72d CONG RES S. SESS. I. CH. 209. JUN E 6, 1932 .
207 SEC. 117. NET LOSSES.
INCOME TAX (a) DE FINI TION OF "NET Loss."-As used in this section the term "Net lo ss", defined. "net loss" means the excess of the deductions allowed by this title over the gross income, with the following except ions and limitat ions
- Exceptions .
(1) NON-BUSINESS DEDUOTIONS .-Deductions otherwise allowed witl°business °°°~ by law not attributable to the operation of a trade or 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 trad e or business ; (2) CAPITAL LossEs.-In the case of a tax pay er oth er than a Capital co rpora . corporation, deductions for capital losses otherwise allowed by tion . law shall be allowed only to the exte nt of the capital gains ; (3) DEPLETION .The deduction for depletion shall not exceed Depletion . the amount which would be allowable if computed without refer- Ante, p . 202, ence to discover value, or to percentage depletion under section 114(b) (3) or (4) ; (4) DIVIDENDS .-The deduction provided for in section 23(p) b Diide8ds rece ive d of amounts received as dividends shall not be allowed ;
lowed . INTEREST.-There s hall be includ ed in computin g gross Ante, p 182. (5)
Interest included to income the amount of interest received free from tax under this gross income . t itle, decreased by the amount of interest paid or accrued which Ante, p. 179. is n ot allowed as a d eduction by sect ion 23(b)
(6) NET LOSS NOT TO PRODUCE NET Loss.-In computing the net no No lo ss sf rprloryear loss for any taxable year a net loss for a prior year shall not be allowed as a deduction . (b) NET Loss AS A DEDII'cnlox.-If, for any taxable year, it appears Net loss to ax for ducted from tax upon the produ ction of evidence satisfactory to the Commissioner second year, etc . that any taxpayer has sustained a net loss, the amount thereof shall be allowed as a deduction in computing the net income of the tax- payer for the succeeding taxa ble year (herein after in this se ction called " second year ") ; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of Regulation s pre • the Secretary .
scribed . (C) CAPITAL NET GAIN IN SEC OND YEAR .-If in the second year Capital net gain or the taxpayer (other than a corporation) has a capital net gain, the A lo pplicaatonof f . .`' deduction allo wed by subsecti on (b) of this s ection shall fir st 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 If in excess. (compute d without such d eduction) the am ount of such ex cess shall then be applied against the capital net gain for such year . (d) NET LOSSES FOR 1930 OR 1931 .-If for the taxable year 1930 a IaNet losses for 1930 or taxpayer susta ined a net loss within the prov isions of the Re venue Act of 1928, t he amount of su ch net loss shal l not be allowed as a deduction in computing net income under this title . If for the Vol . 45, p. 828M taxable year 1931 a taxpayer sustained a net loss within the provi- sions of the Revenue Act of 1928, the amount of such net loss shall be allowed as a deduction in computing net income for the taxable year 1932 to the same extent and in the same manner as a net loss sustained for one taxable year is, under this Act, allowed asa deduction for the succeeding taxable year . (e) FISCAL YEAR RETufms .-If a taxpayer makes return for a Fiscal years . period beginning in one calendar year (hereinafter in this sub- Returns, if period be- section called "
ginninand end in g first
ye ar")
in alen dar calendar ye ar (hereinafter i n this subsection called "second calendar year ") and the law applicable to the second calendar year is different from the law applicable t o the first calen dar year, then h is net loss for the period ending during the second calendar year shall be the computing net loss. sum o f : (1) The sa me proportion of a net loss for t he entire period,
