The screen writer (Apr-Oct 1948)

to Income Tax decision No. promulgated in 1935, which states in part, as follows: "Certain monthly dues and assessments paid by members of a labor union are deductible. . . . Assessments for benefit payments to unemployed members to the extent applied to "outof-work" benefit payments, are deductible, but such assessments are nondeductible to the extent used for sick, accident, or death benefits." The Income Tax decision then quotes the following from Welch v. Helvering (290 U.S. Ill) relative to the meaning of ordinary and necessary exT penses : "A lawsuit affecting the safety of a business may happen once in a lifetime. The counsel fees may be so heavy that repetition is unlikely. None the less, the expense is an ordinary one because we know from experience that payments for such a purpose, whether the amount is large or small, are common and accepted means of defense against attack. . . . The situation is unique in the life of the individual affected, but not in the life ofthe group, the community, of which it is a part." The aforementioned Income Tax Decision No. 2888 then goes on to say "that the deductibility of contributions or payments to an organization of business associates depends upon the relation of the purpose or use of such funds to the business of the contributor thereto, irrespective of whether such contributions are called contributions, dues or assessments, is evident. . . . The nature of the association does not control . . . the monthly dues and . . . the assessments are deductible as business expenses, if such dues and assessments are used to meet the expenses of strictly labor union activities." Legal and Accounting Expenses. Legal and accounting fees paid by a writer in connection with his professional work are deductible as business expenses. Amounts paid in connection with litigation in a tax case are deductible and so are fees paid in connection with the preparation of tax returns. The law permits the deduction for expenses if incurred in connection with a trade or business, and even if the expenses are not connected with a trade or business they may be deducted as non-business expenses if the expenses have been paid for the production of income or for the management, conservation or maintenance of property held for the production of such income. The United States Tax Court has held that any litigation which seeks to increase the production of income, or to protect the right to income produced, being produced, or to be produced, or to prevent others from acquiring a right, title or interest therein would relate closely to the "production or collection of income." (Bartholomew v. Comm. 4TC 349.) ' I 'HE thing to remember in connec-* tion with legal, accounting or any other expenses is that they must be "ordinary and necessary" in order to qualify as deductions. If an expense is appropriate and helpful in the development of the taxpayer's business or profession, it will generally be classified as necessary. The judgment of the taxpayer will be questioned only rarely, since it is usually assumed that the expense would not have been incurred unless required by the needs of the taxpayer's business. An "ordinary" expense does not require it to be habitual or normal. Even if an expense is unique and the necessity for the expense occurs but once in the experience of a particular taxpayer, it may still be considered ordinary on the ground that it is usual in the life of the group or community of which the taxpayer is a part. The comments concerning the deductibility of legal fees made herein under the heading of "Union and Guild Dues and Assessments" likewise apply to the discussion under the caption "Legal and Accounting Expenses." Depreciation and Repairs. Depreciation may be deducted each year on office furniture, machines and equipment including phonograph, radios and television sets used in the taxpayer's business. A portion of the cost of each of the aforestated assets is MANUSCRIPTS Fine Bindings Motion Picture Scripts ZIMMERMAN'S BOOK-BINDING 106 West Third St. Room 341 Los Angeles 13 MAdison 6-1706 HOLLYWOOD HOTEL FLORIST QUALITY FLOWERS Consult us for your Weddings, Parties and Funeral Work. LOCAL DELIVERIES 1705 N. Highland Ave. Hollywood 1328 EXCELLENT ACCOMPANIST Former soloist N. Y. Philharmonic now in Hollywood. Open for professional accompanist work in concerts, auditions, rehearsals, clubs, etc. Classical and popular. MATILDA HART — MAdison 6-6413 MANUSCRI PTS Typed and M Expert Work • imeographed Prompt Service Beverly Hills Letter Shop 9717 Santa Monica Blvd. Beverly Hills, Calif. • CRestview 6-2530 PICKWICK BOOKSHOP the big bookshop of Hollywood 6743 Hollywood Blvd. Hollywood 8191 Evenings till 10 written off or deducted each year as "depreciation" on the basis of the life of the asset. For example, if a desk is acquired at a cost of $100, the amount of $10 would be considered a reasonable allowable deduction each year for ten years under the category of depreciation. Expenses in connection with the repair or upkeep of furniture, machines and equipment used in the taxpayer's business are fully deductible. Operating Net Loss Deduction. It is quite conceivable that a writer, especially during these trying days, may experience a loss in his business or profession. A writer may have little or no income during a given year and his business expenses may be large enough to create a business The Screen Writer, May, 194 25