Charles Evans Hughes

“ If capital deductions and capital losses were in excess of the capital gain, or if there were capital losses in the absence of capital gain, such losses were deductible as ordinary losses. We are told that the opportunity to minimize taxes by the practice of taking capital losses to offset ordinary net income constituted a particularly serious problem after the Act of 1921, which reduced the rate of tax on capital net gains. ”

“ Thus where the limitation is applicable and the offset of 12 1/2 per centum of the capital net loss is allowed accordingly, capital losses are not deductible in determining the taxpayer's net income for the purpose of the normal tax and surtax. And, as in such case there is no capital gain, the 'ordinary net income' under Section 101 (b) , that is, the net income computed after excluding capital loss and capital deductions, is the only net income upon which a tax is laid. ”

“ The Commissioner ruled that 'Since the capital loss of $154,921.98 is in excess of adjusted ordinary net income of $94,963.52 (without contributions) there is no net income against which to make a deduction for contributions'. ”