Douglas E. Kahle and Barbara W. Kahle - Page 2

            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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