- 18 -
1994. These deductions produced net operating loss carryback
deductions of $485,303 for 1989, $87,174 for 1990, and $83,018 for
1991, as well as net operating loss carryover deductions of
$238,293 for 1994 and $206,178 for 1995.
Petitioners in addition claimed a net short-term capital loss
of $5,849 and a long-term capital loss carryover of $8,194 for
1994, both of which were subsequently carried over into 1995.
Petitioners did not report any interest income incident to
the MMS/Miller Loan on their 1993 return. On their 1994 return,
petitioners reported $109,674 of taxable interest income
attributable to MMS.13
Respondent's Determinations
In a notice of deficiency, respondent determined that
petitioners were not entitled to any basis in the Huntington
indebtedness in 1992, 1993, or 1994 and disallowed petitioners'
claimed losses of $750,000, $431,691, and $189,845, in 1992, 1993,
and 1994, respectively, as well as the resulting net operating
loss carryback deductions of $485,303 for 1989, $87,174 for 1990,
and $83,018 for 1991, and carryover deductions of $238,293 for
1994 and $206,178 for 1995. Respondent also determined that
13 The amount of interest that MMS may have deducted on its
Forms 1120S, U.S. Income Tax Return for an S Corporation, for
1993 and 1994 with respect to the Huntington loans is not
disclosed in the record. Huntington's records indicate that the
bank received $58,067.97 and $108,522.81 in interest payments
with respect to the Miller/Huntington Loan in 1993 and 1994,
respectively.
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