Diminution of Loss

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.


Diminution of Loss.—Mere diminution of loss is neither gain, profit, nor income. Accordingly, one who in 1913 borrowed a sum of money to be repaid in German marks and who subsequently lost the money in a business transaction cannot be taxed on the curtailment of debt effected by using depreciated marks in 1921 to settle a liability of $798,144 for $113,688, the “saving” having been exceeded by a loss on the entire operation.55

55 Bowers v. Kerbaugh-Empire Co., 271 U.S. 170 (1926).