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as a loss that they deducted on their 1989 Federal income tax
return in the amount of $2,121,283.
Petitioners filed an Application for Tentative Refund for
1989 claiming NOL carrybacks to the years 1986 and 1987. As a
result, petitioners' entire tax liability for the year 1986 in
the amount of $71,784 was eliminated, and petitioners’ income tax
liability for 1987 was reduced from $537,770 to $37,937.
Petitioners agreed to, and respondent assessed, an increase in
their 1987 income tax liability of $42,990, bringing petitioners'
remaining 1987 income tax liability to $80,927.
Mary Catherine reported a loss for 1990 in the amount of
$5,372,348, $4,687,700 of which was attributable to the
Minnechaug writedown. However, as of the beginning of 1990
petitioner lacked sufficient basis in Mary Catherine to take
advantage of such a loss from that year. In 1990, petitioner
lent Mary Catherine $1,743,893, increasing his adjusted basis and
his amount at risk, thereby enabling petitioners to claim a
deductible loss in the amount of $1,743,893 on their 1990 Federal
income tax return.
Petitioners filed an Application for Tentative Refund for
1990 claiming NOL carrybacks to the years 1987 and 1988.
Respondent reviewed this Application for Tentative Refund and
refunded the remainder of petitioners’ 1987 tax paid in the
amount of $80,927. The additional carryback allowed by
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