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IV. Net Operating Loss Carryovers
Section 172(a) authorizes a net operating loss deduction.
In general, a net operating loss is the excess of a taxpayer’s
deductions over his gross income, with certain modifications.
The modifications include eliminating from the computations the
net operating loss deductions, capital gains and losses of
taxpayers other than corporations, the deduction of personal
exemptions, and nonbusiness deductions. Section 172(b) permits a
net operating loss to be carried back and applied against taxable
income for the preceding 3 taxable years and the succeeding 15
years. In the case of net operating loss deductions, as in the
case of other deductions, the taxpayer bears the burden of
proving the facts and the amount of the loss. See Rule 142(a);
Ocean Sands Holding Corp. v. Commissioner, T.C. Memo. 1980-423,
affd. without published opinion 701 F.2d 167 (4th Cir. 1983).
On his 1991 Federal income tax return, petitioner claimed a
net operating loss carryover of $11,439 from his 1989 and 1990
taxable years. On his 1992 Federal income tax return, petitioner
claimed a net operating loss carryover of $34,797 from his 1989,
1990, and 1991 taxable years. Respondent’s notice of deficiency
disallowed these net operating loss carryovers. In the
substantive part of his petition, which petitioner denominated
“Tax Protest Letter”, he did not contest the disallowance of the
net operating loss carryovers, nor did he otherwise address their
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