- 40 -
regarded R.K. as “a separate entity” for tax and accounting
purposes.
We conclude, and we have found, that R.K. was not part of
Laney’s trade or business of offering his services as a
consultant.
Because R.K. had not yet gone into operation when Laney
suffered his reverses and, in 1983, his loss in connection
therewith, Laney’s 1983 R.K. loss was not a loss attributable to
a trade or business, and so could not enter into the computation
of a net operating loss. Sec. 172(d)(4); Todd v. Commissioner,
77 T.C. 246 (1981), affd. 682 F.2d 207 (9th Cir. 1982).
We hold, for respondent, that Laney’s claimed 1983 loss did
not arise from a trade or business.
D. Nature and Amount of Loss
Respondent concedes that R.K. was a transaction entered into
for profit, within the meaning of section 165(c)(2). We have
held that Laney’s 1983 R.K. loss could not be carried forward as
a theft loss, a casualty loss, or a trade or business loss.
Petitioners have not suggested, and we have not found, any other
ordinary loss that could be carried from 1983 to the years before
the Court.14
14 Neither side discusses sec. 195, relating to
deductibility of startup expenditures. Laney’s testimony about
his pre-1983 notions of proper accounting procedures, his
promises to clarify matters later in the trial, and his brief
(continued...)
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