Allen C. Chamberlin and Martha L. Chamberlin - Page 18

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          income.  Under section 1398(g), the bankruptcy estate received              
          the carryover loss from petitioners upon the filing of the                  
          bankruptcy petition.  The bankruptcy estate of petitioners is               
          also entitled to any loss arising from the payment of $141,429 of           
          interest, the amount of interest paid by the estate that was                
          proportional to the $450,000 loan made to The Chamberlin Corp.              
          from the Freedom Federal loan proceeds.  Combined with the                  
          $944,049 worthless debt from the Ingersoll-Rand loan payment, the           
          bankruptcy estate of petitioners had a combined loss of                     
          $2,340,878 available to reduce its taxable income beginning in              
          1985, the year the estate came into being.                                  
               The entire amount of loss is carried to the earliest taxable           
          years to which such loss may be carried.  See Lone Manor Farms,             
          Inc. v. Commissioner, 61 T.C. at 441.  The portion of such losses           
          that is carried to other taxable years is the excess, if any, of            
          the amount of loss over the sum of the taxable income for each of           
          the prior taxable years to which such loss may be carried.  See             
          id.  Therefore, when a taxpayer claims carryover losses for the             
          year in issue, it is necessary to determine whether the carryover           
          losses, claimed as a deduction for that year, are still available           
          or were absorbed as allowable deductions in prior taxable years.            
          See id.  A carryover loss deduction for a prior year, which would           
          have been allowed if claimed, must be considered as actually                

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