living there and claiming domicile there, his traveling expenses in Los Angeles would (Continued on Page 2+) The Screen Writer, May, 194 11