Allan & Judy N. Green - Page 5

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          loss as shown on the taxable income line of their Federal income            
          tax return for that year as the NOL carryover to the next year.3            
          Without taking into account the claimed NOL carryovers to 1998              
          and 1999, petitioners reported total income for 1998 and 1999 of            
          $207,102 and $120,479, respectively.                                        
               The Commissioner determined in the notice of deficiency that           
          petitioners were not entitled to deduct any part of the NOL                 
          deductions claimed for 1998 and 1999.  The notice of deficiency             
          provides as to these determinations:                                        
               Your loss flow-through from your S corporation is                      
               limited to your basis.                                                 
               For tax years beginning before August 5, 1997 the                      
               period to which you can carry a Net Operating Loss                     
               (NOL) back is 3 tax years.  The period to which you can                
               carry an NOL forward is 15 tax years.                                  
               We disallowed your net operating loss deduction because                
               the carry-over period expired.                                         
               Petitioners made no attempt at trial or on brief to                    
          establish the composition of the NOL carryovers at issue.                   
          Instead, petitioners point to the notice of deficiency and argue            

          3 For example, petitioners ascertained their NOL carryover                  
          from 1998 to 1999 in the following manner.  First, they claimed a           
          deduction on their 1998 Federal income tax return as “Other                 
          income” a “Prior Year Carry-Over” of ($832,503), and they                   
          reported their adjusted gross income for that year as ($625,401).           
          Second, they subtracted from the reported figure $88,763 for                
          itemized deductions and $5,400 for personal exemptions to arrive            
          at “taxable income” for 1998 (and the NOL carryover to 1999) of             

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