The Washington herald., 1914-10-17
LOSS ON STOCKS
DOESN'T CUT TAX
Income Returns Will Be as
Large as Before, Not AL
lowing Deductions.
BROKERS FAVORED CLASS
They and Realty Owners May Be Per
mitted to Construe Their Operations
Under Statute As Trade"

The Income Tax Bureau has an un-
pleasant surprise for = good many folks
who have been consoling themselves with
the idea that loss sutained through the
recent depreciation In stocks and bonds
will reduce the income tax Not %. The
man who was squeezed In the recent stock
market slump will not be able to deduct
this loss in estimating his total taxable
income.
This news will come as q decided shock
to a good many people because such de-
ductions were made in the income tax
returns filed last year. Since then, how
ever. the Treasury Department has con-
strued the Law more narrowly and no
such deductions will be made under the
regulations as they now stand.
stock Brokers Favored.
When the time comes for the reopen
ing Of the stock exchange and the clear
ing up OF loans already outstanding. there
are likely to be further losses to Ameri-
can security holders. Instead of deduct
ing these losses, the losers will be obliged
to disregard them.
Under the ruling by the Treasury ON
cials the stock brokers will be a favored
class. The Treasury officials regard the
buying and selling Of securities by
brokers as trade under the definition
given in the law. The broker who buys
on his own account will have a decided
advantage SO far as the income tax goes,
over his customer. who pays a commits
sion and sustains loss.
The same, 1t is said, is true of losses in
real estate transactions The man who
buys and sells real estate will be able 10
deduct losses, but the man who IL en-
gagged in other lines Of business will not.
That this ruling OF the Treasury De-
partment will come as q decided surprise
to most people was indicated by the fact
that leading bankers in washington had
no idea that losses actually sustained
through depreciation of securities could
not be deducted in computing taxable in
come. 1t was pointed out by many or
these bankers that such deductions were
made by their customers on advice OF the
banks when the first returns were hlied
out.
SIEHIacaRce Not Appreciated.
The rsguIations governing this impor-
tant phase of the income tax problem
vera promulgated by the Treasury De-
parenent some time ago. but their signin-
cance was not appreciated.
The regulation issued by the Treasury
Department on this subject said:
only those losses are deduetible which
are sustained during the tax year In
trade'-that Is, the business which en-
cages the time. attention, and labor OF
any one for the purpose Of livelihood,
profit or improvement. Loss to be de-
ductible must be an absolute loss, not
a speculative or fluctuating valuation OF
continuing 'investment, but must be an
actual .losG actually sustained and as-
certRinsd during the tax year for which
the deduction is sought to be made. 1t
must be incurred In trade, and be de-
termined and ascertained upon an actual,
q completed. a closed transaetion.
Losses sustained by individuals or
corporations from the sale Of or dealings
In personal or real property growing
out Of ownership or use Of or inta1sst
in such property will not be deductibls
at all unless they are an incident of,
connected with, and growth out Of the
business Of the individual or corpora
ton sustaining the loss, and are as
certained, determined, and hxed as ABB
soIute in the above sense within the
taxable year In which the deduction 10
sought to be made"