Jonathan N. and Kimberly A. Palahnuk - Page 10

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          regular tax ISO gains of $148,461) and an AMT capital loss of               
          $2,091,170 (the sum of the non-ISO losses of $153,625 and the AMT           
          ISO losses of $1,937,547).  The recognition of both the regular             
          tax capital loss and the AMT capital loss is limited to $3,000,             
          see sec. 1211(b); see also Merlo v. Commissioner, supra (section            
          1211(b) limits an individual’s annual deduction of an AMT capital           
          loss to $3,000), which, in turn, means that petitioners’                    
          adjustment under section 56(b)(3), representative of the                    
          difference between the recognized losses for regular tax and AMT            
          purposes, is zero as determined by respondent.                              
               We sustain respondent’s determination.  In so doing, we have           
          considered all of petitioners’ arguments and conclude that those            
          arguments not discussed herein are without merit.                           

                                                  Decision will be entered            
                                   for respondent.                                    




















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