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On audit, due to lack of substantiation, respondent
disallowed petitioners' claimed NOL carryovers for 1991 through
1994, and respondent determined petitioners' joint taxable income
and joint Federal income tax liability for 1991 through 1994 as
follows:
Year Taxable Income Tax Liability
1991 $32,758 $ 4,916
1992 57,327 11,397
1993 69,605 14,698
1994 40,567 6,421
OPINION
In general, taxpayers are expected to maintain adequate
records to substantiate claimed losses, and taxpayers bear the
burden of proving that they are entitled to claimed losses. See
sec. 6001; Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933).
Respondent argues that petitioners have not substantiated
the NOL carryovers claimed on their 1991 through 1994 joint
Federal income tax returns. Alternatively under section 108(b),
respondent argues that if the NOL carryovers are found to be
substantiated, petitioners' discharge of indebtedness from the
bankruptcy proceeding in 1988 would eliminate the NOL carryovers.
Petitioners assert that during 1980 through 1987 they
incurred large losses from their farm and oil and gas exploration
activities that generated the large claimed NOL carryovers
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