PK Ventures, Inc. and Subsidiaries, et al. - Page 150

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          Deductions, etc., that were attached to Zephyr’s Forms 1120S for            
          1987 through 1989:                                                          
               Year                   Item                    Amount                  
               1987  Ordinary loss from business activities ($179,025)                
                    Interest income                              511                  
                    Net long-term capital gain                 4,323                  
               1988  Ordinary loss from business activities (797,252)                 
                    Interest income                              838                  
               1989  Ordinary loss from business activities (651,355)                 
                    Interest income                               75                  
               B.  As Reported on the Roses’ Income Tax Returns                       
               On their joint income tax returns for 1990 through 1992, the           
          Roses reported losses of $11,941, $868,812, and $651,355,                   
          respectively, with respect to their interest in Zephyr.                     
               The Roses attached the following statement, in pertinent               
          part, to their joint income tax return for 1990:                            
               The above mentioned taxpayers have elected to                          
               carryforward the net operating lossess [sic] of the                    
               following companies for the tax period ending 12/31/90:                
                         *    *    *    *    *    *    *                              
               The amount of $83,501.00 of unapplied net operating                    
               loss from Zephyr Rock & Lime Inc., (1987) * * * was                    
               carried forward to 1990.  Of this amount, $11,941 was                  
               applied in 1990 (Schedule E, line 31a) and the balance                 
               of $71,560 carried forward.                                            
               In addition, unused outstanding amounts have been                      
               carried forward:  Zephyr Rock & Lime Inc., (1988)                      
               $797,252, * * * Zephyr Rock & Lime Inc (1989) of                       
               $651,355 * * *                                                         








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