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was not in the business of producing goods for sale. However,
petitioner substantiated that $35,000 of the amount wrongly
claimed as cost of goods sold represents deductible business
expenses, and respondent in the notice of deficiency allowed a
deduction of $35,000. Petitioner failed to substantiate with
credible evidence that any of the remaining $93,275 claimed as
cost of goods sold represents deductible business expenses.
Petitioner reported a net operating loss (NOL) carryover of
$148,367 on his 1992 individual return. The NOL carryover
consisted of a $105,740 loss carried forward from 1990 (1990 NOL)
and a $42,627 loss carried forward from 1991 (1991 NOL). The
1990 and 1991 NOLs were due in large part to losses from Sherrys
Exxon reported on Schedule C and to real estate and equipment
rental losses reported on Schedule E, Supplemental Income and
Loss. Petitioner combined the NOL carryovers from 1990 and 1991
with the losses reported in 1992 to arrive at a 1992 NOL
carryforward of $323,352.
Petitioner neither carried back the 1990, 1991, or 1992 NOL
to prior years nor elected to relinquish the NOL carryback
periods on his 1990, 1991, or 1992 individual return.
Petitioner’s returns for taxable years 1987, 1988, and 1989 are
not in the record.
On Schedule E of his 1992 individual return, petitioner
reported a depreciation expense of $15,317, which was
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