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On their Schedules E (Supplemental Income Schedule) for 1985
through 1988, petitioners claimed the following losses from
Vosburg:
Year Loss Claimed
1985 $ 19,886
1986 48,142
1987 94,469
1988 129,083
OPINION
Petitioners claimed an ordinary loss deduction of $129,083
as their portion of Vosburg's operating loss for the taxable year
1988. They also claimed a deduction pursuant to section 1793 of
$3,057 as a result of their stock ownership in Vosburg.
Respondent disallowed both of these deductions. Respondent's
determinations are presumed correct, and petitioners bear the
burden of proving otherwise. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933). A "small business corporation" under
subchapter S of the Internal Revenue Code (S corporation) is not
normally subject to corporate income tax. Sec. 1363(a).
Shareholders include their pro rata share of the corporation's
3Sec. 179 permits a taxpayer who purchases tangible,
personal, depreciable property for use in the active conduct of a
trade or business to expense up to $10,000 of the cost of the
property placed in service in any year. Sec. 179(a), (b), (d).
However, the amount of the deduction cannot exceed the taxpayer's
aggregate amount of taxable income (disregarding sec. 179) from
the active conduct of any trade or business. Sec. 179(b)(3)(A).
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Last modified: May 25, 2011