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treated the subject returns as such an election, petitioner’s
income from the U.S. real estate for the subject years is treated
as effectively connected income.
On its Form 1120-F for its 1993 taxable year, petitioner
recognized option income of $16,290 and deducted an expense for
taxes of $52,081, resulting in a reported taxable loss of
$35,791. On the respective subject returns, petitioner
recognized rental income of $12,000, $18,000, and $12,000 and
option income of $36,000, $21,000, and zero dollars. Petitioner
also on the respective subject returns deducted expenses for
taxes and licenses in the total amounts of $77,059, $62,418, and
$40,041, resulting in reported losses (without consideration of
any net operating loss (NOL) carryforward) of $29,059, $23,418,
and $28,041. Petitioner reported on its Form 1120-F for its 1994
taxable year that it had available as an NOL carryover its prior
year’s loss of $35,791. Petitioner reported on its Form 1120-F
for its 1995 taxable year that it had available as an NOL
carryover its prior years’ losses totaling $64,850 ($29,059 +
$35,791). Petitioner reported on its Form 1120-F for its 1996
taxable year that it had available as an NOL carryover its prior
years’ losses totaling $88,268 ($23,418 + $29,059 + $35,791).
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