*2457 Under section 204 of the Revenue Act of 1918, where the income for 1918 was sufficient to offset a net loss sustained in 1919, such loss may not be deducted from gross income for the year 1920.
*1156 Before GRAUPNER and TRAMMELL.
This is an appeal from the determination of a deficiency in income and profits taxes in the amount of $1,584.97 for the calendar *1157 year 1920. The question involved is whether certain losses sustained in 1919 may be deducted in computing net income for 1920.
FINDINGS OF FACT.
The taxpayer is a Massachusetts corporation with its principal place of business at Boston.
It was incorporated on May 1, 1918, and since that date it has kept its books on a calendar year basis, its first taxable period having terminated on December 31, 1918.
For the period May 1, 1918, to December 31, 1918, the taxpayer realized a taxable gain of $25,493.32. For the calendar year 1919 it sustained a loss of $10,394.11, of which $4,092.56 represents a loss on the sale of Liberty bonds, and the balance, $6,301.55, represents an*2458 operating loss of the business. For the calendar year 1920 the taxpayer realized a taxable gain of $13,276.75.
OPINION.
GRAUPNER: The taxpayer claims the right, under section 204 of the Revenue Act of 1918, to a deduction for the year 1920 of the loss sustained for the year 1919. The terms of section 204 are specific in requiring the application of the losses therein defined, first to the preceding year, and to the succeeding year only in the event that there remains a net loss in excess of the net income for the preceding year. In the case here under consideration, there was a taxable gain in 1918 in an amount more than sufficient to absorb the entire loss sustained in 1919. Consequently, if section 204 were properly applied to the years 1918 and 1919, there would remain no loss to be deducted from 1920 income. Whether or not the Commissioner did permit the application of the 1919 loss to the 1918 income is not before us for determination.
The deficiency is $1,584.97. Order will be entered accordingly.