Section II, subdivision 2B, of the Act of October 3, 1913 (38 Stat. 167), provides that in computing net income for purposes of normal tax there shall be allowed as a deduction:
«* * * Fourth, losses actually sustained during the year, incurred in trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise.”
Mente, a member of the firm of Mente & Co., engaged in the business of manufacturing jute bags and bagging, cotton bags and materials for covering cotton bales, filed his income returns for the year March 1 to December 31, 1913, and for the whole year of 1914. He bad for some three years been buying and selling cotton on the Cotton Exchange for his individual account, in no way connected with the business of Mente & Co., and he deducted from his gross income in each year losses sustained in the year resulting from these transactions as “losses incurred in trade.”
Eisner, as collector of internal revenue for the Third district of the state of New York, assessed an additional tax upon these deductions, which Mente paid under protest, taking an appeal to the Commissioner of Internal Revenue under sections 3220 and 3228, U. S. Rev. Stat. (Comp. St. §§ 5944, 5951), and the regulations of the Secretary of the Treasury in pursuance thereof who rejected his claim. Thereupon Mente began this action against Eisner, as collector, to recover the amounts so paid with interest and costs.
“Loss, to be deductible, must be an absolute loss, not a speculative or fluctuating valuation of continuing investment, but must be an actual loss, actually sustained and ascertained, during the tax year for which the deduction is sought to be made; it must be incurred in .trade and be determined and ascertained upon an actual, a completed, a closed transaction. The ^term ‘in trade,’ as used in the law, is held to mean the trade or trades in^ /""which the p'erson making the return is engaged; that is, in which he has' invested money otherwise than for the purpose of being employed in isolated transactions, and to which he devotes at least a part of his time and atten- , feion. A person may engage in more than one trade, and may deduct losses ■/incurred in all of them: Provided that in each trade the above requirements are met. As to losses on stocks, grain, cotton, etc., if these are incurred by a person engaged in trade, to which the buying and selling of stocks, etc., are incident as a part of the business, as by a member of a stock, grain, or cotton exchange, such losses may be deducted. A person can be engaged in more than one business, but it must be.clearly shown in such cases that he is actually a dealer, or trader, or manufacturer, or whatever the occupation may be, and is actually engaged in one or more lines of recognized business, before losses can be claimed with respect to either or more than one line of business, and his status as such dealer must be. clearly established.”
Both parties having moved' for the direction of a verdict, Judge Grubb directed a verdict in favor of the defendant. We think that the language “losses incurred in trade” are correctly construed by the Treasury Department as meaning in the actual business of the taxpayer, as distinguished from isolated transactions. If it had been intended to permit all losses to be deducted, it would have been easy to say so. Some effect must be given to the words “in trade.”
There is an inconsistency .in making profits derived from such transactions a part of the taxpayer’s gross income and, on the other hand, allowing him no deduction for losses; but tax laws are not required' to be perfect, or even consistent. It must be determined from the .facts in each case whether or not the losses claimed to be deducted have been incurred in a business. In this case the court must be taken to have found as- matter of fact that these transactions in 1913 and 1914 did not constitute a business. Such a finding is binding upon us.
Judgment affirmed.