____ For an activity that is not engaged in for profit, the income from it is includible on your return. From this income, you have deducted the following expenses in the order shown:
1. Interest, taxes and other deductible items without regard to the profitability of the activity;
2. Operating expenses, except those in (3) below (to the extent gross income from the activity exceeds deductions allowable under (1) above); and
3. Depreciation and other basis adjustment items to the extent gross income from the activity exceeds deductions allowable under (1) and (2) above.
____ If the property sold was not used in a trade or business or held as income producing property, the loss on the sale was not deducted.
____ If the loss was incurred on sale or exchange of property between members of the same family, it was not deducted.
____ If the loss was incurred on sale or exchange of property between yourself and a corporation in which you are considered the owner of more than 50 percent of the value of the outstanding stock, it was not deducted.
____ A loss on the sale or exchange of your residence was not deducted.
____ Losses from wash sales were not deducted.
____ Losses on repossessions of property held for personal use were not deducted.
____ Your deductions for gambling losses do not exceed the amount of your gambling winnings.
____ Your deduction for abandonment of business or investment property met the burden of proof for abandonment of property such as the intention to abandon, some act evidencing that intention, and the abandonment occurred in the taxable year.
____ You have established that the loss you claimed for a small business corporation loss was for a corporation that qualifies as a small business corporation.
____ Your deduction for a distributive share of a partnership loss was limited to the extent of your adjusted basis.
____ Your deduction was for a loss that was incurred during the year.
____ Renting a personal residence temporarily prior to its sale does not convert it to business property. If the loss resulted from the sale of a personal residence, it was not claimed.
____ You are able to establish that the securities you deducted as a loss became worthless during the taxable year and you have also established the basis of the stock.
____ Your deduction for a loss on the sale of personal property that had been converted to business use was measured by the difference between the lower of its cost or fair market value at the date of conversion reduced by any allowable depreciation for the period it was used for business purposes and the selling price.
____ For a farm loss to be allowable, you must show you intended to make a profit from your farming operations. This intent can be supported by actions that show that you entered into and operated your farming business in good faith for the purpose of making a profit.
____ Loss due to your failure to exercise an option to buy a personal residence (forfeiture of the down payment) is a personal expense. You did not deduct this loss. For property rented to a friend, relative or other parties for less than its fair rental value, expenses attributable to the rental were deducted only to the extent of the income received and only as itemized deductions on Schedule A. You did not deduct a loss from that rental.
____ You did not deduct a loss for an abandonment of a building after the asset was fully depreciated.
____ Your loss was evidenced by a closed and completed transaction fixed by an identifiable event.
____ You did not deduct a loss for the demolition of a building. Instead, you increased the basis of the land by the adjusted basis of the building.
____ You did not use replacement cost as the measure of your loss.
____ You did not take into account any loss that you realized on the disposition (the loss position) of less than all of the positions of a straddle to the extent that there is any unrecognized gain in one or more of the following positions:
(1) Successor positions,
(2) Offsetting positions to the loss position, or
(3) Offsetting positions to any successor position.
____ If your net section 1231 loss or your section 1231 gains and losses are equal, you have treated each item as an ordinary gain or loss. Long-term capital gain treatment is allowed only for the part of the net section 1231 gain that is more than the total of net section 1231 losses unless you have non-recaptured section 1231 losses for the five most recent preceding tax years that have not already been offset by section 1231 gains. The part of your section 1231 gain that does not exceed your total net section 1231 losses from the five preceding tax years was treated as ordinary income.
____ You offset passive losses (including those passed through to partners and shareholders by partnerships and S corporations) only against passive income. A passive activity is one involving the conduct of a trade or business in which you do not materially participate or any rental activity. A rental activity is a passive activity even if you materially participated in that activity unless you qualify for a special rule for personal services performed in a real property trade or business.
____ The loss you deducted on Schedule C was for an activity that meets the guidelines of carrying on a trade or a business within the meaning of the Internal Revenue Code Section 162.
____ Your claim for an ordinary loss on funds which were not federally insured and were deposited in a financial institution which became insolvent did not exceed $20,000 ($10,000 if you are married filing separately).
© 1986, 1998 to 2002, Jack Warren Wade, Jr.
