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Corporation, Mary Catherine claimed corresponding net operating
losses (NOLs) attributable to the reductions in value. As a
result of the NOLs claimed on Mary Catherine’s returns, the
Pierces claimed flowthrough losses on their 1989, 1990, and 1991
personal Federal income tax returns. They then carried back
those losses to obtain refunds of the taxes they had paid for
1984 and 1986 through 1989.3
Respondent determined that the Pierces were not entitled to
the claimed losses and resulting refunds. As a result,
respondent determined deficiencies of $3,513, $71,974, $539,914,
$527,851, and $102,323 in the Pierces’ income tax for the years
1984, 1986, 1987, 1988, and 1989, respectively. The Pierces
filed a petition with this Court (docket No. 6226-94) on April
18, 1994, alleging error with respect to respondent’s
determination of income tax deficiencies.
The deficiency proceeding was consolidated with another
case, relating to a tax year not in issue in the current
controversy. Following the consolidated trial, we held that:
(1) Mary Catherine was not entitled to the losses from writedowns
of the values of the Ridge and Minnechaug, (2) the Pierces were
liable for the income tax deficiencies determined by respondent,
and (3) the Pierces were not liable for the accuracy-related
3 For purposes of deciding this case only a general
description of these transactions is required. For more detailed
explanations, see Pierce v. Commissioner, T.C. Memo. 1997-411.
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