- 11 -
any offer to compromise petitioners' tax liabilities for the
years in issue and that no settlement agreement with respect to
the tax years 1983 through 1986 ever existed.12
Petitioners next argue that respondent improperly disallowed
losses that they claimed from Double D Ranch, Inc., an S
corporation. Petitioners deducted $277,582, $330,385, and
$274,483 as their share of the purported losses of Double D
Ranch, Inc., in 1984, 1985, and 1986, respectively. Respondent
disallowed $200,331, $255,302, and $229,232 of those loss
deductions in 1984, 1985, and 1986, respectively. These losses
were disallowed because it had not been established to
respondent's satisfaction that deductions taken by Double D
Ranch, Inc., were ordinary and necessary business expenses or
expenses incurred in an activity engaged in for the production of
income.13
12Petitioners also argue that respondent should be estopped
from rejecting their offer in compromise. The doctrine of
equitable estoppel should be applied against the Government
"'with utmost caution and restraint.'" Kronish v. Commissioner,
90 T.C. 684, 695 & n.10 (1988)(quoting Boulez v. Commissioner,
supra at 214-215). In order for estoppel to apply, the proponent
must show, among other things, the existence of a false
representation and detrimental reliance on the representation.
Id. Petitioners have failed to show any misrepresentations made
by respondent.
13The only deductions that respondent allowed to Double D
Ranch, Inc., were those for real estate taxes and interest. The
Double D Ranch, Inc., loss amounts that respondent allowed to
petitioners were computed as follows:
(continued...)
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