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either 1984 or 1985. Beginning in 1986 and continuing through
the years at issue, petitioner and Elwood filed joint Federal
income tax returns. Petitioner and Elwood also filed amended
Federal income tax returns, Forms 1040X, for the taxable years
1987 and 1988.
Petitioner and Elwood claimed an NOL deduction of $195,459
on their 1987 joint Federal income tax return. The 1987
deduction consisted of unused NOL's carried forward from Elwood's
1983, 1984, and 1985 Federal income tax returns and from
petitioner's and Elwood's 1986 joint Federal income tax return.
Petitioner and Elwood reported the calculation of their 1987 NOL
deduction on a schedule attached to their 1987 return as follows:
1983 $10,083
1984 120,199
1985 25,005
1986 40,172
Total 195,459
Petitioner and Elwood claimed an NOL deduction of $109,340
on their 1988 joint Federal income tax return. The 1988 NOL
deduction consisted of the same losses that make up the 1987 NOL,
reduced by $86,119, which was the amount of income offset by the
use of the 1987 NOL. Thus, petitioner and Elwood reported the
calculation of their 1988 NOL deduction on a schedule attached to
their 1988 return as follows:
1983 $10,083
1984 120,199
1985 25,005
1986 40,172
Less 1987 income (86,119)
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