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On or about June 1, 1990, the Federal bankruptcy court
supervising the partnership bankruptcy permitted petitioner to
reacquire the 225-235 Boston Avenue property. The parties have
stipulated that the fair market value of the 225-235 Boston
Avenue property on the reacquisition date was $465,000. Pursuant
to a claim petitioner made in November 1990, he received an
insurance recovery of $4,000 in a later year for damage resulting
from alterations made to the 225-235 Boston Avenue property by
the partnership. Petitioner also filed suit against the attorney
who represented him on the sale of the property, alleging that
the partnership’s purchase money mortgage note should have been
recourse and not nonrecourse. Petitioner recovered no damages.
For taxable year 1990, petitioner and Mrs. Hovhannissian
filed a joint income tax return, reporting a loss of $99,797.
Upon the advice of their then income tax return preparer, they
did not report any gain or loss on the reacquisition. Petitioner
and Mrs. Hovhannissian filed separate Forms 1045, Application for
Tentative Refund, claiming net operating loss carrybacks of
$48,898 and $48,899, respectively, from 1990 to taxable year
1989.
In January to February 1995, respondent issued separate
notices of deficiency to petitioner and Mrs. Hovhannissian for
taxable year 1989 and a joint notice of deficiency for taxable
year 1990. Petitioners filed a timely petition with this Court.
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