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and those losses carried over to 1999. Under section
1212(b)(1)(A) and (B), net short-term and net long-term capital
losses realized in one year are treated, respectively, as short-
term or long-term capital losses in the succeeding tax year.
Thus, the net short-term and net long-term carryover losses from
petitioners' 1998 tax year constituted short-term and long-term
capital losses on petitioners' 1999 return. These carryover
losses totally offset the capital gains petitioners realized
during 1999. Therefore, under section 163(d)(4)(B), petitioners,
during 1999, did not realize any income that would be considered
net income attributable to the disposition of property held for
investment. Respondent, therefore, correctly disallowed
petitioners' investment interest deduction to the extent the
deduction exceeded their net investment income. Under section
163(d)(2), any investment interest that is disallowed as a
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Last modified: May 25, 2011