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Losses

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Community Guru
Juvy Ann P Member Since: Oct 29, 2015

I have questions.  The ITR has a category named "losses".  How is this accomplished using the transactions report?  Does this refer to potential "cash on hand"?  If I had a fixed price contract but the funds did not become transformed into cash, do I consider this as a loss?

 

I did try to search the web for answers.  And these are the things that I found:

 

1.  If the security or investment is sold for less than its original purchase price, then the dollar amount of difference is considered a capital loss.  If the project is supposed to be won at $200.00 and I end up getting only the first milestone accomplished within the deadline set by the client and this milestone has made me earn $50.00 then I had a capital loss of $150.00.  

 

2. Capital losses can be reported as deductions.  So I need to declare $150.00 as one of the deductions.

 

3.  Some losses are realized.  Others are unrealized.  The latter do not need to be reported in the tax return.  How come I failed to realize the latter? Are there accountants on board?

 

 

Reference:

 

Cussen, M. P. 27 June 2013.  Capital Losses and Tax.  Retrieved from https://www.investopedia.com/ (Date accessed 26 December 2018).

2 REPLIES
Active Member
Abhishek V Member Since: Nov 8, 2017

 Not an accountant, but just my 2c. In your example, you mentioned that you took on a task worth 200$, but you only finished a single milestone worth 50$. Meaning that you got your work's worth of 50$, and the 150$ is for the work that was never (or at least shouldn't have been) started in the first place. I would personally just declare that 50$ as income, and forget about the 150$. 

 

Again, not an accountant, but it just wouldn't make sense for any goverment institution to leave a loop hole this big. I dare say nearly everyone would abuse it to hell if it worked like this. Very interested in what the actual accountants think about this; the google searches aren't particularly easy to understand.

Community Guru
Juvy Ann P Member Since: Oct 29, 2015

Thanks for the response, Abhishek.  I am thinking that probably what would be considered as a capital loss would be the dollar difference between what we have actually earned and what we gave back to tha client in the form of a refund.

 

I see your point in the "loophole".  It, probably, won't be realistic.

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