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lndividuai other taxable January return for the year N>me This column of questions and answers on federal tax matters is provided by the local office of the U.S. Internal Revenue Service and is published as a public service to taxpayers. The column answers questions most frequently asked by taxpayers. _ __ Q. I pay an annual fat plus a charge for maintaining and serv­ icing your account. However, the separately stated monthly finance charges you pay are interest, and may be deducted. For more information, see IRS on my credR card Are theee deductible? A. The annual fee is not deduct­ ible because it is not interest, but Letter from Washington by Senator Charles H. Percy This year's record-breaking U.S. corn crop of 5.8 billion bushels was a plus for both farmers and consumers. The bumper harvest, up 25 percent over last year's yield, was especially good for Illi­ nois farmers, who led the nation in corn production with 1.2 billion bushels. The harvest was good for con­ sumers too. Agriculture De­ partment officials estimate that food prices will rise only about 2.5 percent in the first six months of 1976, down con­ siderably from the 7 percent rise in the first half of 1975. But the record harvest will pay off only if it reaches the market. Delivery of the corn crop to market has been de­ l a y e d b e c a u s e o f m a r k e t forces as well as insufficient storage and transportation facilities. An estimated one-third of Illinois' 750 grain elevators cannot accommodate the large amounts of corn which reached the elevators this fall. As a result, agriculture offi­ cials estimate that about 25 million bushels of corn are 'piled on the ground, exposed to the elements and the risk of spoilage. Illinois agricultural officials report that the amount of corn piled on the ground near elevators is much greater. Grain elevator operators could lose as much as $10 million if the grain is not moved soon, and consumers would even­ tually feel the pinch through t higher prices. In' addition to the problem of inadequate storage facili­ ties, some farmers are with­ holding delivery of their corn to market in hopes that the price will increase from the present level of $2.20 a bushel. But the real crux of the problem is a shortage of rail­ road hopper cars and barges to transport grain during peak seasons. This problem was compounded recently by a tugboat strike in Baltimore and delays in loading ships in Gulf ports. The Interstate Commerce Commission last month ordered railroads to give transport priority to grain elevators that have corn piled on the ground. The Burlington Northern Railroad reports setting three hauling records in recent months. In one recent six- week_ period, more than 80 million tons of grain per week left U.S. ports. Barge lines, which traditionally haul 80 percent of Illinois' corn, also have tried to make truck and barge transport more attrac­ tive to farmers by lowering rates by 300 percent. But the Illinois Department of Agriculture predicts that Illinois corn could be on the ground until the end of the year. Everyone stands to lose if a sizable proportion of this year's bumper crop is ruined. To help get to the root of the grain transport problems, I have asked my Farm Ad­ visory Committee to study the situation and recommend solu­ tions. Planning is required to avoid similar transport delays in the future. Specifically, we should pro­ vide more storage and trans­ port facilities to handle high yields at harvest time. The results of tbe Committee re­ view, as well as responses from a questionnaire I plan to send to Illinois farmers, will b e d i s c u s s e d i n a f u t u r e column. -Ho&dfluj GfieeHngi c(£a Award Winning Restaurant THURSDAY SPECIAL Beef Royal Thin slices of beef tenderloin saute' with fresh mushrooms and bordelaise sauce. Served on bed of rice pilaff. $5» FRIDAY SPECIAL Stuffed Crepes St. Michel with American sauce. Stuffed with scallops, crab meat, lobster and shrimp »5a These specials include Soup de Jour, Salad, Vegetables, Bread and Butter. PLUS SERVING OUR REGULAR AND GOURMET DINNERS 220 W. RAND ROAD LAKEM00R 815/385-7495 East of McHeniy Publication 545, Income Tax De­ duction for Interest Expense, available free at your nearest IRS office. Q. I maintain a foreign student in my home under the auspices of a national charity. Am I entitled to any deductions for the expense of maintaining the student? A. Assuming the student is not your dependent and is a full time student in the twelfth or any lower grade, you may be able to deduct some of the expenses. However, you must have a written agree­ ment between you and the chari­ table organization stating that educational opportunities are pro­ vided the student. You may re­ ceive no reimbursement toward your expenses. You may deduct up to $50 of your expenses for the student for earh school month the student stays with you more than 15 days. The deduction is considered a charitable deduction, and is item­ ized on Schedule A of Form 1040. Q. My medical insurance reim­ bursed me for some of my medical expenses this year. Will this affect the tax I pay? A. Yes, if you itemize your de­ ductions. You must reduce your medical expenses by the amount of the reimbursement you receive from insurance, including Medi­ care benefits (Medicare A) and supplementary Medicare benefits (Medicare B), paid to you or the provider of the service. The expenses must be reduced by the amount of the reimburse­ ment before you apply the one and three percent limitations for medi­ cal expense deductions. However, you do not have to include any re­ imbursement for loss of earnings or damages for personal injury. Q. I loaned money to a friend to start a small business. The business has gone bankrupt and I have no chance of getting my money back. Can I deduct the money I lost? A. Whether you claim a bad debt depends on the circum­ stances under which you made the loan, and what attempts you made to recover it. First, you may not claim a bad debt unless there is a legal liability enforceable in court. Gifts cannot be the basis of bad debts. If you had no in­ tention of collecting the debt, the advance is considered a gift. You must also take reason­ able steps to collect the debt, although you do not have to go all the way to court if you can show the judgment obtained would be uncollectible. Usually, if good business judgment indicates that the debt will remain uncollectible in the future, the debt will be conside ed worthless. Non-business bad debts are reported on Schedule D, Form 1040. For more information, see IRS Publication 548, Tax Information on Deductions for Bad Debts. Q. We bought some Series E Savings Bonds for our grand­ child and listed her as co- owner. We would like to trans­ fer the bonds to her name. Are we responsible for any of the interest? A. Although the bonds are held jointly, since you actually bought the bpnds, you are re­ sponsible for) all' the interest earned on them until the time of the transfer. You should in­ clude the interest in your in­ come for the year the bonds were reissued in your %<^nd- child's name. If the bonds had been taken out in the child's name, all the income would be the child's even though you paid for the bonds. Q. We are renting the second floor of our house and require the tenants to pay a security deposit equal to one month's rent. Is this considered part of the rent and should we report it as income? A. Security deposits are not considered rent or income when they are received, unless they are applied to the rent payment for the last month of the lease. Then they are considered ad­ vance rental income and must be reported in the year they are received. If all or part of the deposit is kept because the tenant de­ faults, it should be reported as income at the time it is appro­ priated for back rent. Q. Three of us support our fa­ ther, each contributing one-third of his support. How do we divide the deduction? A. As long as no one of you con­ tributes more then 50 percent of your father's support, then any one of you who contributes more than 10 percent of the support is eligible to daim the dependency SECTION 2 deduction. Only one person may claim the deduction each year, so the three of you may decide who gets it. The others must file a writ­ ten statement that they will not claim the deduction that year. The statements must be Wed with the return of the person claiming the deduction. You may use Fivm 2120, Multiple Support Declaration, which may be ob­ tained from your local IRS office. Q. I am going to be taking some business trips before the end of the year, and I want to make sure ray expense records are in the proper order. What kind of records should I keep? A. You must be able to show proof of the amount of each sepa­ rate travel expenditure, such as transportation and lodging. You may total the daily cost of inciden­ tals as long as you list them in rea­ sonable categories, for example, food, gas, cab fare, etc. Record your destination, the dates you arrive and depart and the number of days spent on busi­ ness. You should also include the business reason for the trip and the business benefit you expect. The records should be kept in an account book, diary or other such ledger, and should be sup­ ported by receipts. Q. I must take my five-year-old child for medical treatment twice a week. We usually take a bus or cab. Is there some way to deduct these travel expenses? PAGE 3 - PLAINDEALER-WEDNESDAY, DECEMBER 10,1975 SENIOR CITIZEN S CORNER HELPFUL IDEAS FOR SUCCESSFUL RETIREMENT Farmers and Social Security Self-employed farmers earn social security protection just as other self-employed people, but there are some special rules that apply to farmers For social security purposes, a farm operator is a person who operates a farm for profit. He may be an owner-operator, part­ ner, renter, or share farmer. A share farmer is a farm operator if he arranges to produce a crop or livestock on land owned by another person with whom the crop or livestock or proceeds is shared. y Sometimes, one or more mem­ bers of the farm family has his or her own business, which is com­ pletely separate from the rest of the operation. If, this per­ son keeps the income separate, keeps separate records, pays all expenses himself, and has enough net earnings, he earns social security credits. In general, net farm earnings are the profits a farmer has fn>m farm jjperations. Net farm earn­ ings are calculated by subtract­ ing all allowable iarm business expenses, including depreciation, from gross farm income. Gross earnings generally are the same as the gross farm profit farmers report on Form 1040 Schedule F (Farm Income and-Expenses) for Federal income tax purposes A. Yes. Payments for transpor­ tation essential for medical care may be deducted as medical ex­ pense. Not only are the child's ex­ penses deductible, but so are the expenses of the parent who must accompany the child. % If you use public transportation, the fares are deductible. If you drive a car, the cost of gas, oil, tolls and parking fees is deductible, or you may take the standard mile­ age rate of seven cents per mile in addition to tolls and parking fees. worti To examine your breasts once a month, isn't it? Breast cancer is the leading cause of death from cancer in women today. The earlier it is detected and treated, the greater the chances of cure. And breast stlf-examination is the simplest means of early detection. Ask your doctor to show you how to do it. Or ask your local Unit for our BSE pamphlet. American Cancer Society * •^V:S AVvtl £/aV % • \X. 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