- 5 -
$2,657, deductible rental and partnership losses totaling
$25,000, and NOL carryovers totaling $97,282.2 The return also
reported that petitioners had sold their home during 1993 at a
gain of $904,596 and that they planned on replacing the home
within the applicable period of section 1034. On or about June
4, 1996, petitioners amended their 1993 return primarily to
recognize $630,764 of the gain realized on the sale of their home
and to offset that gain by $604,345 of NOLs inclusive of (1) the
previously mentioned $97,282, (2) $25,000 reportedly from 1993,
(3) $171,055 reportedly from 1994, and (4) $311,008 reportedly
from 1995. The amended return reported that petitioners’ Federal
income tax liability for 1993 continued to be zero.
Respondent’s revenue agent audited petitioners’ 1993 through
1996 Federal income tax returns and concluded his audit on or
about February 3, 1998, with the issuance of a letter to
petitioners’ representative, Sam Bellavia, C.P.A. (Bellavia).
That letter was accompanied by a Form 4549-CG (with supporting
schedules) completed by the revenue agent as to his audit of
petitioners’ 1993 through 1996 tax returns. The letter and the
Form 4549-CG (inclusive of the supporting schedules) informed
Bellavia of the revenue agent’s adjustments to petitioners’ 1993
through 1996 tax returns and the revenue agent’s conclusion that
2 Of the $97,282, $38,891 was from 1990, $25,000 was from
1991, and $33,391 was from 1992.
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