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This statement was signed by the Roses and dated October 12,
1991. In sum, the Roses carried forward losses from Zephyr
totaling $1,520,167.
The Roses attached the following statement, in pertinent
part, to their joint income tax return for 1991:
The above mentioned taxpayers have elected to
carryforward the net operating lossess [sic] of the
following companies for the tax period ending 12/31/91:
* * * * * * *
4. The amount of $651,355 unapplied net operating
loss from Zephyr Rock & Lime, Inc. (1989) * * *
has been carried forward.
This statement was signed by the Roses and dated October 14,
1992.
The Roses attached the following statement, in pertinent
part, to their joint income tax return for 1992:
The above mentioned taxpayers have elected to apply
* * * the net operating losses of the following company
for the tax period ending 12/31/92:
* * * * * * *
5. The amount of $651,355 of net operating losses
from Zephyr Rock & Lime Inc. (1989) * * * have been
applied.
C. IRS Determinations
The IRS determined that the Roses could deduct the losses
that they reported from Zephyr on their joint income tax returns
for 1990, 1991, and 1992 to the extent of the basis in their
Zephyr interest. The IRS determined that, as of January 1, 1990,
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