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Respondent does not dispute that petitioners elected to
relinquish the carryback periods for 1990 and 1991 and apply the
NOLs against income for 1991 and 1992. Respondent, however,
argues that petitioners have failed to show that they incurred
any NOL in either 1990 or 1991. Deductions are a matter of
legislative grace, and petitioners must prove they are entitled
to the deductions. Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).
Petitioners were audited for the taxable years 1987, 1988,
and 1989, and later resolved their Tax Court cases6 for those
years by agreeing to deficiencies in income tax and related
additions to tax for all 3 years. Additionally, the settlement
establishes that petitioners did not incur any NOLs in any of
those years, and that no NOL carryover deduction from any pre-
1987 taxable year existed to be carried forward. Thus,
petitioners’ entitlement to any NOL carryover deduction for
taxable years 1991 and 1992 depends solely on whether they have
substantiated both the existence and amount of any NOL for 1990
or 1991.
Petitioners argue that their 1990 return shows an NOL of
$19,008, and that, by not examining petitioners’ 1990 taxable
year, respondent has conceded the NOL and cannot disallow it now.
Petitioners’ argument is without merit. Respondent’s failure to
6Docket Nos. 10472-91 and 1615-92.
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