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Petitioners jointly filed Form 1040, U.S. Individual Income
Tax Return (Form 1040), for their taxable year 1998 (1998 re-
turn).14 Petitioners’ 1998 return showed, inter alia, taxable
income of $0 and total tax of $0. In calculating the taxable
income of $0 reported in petitioners’ 1998 return, petitioners
claimed, inter alia, a loss of $809,668 in Schedule E, Supplemen-
tal Income and Loss (Schedule E), included as part of that
return. Such claimed loss included a nonpassive loss of
$784,668, which was shown in Schedule E as resulting from the
“ENTIRE DISPOSITION OF [A] PASSIVE ACTIVITY” conducted by Kildare
Timmy.
Petitioners’ 1998 return included Form 4797, Sales of
Business Property (petitioners’ 1998 Form 4797). In Part I of
that form (Form 4797, Part I), Sales or Exchanges of Property
Used in a Trade or Business and Involuntary Conversions From
Other Than Casualty or Theft--Property Held More Than 1 Year,
petitioners reported, inter alia, a “28% Rate” loss of $21,749
attributable to Kildare Timmy.
In Part II of petitioners’ 1998 Form 4797, Ordinary Gains
and Losses, petitioners claimed, inter alia, a loss of $11,541.
In an explanatory statement attached to that form, petitioners
claimed that such claimed ordinary loss was attributable to,
inter alia, Mr. Ramsburg’s sole proprietorship’s sale of nine of
14Keller Bruner prepared petitioners’ 1998 return.
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