related penalty under section 6662(d) in the amount of $7,359.60.
The deficiency results from the disallowance of the carryover of
a net operating loss (NOL) of petitioner husband Douglas E. Kahle
(Mr. Kahle) from the 1990 taxable year. The issue for decision
in this case is whether petitioners may use the NOL to reduce
income in the year in which petitioners filed for personal
bankruptcy. Based on our decision with regard to this issue, we
will have to decide whether petitioners are liable for the
addition to tax for delinquent filing and an accuracy-related
penalty for substantial understatement of tax liability.
Background
This case was submitted fully stipulated under Rule 122.
The stipulation of facts and attached exhibits are incorporated
herein by this reference and found accordingly.
Petitioners are married individuals filing jointly, and
resided, at the time the petition in this case was filed, in
Virginia Beach, Virginia. Their 1991 return was filed
delinquently on April 9, 1993, with the Internal Revenue Service
at Norfolk, Virginia.
On December 6, 1991, Mr. Kahle filed a voluntary bankruptcy
petition under chapter 7 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court, Eastern District of Virginia, Newport News
1(...continued)
the Internal Revenue Code in effect for the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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