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The only issue remaining for decision1 is whether section
469(g)(1)2 permits petitioners to treat for 1998 certain losses
from a passive activity (passive losses) as losses not from a
passive activity (nonpassive losses).3 We hold that it does not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
At the time petitioners filed the petition in this case,
they resided in Thurmont, Maryland.
Petitioner Jacob R. Ramsburg, Jr. (Mr. Ramsburg) and Carroll
K. Stottlemeyer (Mr. Stottlemeyer) have been friends since they
were children. In 1972, Mr. Ramsburg hired Mr. Stottlemeyer to
work for Frederick Underwriters, Inc. (Frederick Underwriters), a
corporation 94 percent to 96 percent of whose stock Mr. Ramsburg
owned at all relevant times. In 2004, Mr. Stottlemeyer retired.
1Petitioners and respondent agree that the Court’s resolu-
tion of the issue remaining for decision will resolve whether
petitioners are entitled to a net operating loss (NOL) deduction
for each of the years 1996 and 1997 that is attributable to an
alleged NOL carryback from 1998. There also are other questions
relating to certain determinations in the notice of deficiency
(notice) that are computational in that their resolution flows
automatically from our resolution of the issue that we address
herein.
2All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
3As discussed below, petitioners had both ordinary passive
losses and sec. 1231 passive losses. For convenience, we shall
sometimes refer collectively to petitioners’ ordinary passive
losses and sec. 1231 passive losses as petitioners’ passive
losses.
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