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All section references are to the Internal Revenue Code for
the years under consideration. All Rule references are to the Tax
Court Rules of Practice and Procedure. All dollar amounts are
rounded.
Some of the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference.
General Findings
Petitioners, husband and wife, resided in Carmichael,
California, at the time they filed their petition challenging
respondent's determinations. Petitioners timely filed joint
Federal income tax returns for each of the years under
consideration. On June 1, 1992, petitioners were issued a refund
of $1,351 for tax year 1988. The refund resulted from
petitioners' request for a tentative refund based upon a claimed
net operating loss carryback from 1991.
For convenience and clarity, we have combined additional
findings of fact and opinion with respect to each issue.
Issue 1. Characterization of Advances From Robert Randall Co.
Petitioner husband Mark D. Morgan (hereinafter referred to as
petitioner) has been involved for many years in real estate
activities, particularly the construction of real estate. In June
1988, he began working for Robert Randall Co. which is in the
business of developing and managing apartment complexes.
Previously, petitioner had been employed by Gibraltar Community
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