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concluding that its position is 'unreasonable' or 'not
substantially justified.'" Analogously, the more difficult a
building's basis is to establish, the more leeway the Court
should accord the IRS before concluding its position is
unreasonable. As a result, we hold respondent substantially
justified in her position on this issue.
(4) Net Operating Loss Carryforwards
Respondent denied net operating losses claimed by petitioner
in excess of $250,000 in 1989 and used as part of the carryover
loss for 1990 based on NII's failure to establish that any losses
were in fact incurred in the years 1976, 1978-1985, and 1988.
Petitioner's net operating loss carryovers were premised on: (a)
Business expenses; (b) interest expenses; (c) depreciation
deductions; and (d) losses of petitioner's subsidiaries incurred
in those years.
In October of 1989 petitioner destroyed most of the
underlying documentation for its expenses from 1971 to 1984 or
1985, keeping only its unaudited books of original entry, other
books based on them and some checks for its two wholly owned
subsidiaries, National For Sale by Owner Realty Corp. (Sale by
Owner) and Far Western Real Estate Corp. (Far Western). The
Court found NII not entitled to most of the operating losses from
the prior years that were carried over to 1989, except for
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