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Petitioners contend that they suffered a “theft/casualty”
loss in 1983 in the amount of $16,347,250, which is treated in
effect as a business loss for net operating loss deduction
purposes.11 See 172(d)(4)(C). Their deduction of this item on
the Schedule C attached to their 1983 tax return resulted in a
net loss in the amount of $16,232,416.86. They contend that they
properly elected to waive the carrybacks (sec. 172(b)(3)) and
instead claim to be entitled to carry this loss forward for 15
years including the years in issue as a net operating loss (sec.
172(b)(1)(A)(ii)).
Respondent contends that (1) petitioners’ loss was much less
than petitioners claim, (2) the loss was not from a theft or
11 Petitioners’ original claim, and the expert witness
evidence they presented at trial, go to the expected value of the
enterprise that was expected to arise from R.K. Petitioners
initially overlooked the effect of sec. 165(b), as follows:
SEC. 165. LOSSES.
* * * * * * *
(b) Amount of Deduction.--For purposes of
subsection (a), the basis for determining the amount of
the deduction for any loss shall be the adjusted basis
provided in section 1011 for determining the loss from
the sale or other disposition of property.
At one point in their answering brief petitioners contend
that their basis in the property involved in R.K. was “at least
$563,784”, but for the most part they still contend that they are
entitled to deduct $16,347,250 for 1983 and to carry over to the
years in issue the amounts shown on their tax returns for these
years. See supra table 1.
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