Ronald F. and Cynthia G. Van Scoten - Page 15

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          petitioners claimed a net operating loss (NOL) carryback from               
          1990 in the amount of $102,228.  Petitioners reported the                   
          following after application of the carryback to the respective              
          taxable years:                                                              
               1987      1988      1989                                               
               AGI on return             $49,726   $38,967   $40,889                  
               Tax liability on return     5,949     3,529     3,549                  
               Corrected tax liability       -0-       -0-       -0-                  
               Overpayment                 5,949     3,529     3,549                  
          The 1990 return and the Form 1045 were prepared by individuals              
          affiliated with the Hoyt organization.  The refund and tentative            
          refunds requested by petitioners with respect to the 1990 return            
          and the carryback years totaled $16,798.  Petitioners remitted              
          two payments to the Hoyt organization during 1991 in the form of            
          two cashier’s checks dated May 8, 1991, and August 20, 1991, in             
          the respective amounts of $7,000 and $9,750.                                
               In January 1992, prior to the time petitioners signed their            
          1991 return, respondent mailed Hoyt investors, including                    
          petitioners, a letter regarding the application of section 469              
          (relating to passive activity loss limitations).  That same                 
          month, Mr. Hoyt mailed a letter to investors, including                     
          petitioners, setting forth arguments that Hoyt investors                    
          materially participated in their investments within the meaning             
          of section 469.  In this letter, Mr. Hoyt stated that                       
          respondent’s assertions in the preceding letter were incorrect,             
          and that the investors should do what was necessary to                      





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