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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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