Melvin J. Laney and Carolyn A. Laney - Page 4

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                        (1) Whether petitioners had a binding settlement                              
                  agreement entitling them to deduct a net operating loss                             
                  carryover for the years in issue.                                                   
                        (2) Whether petitioners had a 1983 theft loss, or                             
                  casualty loss, or trade or business loss that could                                 
                  properly be carried over to the years in issue and, if                              
                  so, then in what amount.                                                            
                        (3) Whether petitioners are liable for a late                                 
                  filing addition to tax under section 6651(a) for 1987.                              
                        (4) Whether petitioners are liable for negligence,                            
                  etc., additions to tax under section 6653(a)(1) for                                 
                  1986, 1987, and 1988 and if so for 1986 or 1987, then                               
                  in what amounts.                                                                    
                        (5) Whether petitioners are liable for additions                              
                  to tax under section 6661 for 1986, 1987, and 1988.                                 

            petitioners reported self-employment tax liabilities for each                             
            year from 1978 through 1982.  However, see sec. 1402(a)(4),                               
            which, for purposes of self-employment taxes expressly disallows                          
            net operating loss deductions in computing net earnings from                              
            self-employment.  Apart from the disallowance of the claimed                              
            theft/casualty net operating loss deductions, respondent has not                          
            made any adjustments to the amounts, categories, or accounting                            
            methods that petitioners reported on the Schedules C attached to                          
            petitioners’ tax returns for the years in issue.  Apart from                              
            these disallowed deductions, the amounts shown on petitioners’                            
            Schedules C would result in a net profit of $24,959 for 1987 and                          
            $29,000 for 1988.  See infra table 1.  As a result, it appears                            
            that respondent’s determination of self-employment tax                                    
            liabilities is correct, regardless of our conclusions as to the                           
            proper treatment of petitioners’ claimed deductions.                                      

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