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Petitioners’ failure to file their 1987 income tax return
until May 11, 1989, was not due to reasonable cause.
Petitioners substantially understated their income tax
liabilities for 1986, 1987, and 1988; however, they adequately
disclosed in a statement attached to their tax returns the
relevant facts affecting the tax treatment of their claimed net
operating loss carryforward.
OPINION
Every matter that we are to resolve in the instant case
stems directly from, or is substantially affected by, R.K.
I. Settlement
A. With Justice Department
Petitioners argue that they are entitled to a 1983
theft/casualty loss deduction with a 15-year net operating loss
carryover because Laney had an agreement with the Department of
Justice that he is entitled to deduct this net operating loss
carryover in exchange for voluntarily dismissing the Court of
Claims petition in which he alleged a taking of R.K. by the
United States.
Respondent contends that petitioners did not have an
agreement with the Department of Justice.
We agree with respondent.
In their pretrial memorandum, the first witness petitioners
listed was Henry, who was expected to testify about “the
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