Edward Lee Roberts v. Commissioner of Internal Revenue, Richard Lee Plowden and Dale T. Plowden v. Commissioner of Internal Revenue

The decision of the Tax Court 1 is affirmed.

Taxpayers believe themselves wronged in the instant case because of a basic misunderstanding as to the interaction of §§ 172 and 1374 of the Internal Revenue Code of 1954. 2 They argue that § 172 takes precedence over § 1374 and entitles them to a larger net operating loss deduction than that computed by the Commissioner. What they fail to perceive, however, is that under the circumstances of this case, § 172 is not applicable to them.

During the period critical to the determination of this controversy, taxpayers were equal partners in a corporation…