Melvin J. Laney and Carolyn A. Laney - Page 30

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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.                          
                  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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