Melvin J. Laney and Carolyn A. Laney - Page 31

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            casualty, and (3) R.K. was not a trade or business, so                                    
            petitioners did not have a net operating loss, and so petitioners                         
            are not entitled to net operating loss carryover deductions for                           
            the years in issue.  Respondent concedes that (1) petitioners had                         
            a loss from R.K., (2) R.K. was a transaction entered into for                             
            profit, and (3) petitioners are entitled to capital loss                                  
            carryover deductions for the years in issue.  Because petitioners                         
            did not have any capital gains for the years in issue, the                                
            capital loss carryover deductions are only $3,000 per year.  For                          
            1986, see sec. 1211(b)(2)(B).  For 1987 and 1988, see sec.                                
            1211(b)(1).                                                                               
                  We agree with respondent.                                                           

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