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(the judgment) against Ms. Perez for $166,013. On March 14,
1997, Ms. Perez filed a Chapter 7 bankruptcy petition in the U.S.
Bankruptcy Court, Central District of California. Mrs. Green
filed a proof of claim in Ms. Perez’s bankruptcy proceeding but
did not receive any funds relating to the judgment.
Petitioners, on their 1997 return, claimed a $166,013
casualty loss. Petitioners also attached to their 1997 return a
document titled “Election to Forgo The Carryback Period Under
172(b)(3) of Internal Revenue Code NOL Carryforward”. This
document set forth petitioners’ intention to claim an annual
$11,068 (i.e., from 1997 through 2011) NOL carryforward.
Petitioners filed Forms 1040, U.S. Individual Income Tax
Return, relating to 2000 and 2001. On line 20a they reported
Social Security benefits of $12,258 and $12,708, respectively.
Petitioners did not, however, report these benefits as gross
income on line 20b of either return. Petitioners claimed an
$11,068 NOL carryforward on line 21 of each of their 2000 and
2001 returns.
On November 10, 2003, and January 26, 2005, respectively,
respondent issued petitioners a notice of deficiency relating to
2001 and 2000. In the notice, respondent determined that the
Social Security benefits were taxable and petitioners were not
entitled to the NOL carryforwards. On February 11, 2004, and
March 14, 2005, petitioners, while residing in Moorpark,
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Last modified: May 25, 2011