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Respondent proposed numerous adjustments in the notices of
deficiency, most of which have been resolved. For each year at
issue with respect to BAC, respondent disallowed all of BAC’s
expenses and recalculated BAC’s income accordingly, determined
that petitioner must include in his income BAC’s corrected S
corporation income, and allowed petitioner additional Schedule A
miscellaneous deductions in amounts equal to BAC’s corrected S
corporation income, presumably pursuant to section 183(b).12 For
1988, 1991, and 1992 with respect to LFI, respondent disallowed
petitioner’s deductions of LFI’s distributive net losses. For
1989, respondent disallowed all of LFI’s deductions and
determined that petitioner must include in income LFI’s corrected
S corporation income but did not make any adjustment under
section 183(b) except with respect to Granot Loma’s real estate
taxes. For 1990, respondent reclassified LFI’s net auction
proceeds as capital gain to petitioner, disallowed all of LFI’s
deductions, and determined that petitioner must include in income
LFI’s corrected S corporation income but did not make any
adjustment under section 183(b) except with respect to Granot
Loma’s real estate taxes.
12By disallowing petitioner’s deductions of BAC’s losses,
respondent effectively allowed petitioner the adjustment required
by sec. 183(b).
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