Oliver Q. Foust and Talietha Foust - Page 4

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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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