- 12 -
year, or that it was carried forward to 1992 and 1993 in
accordance with the requirements of section 172.11 Accordingly,
petitioners have not established their entitlement to the loss
carryforwards from previous years as reflected on their 1992 and
1993 returns. See Larabee v. Commissioner, T.C. Memo. 1989-298.
Similarly, petitioners have failed to establish that they
incurred the claimed loss of $44,872 from a sale of the San Jose
property in 1993. Nor have petitioners presented any evidence
that they paid or incurred any expenses with respect to the San
Jose property in the years at issue. Accordingly, we sustain
respondent’s disallowance of the losses claimed with respect to
the San Jose property.12
11 Under sec. 172, a net operating loss generally may be
carried forward only if it is not absorbed through the operation
of a 3-year carryback, unless an election is made under sec.
172(b)(3) to waive the carryback. See McGuirl v. Commissioner,
T.C. Memo. 1999-21. There is no evidence that petitioners have
followed these procedures.
12 In fact, we question whether the San Jose property was
ever rented. There are many irregularities with regard to
petitioners’ purported rental activity at the San Jose property.
For instance, although petitioner husband introduced into
evidence an alleged lease agreement to show that petitioners
leased the San Jose property to petitioner wife’s brother in
1989, petitioner husband conceded at trial that this was not a
real “lease” but a fictitious document created for the purpose of
qualifying for a mortgage. As mentioned above, petitioners
originally omitted any rental activity from the San Jose property
on their 1989, 1990, and 1991 tax returns. When they amended
their 1990 and 1991 tax returns, they reported gross rental
income in the amount of $2,400 for each year. When cross-
examined about the peculiarity of these identical round amounts
of gross rental income for the 2 years, petitioner husband
testified that the amounts reported were probably a "mistake".
In addition, on these amended returns, petitioners claimed
expenses with respect to the San Jose property that duplicated
(continued...)
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