Ramon and Irma Ortiz - Page 15

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          Under section 1212 any net capital losses that are disallowed as            
          a result of the limitation in section 1211 may be carried forward           
          to the next taxable year.  In this case petitioners did not                 
          report a capital loss in 1990, but they have claimed a capital              
          loss carryover to 1991.  They have also claimed that the loss was           
          actually a net operating loss carryforward.  However, petitioners           
          did not elect on their 1990 return to carry forward a net                   
          operating loss, as required by section 172(b)(3), and they have             
          failed to substantiate that they experienced a loss in 1990 or              
          1992.  Petitioners have the burden of proving entitlement to a              
          capital loss or net operating loss.  Rule 142(a); Burke v.                  
          Commissioner, T.C. Memo. 1995-608.  They failed to do so.                   
          Therefore, we sustain respondent's disallowance of the claimed              
          capital loss.                                                               
          Issue 4.  Self-Employment Taxes and Adjustments                             
               Respondent determined that Mr. Ortiz' unreported income in             
          1991 and 1992 was subject to self-employment taxes under section            
          1401 and to an adjustment in his self-employment tax deduction in           
          each year.                                                                  
               Section 1401 imposes a tax on a taxpayer's self-employment             
          income.  Self-employment income includes the net earnings from              
          self-employment derived by an individual during the taxable year.           
          Sec. 1402(b).  Net earnings from self-employment means gross                
          income derived by an individual from any trade or business                  
          carried on by the individual, less allowable deductions                     




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