Frederick H. Jackson III and Pamela S. Jackson - Page 8

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               The corporation has not defaulted on the loans.                        
          The Guarantors                                                              
               Petitioner’s father testified that he agreed to act as                 
          guarantor:  “To expedite the loan and, hopefully, get a little              
          lower interest rate.”  Petitioner’s father was not a shareholder,           
          officer, or employee of the corporation.                                    
          Petitioners’ Returns                                                        
               On petitioners’ Federal income tax returns for 1994 through            
          1996, petitioners claimed losses from the corporation of                    
          $39,621.25, $44,390.02, and $53,188.25, respectively.  For 1994,            
          petitioners claimed a net operating loss carryforward of $743.62            
          (the carryforward), which resulted from losses of the corporation           
          for 1993 and prior years (both such carryforward and the losses             
          from the corporation for 1994 through 1996 being referred to as             
          “the losses”).                                                              
          The Notice                                                                  
               The adjustments giving rise to the deficiencies in tax here            
          in question are respondent’s disallowance of any deductions for             
          the losses.1  Respondent’s grounds for such adjustments are that,           

               1  Inexplicably, respondent’s disallowance for 1995 is in              
          the amount of $42,564, which is $1,825.02 less than the loss                
          claimed by petitioners ($44,390.02).  We shall sustain                      
          respondent’s determination of a deficiency with respect to 1995             
          only to the extent attributable to respondent’s disallowance, in            
          the amount of $42,564.                                                      

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