The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1921-01-17

subject of numerous errors The mis-
takes are of commission and omis-
sion. Claim is made for a loss to
which the taxpayer is not entitled. In
other returns no claim is made for a
deductible loss which, if included,
would mean a substantial reduction
in tax.
To be allowed, deductions for losses
must be confined to the following
classes: Losses sustained in trade or
business; losses sustained in transac-
tons entered into for profit, though
not connected with a trade or BUSH
ness; losses sustained of property not
connected with trade or business if
arising from fires, shipwreck, storms
or other casualty, or from theft. To
the extent any of the above losses are
compensated for by insurance they
are not deductible.
The loss must have been actually
sustained during the year for which 1t
is claimed in the taxpayers return. A
taxpayer may feel certain that real
estate owned by him is worth less
than the purchase price. A merchant
may be convinced that certain stock
can not be sold unless marked below
cost In neither event, however, is he
entitled to a claim for deduction until
| the loss is made absolute by sale or
other disposition of the property.
Claims for losses must conform
closely to the wording of the statute.
| A loss sustained in the sale of an au-
tomobile purchased for personal use
| is not Geductible, because it is not
transaction entered into for profit
Many claims are made for losses sus-
| tanned in the sale of property used by
| the taxpayer as a residence. Ordi-
narily, when a man buys a home and
moves into it, he has no intention OF
| selling. He does not center into a
| transaction for profit" and such a
loss is not deductible.
| Owners of stocks and bonds cannot
deduct from gross income amounts
claimed as losses on account of the
shrinkage in value of such securities
through fluctuations of the market
or otherwise The foregoing applies
only to owners and investors, and not
| to dealers in securities, who by a spe-
cial rule are given the benefit of any
shrinkage in the securities in which
they deal.
Losses in illegal transactions.
| poker playing, dice. horse racing or
other forms of gambling-are not de-
transactions constitute taxable in
come and must be included in the re-
| turn.
While deductions for worthless
debts are provided for by revenue
act, many claims entered by taxpay-
ers are not allowed because of the
nature of the obligation. Claims for
such deductions must have certain
! qualities The debt must have been
charged off within the year in which
| its worthlessness was discovered, the.
| return must show evidence of the
manner in which discovery was made;
statement should be made that the
debtor has been discharged in bank
ruptcy or has disappeared, leaving no
| trace, or that the ordinary means of
! collection have been exhausted.
Unpaid loans made to needy reIa-
tives or friends with little or no ex-
| pectation that they would be returned
are not deductible, but are regarded
i as gifts. Where the creditor con-
tinues to extend credit debt may
not be claimed as worthless. debt
| may not be charged off nor deducted
! in part, but must be wholly worthless
i, before any part can be deducted,
/ though it may be clearly worth less
than the face amount. If a debt is
forgiven. it can not be deducted, be-
cause it is then regarded as a gift.
A debt proved TO be worthless is
not always a proper deduction For
example, unpaid amounts represent
| ing wages, salaries. rentals or SINH
i lar items of taxable income are not
allowed as deductions unless included
as income in the creditors return for
/ the year in which the deduction is
sought or in a previous year. The
/ fact that expected income was not
/ received does not reduce the taxable
/ income.
J Payment of an ordinary debt need
not be included in the taxpayers re-
turn, since it is mere change in