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the Internal Revenue Service Center in Fresno, California, on
April 27, 1993.
From 1987 through 1992, petitioners prepared their own tax
returns. When they began using a paid preparer in 1993, they
discontinued deducting the NOL. They also discontinued filing a
Schedule C with their 1993 income tax return. Although
petitioner called the Internal Revenue Service (IRS) to ask about
the mechanics of calculating the NOL, he did not tell anyone at
the IRS that the NOL he was planning to deduct involved lost
anticipatory wages.
OPINION
Determinations made by the Commissioner in the notice of
deficiency are generally presumed correct; the burden of proof is
on the taxpayers to show those determinations are wrong. Rule
142(a); Welch v. Helvering, 290 U.S. 111 (1933).
Net Operating Loss
Deductions are a matter of legislative grace. New Colonial
Ice Co. v. Helvering, 290 U.S. 435, 440 (1934). It is well
established in case law that no deduction is allowed under
section 165 or any other Code section for loss of potential
income. See, e.g., Hort v. Commissioner, 313 U.S. 28, 33 (1941)
(since unrealized rent is not includable in taxpayer's gross
income, taxpayer has no grounds for deduction); Stephens v.
Commissioner, T.C. Memo. 1980-131 (no deduction allowed for wages
that could have been earned had an individual's employment not
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