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ordinary loss of $693,492 from the sale of such stock. Also on
amended returns, a net operating loss in the amount of $655,191
was carried back to 1988, and then forward into 1989 and 1990, in
the amounts of $601,814 and $591,629, respectively.
On their 1992 Federal income tax return, petitioners claimed
a net operating loss carryover deduction in the amount of
$587,581, the source of which is not readily identifiable on the
return, but apparently relates to the sale of petitioner's BCBI
stock. Petitioners' amended returns for the years 1988 through
1991, all of which claimed refunds, and their 1992 return were
prepared by Thomas A. Lawler, Esq., who is also their counsel of
record in this case.
In the notice of deficiency, respondent determined that
petitioner suffered a loss of $693,492 ($1,743,793 basis, minus
$1,050,000 realized) on the sale of his BCBI stock and further
determined, pursuant to section 1244, that petitioners were
limited to an ordinary loss deduction of $100,000 in 1991 from
the transaction.3 Respondent treated the balance of the loss
3 It would appear that respondent was unaware of or
disregarded the allocation schedule in the agreement, potentially
allowing petitioners (at least with respect to the amounts
attributed to the covenant not to compete and consulting
services) to offset ordinary income by long-term capital loss in
excess of the amounts otherwise allowable under sec. 1211(b). We
cannot tell at this point whether treating the sale of
petitioner's option in the real estate as though it were
inherently part of the sale of his BCBI stock worked to
petitioners' advantage or disadvantage for Federal income tax
(continued...)
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