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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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