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deductions from carrybacks relating to petitioner-husband's
interest in Manchester Steel, Inc., an S corporation. The
Friedmans claimed refunds in the amounts of $765,440 and $792,469
for the taxable years 1989 and 1990, respectively.
Petitioners Edward and Deborah Rosenthal resided in Pepper
Pike, Ohio, at the time the petition was filed in this case. On
October 21, 1993, the Rosenthals filed an amended income tax
return for the taxable year 1988, claiming a carryback of a net
operating loss for 1991 to 1988. The Rosenthals claimed
entitlement to a 1992 net operating loss which, in turn, was
carried back to 1989 and 1990. Subsequently, on November 12,
1993, the Rosenthals filed a claim for refunds for the taxable
years 1989 and 1990, for $834,729 and $810,331, respectively.
Respondent mailed notices of deficiency to petitioners.
The deficiencies relate to petitioners' stock investment in
Manchester Steel, Inc. Subsequently, petitioners filed separate
petitions for a redetermination of their respective income tax
deficiencies for the taxable years at issue.
Background
Manchester Consolidated Industries, Inc. (Old Manchester),
was founded in 1970 by petitioners. It was a major independent
steel service center specializing in the resale and processing of
carbon flat rolled steel. Old Manchester's success arose, in
part, to its niche in the coated products market, specializing in
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