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Petitioner's 1986 and 1988 Federal Income Tax Returns
On Schedule C (relating to petitioner's retail coin and stamp
business) attached to petitioner's 1986 Federal income tax return,
petitioner deducted $54,0001 as a loss from "foreclosure to pay
business loan".
On petitioner's 1986 return, petitioner claimed a dependency
exemption for Florence H. Ratliff, who was listed on the return as
petitioner's "companion". Petitioner was not married to Florence
H. Ratliff (Ms. Ratliff) in 1986 or 1988, nor were they related.
On his 1988 Federal income tax return, petitioner deducted
$17,769 as a net operating loss carryover from 1983, 1984, and
1986.
The Notice of Deficiency
In the notice of deficiency, respondent disallowed $47,405 of
the claimed foreclosure loss, allowing the remaining $6,595 as an
interest expense. Respondent also disallowed the claimed
dependency exemption for Ms. Ratliff. Finally, respondent
disallowed the claimed $17,769 net operating loss carryover for
1988 on the basis that petitioner failed to timely elect to
carryforward his net operating losses from tax years 1983 and 1984.
Moreover, respondent determined that petitioner had not established
that any portion of those prior years' losses would be available
for 1988. Respondent accordingly increased petitioner's 1988
taxable income by $17,769.
1 The record does not indicate how petitioner arrived at
the $54,000 figure; his borrowings from NCB totaled $52,000.
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