The daily banner. (Cambridge, Md.) 1897-2008, 1921-01-25
Seventh Artic e
On The 1920 Income
1921 Euc0me Tax Facts You Should
Know

Know
Claims for deduction for losses
'Orn an important item in income
AK returns and heretofore have been
he subject of numerous errors. The
mistakes are of commission and
)miasiua. Claim is made for loss
o which the taxpayers is nO5 entitl-
I'd. IN other returns no claim is
tor deductibIe loss which il in
luded would mean a substantial re
iuction IN tax.
To he allowed, deuuct1ons TOR
.oSses must be confined 10 tie fol
owing classes: Losses sustained ii
rade or business; losses sustained
Il transactions entered into for pro
it, though not connected with Il
rade or business; losses sustained
If property not connected with trade
II business if arising from fires,
,hlpWreck, storms, or other casual
y, or from theft. To the extent any
If the above losses are compensated
or by insurance they are not deduc-
.ible
The loss mus; have been actually
ustained during the year for which
is claimed IN the taxpayers re-
urn. A taxpayer may feel certain
.eal estate owned by him is wortL
ass than the purchase price. a ner
,hant may be convinced that certain.
,tock cann OF be sold unless marked.
jeiow cost. In neither event, how
Yer, is he entitled to a claim for de
tuctiOn until the loss is made abso
ute by sale or other disposition y!
he property.
Must Follow Statute
Claims for losses must conform
loosely to the wording of the statute
loss sustained in the sale of an au
omobile purchased for personal u.s.
not deductible because it Is no.
/ transaction entered into for pro
it." Many claims are made TO.
0sses sustained in the sale OF prop
5rty used by the taxpayer as a resi-
.ence. Ordinarily, when MAJ
Juys q home and moves into it, ht
las no intention of selling. He doe.
lot ''enter into transaction TO.
rofit,' and such a loss is not deduc
tible
owners of stocks and bonds car
.ot deduct from gross incom'
mounts claimed as losses on ac
count of the shrlnkage in value o.
..uch securities through tuctuation.
If the market or otherwise. Th,
oregoing applies only TO owners ant
investors ana not to dealers IN Sc
urities, who by a special rule al, |
ciyen the benefit of any shrinkage il /
the securities IN which they deal.
Losses in illegal transactions |
}oker playing, dice, horse racing, O. {
1ther forms of gambling-are no /
.eductible. although gains in sucI !
transactions constitute taxable in /
ONE and must be included in tn, (
-eturn
Bad Debts /
While deductions for worthless /
Iebts are provided for by reyenu' /
ct many claims entered by taxpay |
rs are not allowed because of tho /
nature oA the obligation. Claims |
or such deductions must have eel |
an qualities. The debt must hayt |
,een charged off within the year Ii |
Faich its worthlessness was discov /
red; the return must show evidence |
- tho. rllo.nner in which. discover. |
vas made; statement sno0fd be mao 7
hat the debtor has been discharge, !
in bankruptcy or has disappeared |
leaving no trace, or that the ordlL /
airy means of collection nave been ex |
hausteu.
Unpaid loans made TO needy re /
latives or friends with little or NJ |
expectation that they would be re /
turned are not deductible, but ar F.!
regarded as gifts. Where the credl
tor continues to extend cre~.. a deb |
may not be claimed as worthless. / |
debt may not be charged off or de |
Quoted in part. but must be who'll,
worthless before any part can be de
Quoted, though it may be clear.
worth less than the face amount. l.
a debt is forgiven, it can not be de
Quoted, because it is then regarded
as a gift.