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Furthermore, section 4940(c)(1) specifically provides that
“except to the extent inconsistent with the provisions of this
section, net investment income shall be determined under the
principles of subtitle A.” The rule under section 4940(c)(4)(C)
specifically excluding capital loss carryovers from the
calculation of capital gains and losses applies only to excise
taxes, and not to the present case. Consequently, section
4940(c)(4)(C) does not support petitioners’ interpretation of the
term “investment income” under section 163(d)(4)(B). As
pertinent to our inquiry, we rely on section 163(d)(4)(B) as the
controlling definition for the term “investment income” in
conjunction with sections 1212 and 1222.
We now turn to the amount of petitioners’ investment income.
Petitioners carried forward from 1996 a $141,621 long-term
capital loss. Sec. 1212(b)(1)(B). This carryover is treated as
a long-term capital loss for 1997. Sec. 1.1222-1(b)(2), Income
Tax Regs. Accordingly, the loss carryover is included in 1997
for purposes of calculating petitioners’ long-term capital loss,
net long-term capital loss, net capital loss, and capital loss
carryover to 1998. Sec. 1.1212-1(b)(1), Income Tax Regs. It
follows, then, that it is included in the calculation of net gain
and net capital gain in 1997 for purposes of section
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