1.26 Ark. Code R. 51-403(b)
Each year's return should be completed in itself and taxpayer's are expected to make every reasonable effort to ascertain the facts necessary to make a correct return. The expenses of one year can not be used to reduce the income of a subsequent year. A taxpayer has the right to deduct all authorized allowances, and it follows that if he does not within any year deduct certain of his expenses, losses, interest, taxes or other charges, he can not deduct them from the income of the next or any succeeding year. It is recognized, however, that particularly in a going business of any magnitude, there are certain overlapping items of both income and deductions, and so long as these overlapping items do not materially distort the income they may be included in the year in which the taxpayer, pursuant to a consistent policy, takes them into his accounts. Judgements[sic] or other binding adjudications, such as decisions of referees and boards of review under workman's compensation laws, on account of damages for patent infringement, personal injuries, or other causes, are deductible from gross income when the claim is so adjudicated or paid, unless taken under other methods of accounting which clearly reflects, the correct deduction, less any amount of such damages as may have been compensated for by insurance or otherwise. If, subsequent to its occurrence, however, a taxpayer first ascertains the amount of a loss sustained during a prior taxable year which has not been deducted from gross income, he may render an amended return for such preceding taxable year including such amount of loss in the deductions from gross income and may file a claim for refund of the excess tax paid by reason of the failure to deduct such loss on the original return. A loss from theft or embezzlement occurring in one year and discovered in another year is ordinarily deductible for the year in which sustained.
1.26 Ark. Code R. 51-403(b)