52 STAT.] 75TH CONG. , 3D SESS.-CH. 289-MAY 28, 1938 (2) income, war-profits, and excess-profits taxes imposed by the authority of any foreign country or possession of the United States; but this deduction shall be allowed in the case of a tax- payer who does not signify in his return his desire to have to any extent the benefits of section 131 (relating to credit for taxes of foreign countries and possessions of the United States); (3) estate, inheritance, legacy, succession, and gift taxes; and (4) taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not exclude the allowance as a deduction of so much of such taxes as is properly allocable to maintenance or interest charges. (d) TAXES OF SHAREHOLDER PAID BY CORPORATION.-T he deduction for taxes allowed by subsection (c) shall be allowed to a corporation in the case of taxes imposed upon a shareholder of the corporation upon his interest as shareholder which are paid by the corporation without reimbursement from the shareholder, but in such cases no deduction shall be allowed the shareholder for the amount of such taxes. (e) LossES BY INDIVIDUALS.- In the case of an individual, losses sustained during the taxable year and not compensated for by insur- ance or otherwise- (1) if incurred in trade or business; or (2) if incurred in any transaction entered into for profit, though not connected with the trade or business; or (3) of property not connected with the trade or business, if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. No loss shall be allowed as a deduction under this para- graph if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return. (f) LOSSES BY CORPORATIONS. -In the case of a corporation, losses sustained during the taxable year and not compensated for by insur- ance or otherwise. (g) CAPITAL LossES.- (1) IMITrATION. -Losses from sales or exchanges of capital assets shall be allowed only to the extent provided in section 117. (2) SECURITIES BECOMING WORTHLESS.-I f any securities (as defined in paragraph (3) of this subsection) become worthless during the taxable year and are capital assets, the loss resulting therefrom shall, for the purposes of this title, be considered as a loss from the sale or exchange, on the last day of such taxable year, of capital assets. (3) DEFINITION OF SECURITIES.- As used in this subsection the term "securities" means (A) shares of stock in a corporation, and (B) rights to subscribe for or to receive such shares. (h) WAGERING LOSSES.- Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions. (i) BASIS FOR DETERMINING Loss. -T he basis for determining the amount of deduction for losses sustained, to be allowed under sub- section (e) or (f), and for bad debts, to be allowed under subsection (k), shall be the adjusted basis provided in section 113 (b) for deter- mining the loss from the sale or other disposition of property. (j) Loss ON WASH SALES OF STOCK OR SECTUITIEs.-For disallow- ance of loss deduction in the case of sales of stock or securities where within thirty days before or after the date of the sale the taxpayer has acquired substantially identical property, see section 118. Income, etc., taxes imposed by foreign country, etc. Post, p . 506. Estate, etc., taxes. Assessment against local benefits, etc. Taxes ofshareholder paid by corporation. Losses by individ- uals. Business. Not connected with trade or business. Casualty losses not connected with busi- ness. Disallowed, if de- ducted for estate tax purposes. Losses by corpora- tions. Capital losses. Limitation. Securities becoming worthless. Definition of securi- ties. Wagering losses. Basis for determin- ing loss. Post, p. 493. Loss on wash sales of stock or securities Post, p. 53. 461
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