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sale of the Roslyn residence that should be included in their
income for 1986.
In their 1988 return, the Gordons reported as ordinary
income the wages of $379,071 that MKI had paid to Mr. Gordon
during that year and claimed a net operating loss deduction of
$268,318 (claimed 1988 NOL deduction) that was attributable to
Mr. Gordon's 1986 net trading loss that they claimed in their
1986 return.
In their 1989 and 1990 returns, the Gordons did not claim
any net operating loss deductions.
During 1992, the IRS initiated an examination of the
Gordons' 1988 return. The IRS revenue agent examining that
return examined, inter alia, the claimed 1988 NOL deduction.
Because that claimed deduction was attributable to Mr. Gordon's
1986 net trading loss, that agent reexamined that loss after
having notified the Gordons in writing of his intention to do so.
Based on that reexamination, the revenue agent concluded that Mr.
Gordon's 1986 net trading loss constituted a capital, and not an
ordinary, loss and that, consequently, that loss did not result
in a net operating loss for 1986, and the Gordons were not
entitled to the claimed 1988 NOL deduction.
The Gordons' Separation and
Their Separation Agreement
The Gordons separated in March 1991. Thereafter, Mr. Gordon
moved out of the Lincoln Plaza residence.
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