Arizona republican., 1922-02-03
Income Tax Facts |
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No.
In computing net income the tax
payer is permitted to deduct from
gross income certain deductions for
losses, bad debts, contributions, in
terest, taxes, etc. Deductions for
losses include not only losses in
CURED in the taxpayers trade or
business, but losses connected with
any transaction entered into for
profit" or il arising from fires,
storms. shipwreck, or other casualty.
Deductions for losses are allowable
only to the extent that they are not
compensated for by insurance or
otherwise.
Losses arising from the destruc-
tion or damage to property acquired
prior to March I, 1918, are TO be com
puted on the basis OF the fair market
price or value as of that date, unless
the cost is less than such value, N
which case the loss is computed on
the basis Of cost.
A new provision of the revenue act
Of 1921 is that in exceptional cases.
and in order more clearly to. reflect
income, the commissioner OF inter
nal revenue may permit the deduc-
tion OF a loss other than in the year
in which actually sustained. The tax
payer in his return, or an amended
return may deduct n loss only Tor
the year in which sustained. IL he
desires TO account for the loss as OF
another period, he must attach TO his
return for that year a request for
consideration of the case by the COM
missioner, together with a complete
statement OF the facts. Upon auct
OF the return, the commissioner VIII
decide whether the case is within the
exception provided by the statute
Allowance OF a deduction other thar
in the year in which actually sus-
tanned is entirely within the discre
tion of the commissioners and win
apply only in exceptional cases.
Must Follow Statute
Claims for losses must conform
closely to the wording OF the statute.
The loss must ave been actually
sustained during the year IN which
1t is claimed in the taxpavers return,
While a taxpayer may feel certain
that property owned by him is worth
less than the purchase price. he is not
allowed a deduction until the loss is
made absolute by the sale, or other
disposition of the property. A loss
sustained by a taxpayer in the sale
OF his residence, which at the time
OF purchase was bought without in
tention OF selling, is not deducuble
item because it was not TRANSACTION
"entered into for profit" For the
same reason loss sustained IN the
sale of an automobile purchased Tor
personal use may not be deducted.
A loss may be claimed by the owner
OF a business truck injured or demol-
ished in a collision, but not by ths
owner of a pleasure car.
"Wash Sales"
Claims for deductions for losses on
what is known as wash sales are
expressly disallowed by the revenue
act of 1921. In connection with the
sale or disposition of stocks or Sc
curities no deduction will be allowed
"where il appears that within thfts
days before or after such sale or
disposition the taxpayer has acquired
(other than by bequest or lnheilt-
ance) substantially identical property
and the property so acquired IS held
by the taxpayer for any period atter
e,icb sale or other disposition.
Owners Of stocks and bonds cannot
deduct from gross income amounts
claimed as losses on account of the
shrinlxage Of value in such securities
through fluctuations in the market or
otherwise. The foregoing apphes
only TO owners and investors and not
10 dealers in securities. who. by
means OF the inventory, are given the
benefit OF shrinkage in the securities
in which they deal.