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61(a)(13), 702(a)(8). With respect to an S corporation, a
shareholder shall take into account his or her pro rata share of
the corporation's losses and deductions to the extent that the
total losses and deductions do not exceed the sum of the adjusted
basis of the shareholder's stock and the shareholder's adjusted
basis of any indebtedness of the S corporation to the
shareholder. See sec. 1366(d)(1).
The first issue is whether petitioner is entitled to net
operating loss carryforwards from her 1985, 1986, and 1987 tax
years to her 1988, 1989, and 1990 tax years. Petitioner reported
negative taxable income amounts of $9,771 and $17,928 on her
Federal income tax returns for 1985 and 1986, respectively. On
her 1986 return, petitioner claimed a $9,771 net operating loss
carryover from 1985. On her 1987 return, petitioner reported
adjusted gross income of $3,269 and zero taxable income. On
September 12, 1989, petitioner filed an amended return for 1987
claiming a $27,699 net operating loss carryover from 1986, plus a
$14,750 loss from an unidentified partnership, for a total loss
of $39,180.4
4
The $27,699 loss carried over from 1986 to 1987 results from
the $9,771 loss reported for 1985 plus the $17,928 loss reported
for 1986. The $39,180 total loss claimed for 1987 results from
the $27,699 loss carried over from 1986 plus the $14,750
unidentified partnership loss reported for 1987, minus the $3,269
adjusted gross income previously reported for 1987.
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