SEVENTIETH CONGRESS . SESS. I. Cx. 852. 1928 . 825 SEC. 117. NET LOSSES.
t loOME TAX Net osses. (a) Definition of " net loss ."-As used in this section the term " net Determined by ex . cess of deductions over loss" means the excess of the deductions allowed by this title g r os s i n co m e . over the ro ss inc ome, w ith th e foll owing e xcepti ons an d limi tation s (1 NON -BU SINE SS D EDUC TION S .-De ducti ons o therw ise allow ed xoep ions . Losses not connected by law not attributable to the operation of a trade or business with business . regularly carried on by the taxpayer shall be allowed only to the extent of the amount of the gross income not derived from such trade or business ; CAPI TAL LOSSES .-In the case of a taxpayer other than a capital losses, of (2)
other than a corpora- co rporat ion, d educti ons fo r capi tal lo sses ot herwis e allo wed by tion. law shall be al lowed only t o the extent of the capit al gai ns ; (3) DEPLETioN .-The d educti on for deple tion s hall n ot exce ed Depletion . the amount which would be allowable if computed without refer- ence to discovery value, or to percentage depletion under section Ante, p .821 . 114 (b) (3) ; DIVIDENDS.-The deduction provided for in section 23(
On corporation divi- (4)
\h) dends not allowed . of amounts received as dividends shall not be allowed ;
Ante, p. 801. 5) INTEREST .-There shall be included in computing gross Interest included in (
gross income . income the amount of interest received free from tax under this title, decreased by the amount of interest paid or accrued which Ante, p. 799. is not allow ed as a d eduction by sectio n 23 (b)
(6) NET LOSS NOT TO PRODUCE NET LOSS .-In computing the net Net loss for prior year not allowed . loss for any taxable year a net loss for a prior year shall not be allowed as a deduction .
Net less to be de. (b) Net loss as a deduction .-If, for any taxable year, it appears ducted from tax for suc- upon the prod uctio n of evid ence satis fact ory t o the Com missi oner seeding taxable years. that any ta xpayer has s ustain ed a n et loss , the amount there of sha ll be allowed as a deduction in computing the net income of the tax- payer for the succeeding taxable year (hereinafter in this section called "second year "), and if such net loss is in excess of such net income (computed without such deduction), the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year (hereinafter in this section called "third year ") ; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary. (e) Capital net gain or loss in second year.-
Capital gain or loss. CAPI TAL NET LOSS .-If in t he se cond year the taxpa yer Application if capital (1)
loss sustained in second (other than a corporation) sustains a capital net loss, the deduc- ye-- tion allowed by subsection (b) of this section shall first be applied as a deduction in computing the ordinary net income for such year. If the deduction is in excess of the ordinary net income (computed without such deduction) then the amount of such excess shall be allowed as a deduction in computing net income for the third year .
Application to capi- (2) CAPITAL NET GAIN .-If in the second year the taxpayer tal gain for second (other than a corporation) has a capital net gain, the deduction Y11- allow ed by sub section ( b) of thi s sectio n shall f irst be a pplied as a de ductio n in c omputi ng the ordin ary net incom e for such y ear, If the deduction is in excess of the ordinary net income (com- puted without such deduction) the amount of such excess shall next be applied against the capital net gain for such year, and if in excess of the capital net gain the amount of that excess shall be allowed as a deduction in computing net income for the third year .
Application to third (d) Capital net gain or loss in third year .-If any portion of a net year. loss is allowed as a deduction in computing net income for the third year, under the provisions of either subsection (b) or (c)
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