Types of Losses ORDINARY Occurs when the EXPENSES is MORE than GROSS INCOME or SALE of ORDINARY ASSET To a domestic

corporation all losses actually sustained & charged off within the taxable year and not compensated by insurance or other form of indemnity Amount deductible: Total destruction net book value (cost less accumulated depreciation) immediately preceding the casualty, to be reduced by any indemnity from insurance received. Partial destruction the replacement cost to restore its normal operating condition, but in no case shall the deductible loss be more than the net book value of the property as a whole, immediately before casualty. The excess over the net book value should be capitalized subject to depreciation over the remaining useful life of the property CAPITAL SPECIAL Can be DEDUCTIBLE only from Kinds of Special losses: CAPITAL ASSET Wagering losses Subject to the Loss Limitation DEDUCTIBLE only to the extent of GAIN or WINNINGS Rule Loses on wash sales of stocks NOT deductible because these are considered as ARTIFICIAL LOSS

Kinds of capital losses:

of losses a) Losses from sale or Abandonment petroleum operation and exchange of capital assets producing well. b) Loses resulting from securities becoming worthless Losses due to voluntary removal of building incident to renewal and which are capital assets or placements DEDUCTIBLE from GROSS c) Losses from short sales of expenses INCOME. But when the building property was NEVER INTENDED to be d) Losses due to failure to used when the asset was it is NOT exercise privilege or option to acquired, DEDUCTIBLE loss. buy or sellproperty. Loss of useful value of capital asset due to changes in business conditions DEDUCTIBLE expenses only to the extent of ACTUAL loss sustained (after adjustment of improvement, depreciation and salvage value) Losses from sales or exchanges of property between related taxpayers losses of this nature are NOT DEDUCTIBLE but GAINS are TAXABLE Losses of farmers if incurred in the operation of farm business, it is DEDUCTIBLE.