Loss Sustained in One Line of Business Cannot Be Claimed as Deduction from the Income of Another Line of Business

February 9, 1984 BIR RULING NO. 035-84 30 (d) (1) (A)-000-00-035-84 Gentlemen : In reply to your letter dated February 15, 1983, please be informed that Section 30(d)(1)(A) of the Tax Code, as amended, provides that a loss representing the excess over the income, of allowable expenses and other deductions directly or proximately attributable or related to the production or earning of such income from a particular line of business or activity, shall not be allowed as a deduction from or offset against income of an individual derived from other sources. In other words, if a taxpayer's gross income is derived from two (2) or more lines of businesses or activities, the loss sustained in one line of business or activity cannot be claimed as deduction or offset from the income of his other line of business or activity. Thus, if in 1981 an individual derived income from manufacturing and at the same time was engaged in the business of farming but his farming expenses exceeded his farming income, he cannot offset his net loss from farming against his manufacturing income. However, if he commenced his farming business in 1981, he is entitled to carry over his net operating loss from farming in 1981 to the next two years beginning 1982. In other words, he can deduct the net loss incurred in 1981 from his farming income in 1982 and 1983. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner