Melvin D. Lee - Page 9

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          capital loss was to introduce Federal income tax returns from               
          prior years on which capital loss carryovers were claimed.                  
               As explained earlier, income tax returns merely reflect                
          taxpayers’ claims.  They do not establish the facts reflected               
          therein.  Without additional evidence of the original claimed               
          capital loss, petitioner’s tax returns are insufficient to                  
          substantiate his entitlement to the claimed $206,881 capital loss           
          carryover to 1997.                                                          
               Petitioner argues that respondent’s acceptance without                 
          adjustment of his prior year income tax returns on which                    
          petitioner claimed a carryforward of the capital loss now estops            
          respondent from contesting that the underlying capital loss                 
          occurred.  We disagree.  Respondent is not bound in any given               
          year to allow the same treatment or the same deductions not                 
          disallowed in prior years.  See Lerch v. Commissioner, 877 F.2d             
          624, 627 n.6 (7th Cir. 1989); Pekar V. Commissioner, 113 T.C. 158           
               Petitioner’s claimed $206,881 capital loss carryforward to             
          1997 is denied.                                                             

          Peach Tree Property Suspended Losses -- $35,289                             
               In general, no deduction is allowed in a year for an                   
          individual taxpayer’s passive activity losses in excess of                  
          passive activity income, but the excess losses may be carried               
          forward to subsequent years to offset subsequent passive activity           

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Last modified: May 25, 2011