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Generally, the Commissioner’s determinations are presumed
correct, and the taxpayer bears the burden of proving otherwise.
Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Some of petitioners’ contentions are addressed above in the
discussion of fraud and do not bear repeating here, except that
we conclude that petitioners have failed to prove respondent’s
adjustments are not correct. Accordingly, we uphold respondent’s
determination with respect to those adjustments; i.e., the
Schedule C adjustments, the payments to petitioners’ children,
and the travel adjustments. The remaining contested items are
addressed below.
In the notice of deficiency, respondent disallowed a net
operating loss deduction for petitioners’ taxable years 1991 and
1992. Section 172(a) allows a “net operating loss deduction” for
the aggregate of net operating loss carrybacks and carryovers to
the taxable year. The term “net operating loss” (NOL) is defined
in section 172(c) to mean the excess of deductions allowed by
chapter one over gross income. Section 172(b)(1)(A) generally
provides that the period for an NOL carryback is 3 years and that
the period for an NOL carryover is 15 years.
However, a taxpayer may elect to relinquish the carryback
period with respect to an NOL for any taxable year, thereby using
the loss to offset income only in future years. Sec. 172(b)(3).
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Last modified: March 27, 2008