A New Look at an Old Subject — Losses
BY SIG O. JORAANSTAD Partner, Seattle Office
Presented before the 37th Annual Conference of Certified Public Accountants of the Pacific Northwest, Spokane — June 1960
WHEN the Internal Revenue Code of 1954 was enacted the Com-mittee reports indicated that Congress was not making any substantive
changes respecting the tax treatment of losses deductible under Section 165 except in two rather narrow areas dealing with theft losses and losses on securities in affiliated corporations. Despite this fact the first proposed regulations were not issued until June 1956. Over three years later the Commissioner withdrew the first proposed regulations and substituted a new set of proposed regulations. This revision was necessary because of amendments made by the Technical Amendments Act of 1958.
After hearings on the new regulations, the final regulations were issued on January 16, 1960. These regulations are important because the Service has changed its position on a number of fairly important points. In some areas there has been clarification of the present policy of the Service respecting the tax treatment of losses. Specific and detailed guides are given which will be used in applying the rules and policies. Many of the guides outlined in the final regulations are based on principles developed by various courts in arriving at decisions on like matters. This is apparently a continuation of the trend to more specific rules in the statute and regulations in an attempt to narrow the area of uncertainty concerning proper tax treatment.
This morning we will consider only the more important changes that have been made which affect the tax treatment of losses on the voluntary removal of buildings and casualty losses. Also, some of the general rules governing the year of deduction and partial deduction of a loss where there is possibility of recovery or reimbursement. Other areas covered by this Treasury Decision are important and merit careful
study by everyone.
VOLUNTARY REMOVAL OF BUILDINGS
One of the important areas that has been given rather lengthy treatment in the new regulations relates to the voluntary removal of