783. Gains and losses generally.

It has been authoritatively stated that a guiding principle must underlie any interpretation of the capital gains tax legislation. This is that its purpose is to tax capital gains and to make allowance for capital losses, each of which ought to be arrived at on normal business principles. In straightforward situations the courts should hesitate before accepting results which are paradoxical and contrary to business sense. Capital gains tax is a tax on gains; it is not a tax on arithmetical differences1.

It has further been stated that to say that a loss or gain which appears to arise at