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a detailed schedule showing the computation of the NOL deduction.
Sec. 1.172-1(c), Income Tax Regs.
Section 172(c) defines the term “net operating loss” as “the
excess of the deductions allowed by this chapter over the gross
income. Such excess shall be computed with the modifications
specified in subsection (d).” In the case of individuals such as
petitioners, the list of modifications in subsection (d) includes
that “No net operating loss deduction shall be allowed”, that “No
deduction shall be allowed under section 151 (relating to
personal exemptions)”, and that “the deductions allowable by this
chapter which are not attributable to a taxpayer’s trade or
business shall be allowed only to the extent of the amount of the
gross income not derived from such trade or business”. Sec.
172(d)(1), (3), and (4).
Petitioners’ counsel acknowledged at trial that petitioners
bear the burden of proof in this case. Petitioners, as taxpayers
attempting to deduct NOLs, bear the burden of establishing both
the existence of the NOLs and the amount of any NOL that may be
carried over to the subject years. Rule 142(a)(1); United States
v. Olympic Radio & Television, Inc., 349 U.S. 232, 235 (1955);
Keith v. Commissioner, 115 T.C. 605, 621 (2000); Jones v.
Commissioner, 25 T.C. 1100, 1104 (1956), revd. and remanded on
other grounds 259 F.2d 300 (5th Cir. 1958). Such a deduction is
a matter of legislative grace; it is not a matter of right.
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Last modified: May 25, 2011