Wednesday, June 25, 2014

Requisites for the Deductibility of a Loss

Losses are deductible for Income Tax purposes if the following requisites are met:

1. The loss must be incurred in trade, profession, or business of the taxpayer, or any transaction entered into for profit;

2. It must be actually sustained within the taxable year;

3. It must be evidenced by a closed and completed transaction;

4. It must not be compensated for by insurance or other form of indemnity; and

5. The taxpayer has filed a sworn declaration of loss within 45 days after the date of the occurrence of casualty or robbery, theft, or embezzlement.

NOTE: No loss shall be allowed as a deduction if a the time of the filing of the return, if such loss has been claimed as a deduction for estate tax in the return.

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