BOSTON -- Mortimer B. Zuckerman, the nationally prominent real estate magnate who owns U.S. News & World Report magazine, has paid no federal income tax for the past five years by claiming tens of millions of dollars in what his lawyer calls "paper losses" from his various business ventures, according to recent court testimony here.

Portions of Zuckerman's personal tax returns, along with numerous other details about his business practices, have emerged in recent weeks during the course of an unusually fierce and protracted legal dispute growing out of Zuckerman's 1980 purchase of the Atlantic Monthly magazine.

Zuckerman's lawyers, who bitterly fought to exclude the tax returns from the case, have contended that his lack of income tax liability between 1981 and 1986 reflects routine practice in the real estate business -- the result of depreciation and interest writeoffs on property he owns. Zuckerman, ranked by Forbes magazine among the 400 wealthiest Americans with an estimated net worth of $250 million, recently testified here that he has accumulated more than $100 million in real estate tax losses during the past few years -- more than enough to wipe out his personal tax obligations for the foreseeable future.

"These are paper losses created by the Internal Revenue Service," Joel A. Kozol, Zuckerman's lawyer in the Atlantic case, said about the tax writeoffs. "It {a zero tax liability} is true of almost every substantial real estate developer in the country."

Nevertheless, the disclosure has proven embarrassing to Zuckerman, whose development company, Boston Properties, is currently developing more than $1 billion worth of real estate, mostly in Boston, New York, and Washington, according to trial testimony. The tax returns and court testimony have shown that, while Zuckerman's business has flourished, allowing him to become a major force in the magazine publishing world, his tax losses have ballooned: From an "adjusted net loss" of $12.4 million on his 1982 tax return, to $49 million in losses on his 1985 return, according to recent testimony by John A. Foppiano, a Price Waterhouse partner and tax specialist who reviewed Zuckerman's tax returns as a consultant for the former owners of the Atlantic who are suing Zuckerman.

"I've never seen anybody with these kind of losses," said Foppiano in an interview. "He's had some smart guys advising him."

Rather than evidence that Zuckerman is suffering, Kozol said, the growth in paper losses "indicates his real estate business is booming" with more and more property that can be depreciated.

Efforts to obtain Zuckerman's comments were unsuccessful. His personal assistant, Clare Probert, said Zuckerman was aware of the subject matter, but was on vacation and could not be reached for comment.

One apparent sign of Zuckerman's current financial health was his 1984 purchase of U.S. News for $163 million, a deal that industry sources say has yielded Zuckerman even more tax benefits. Another sign was his October 1985 purchase of a three-level Manhattan penthouse overlooking Central Park at a price of more than $8.5 million -- reported at the time to be the world's most expensive cooperative apartment sale.

The tax returns have filtered into the case because of claims by five former owners of the Atlantic that Zuckerman bought the financially ailing magazine, at least in part, for the tax writeoffs. The former owners, led by an elderly New Yorker named Marion Campbell, whose family had long owned the magazine, filed suit against Zuckerman for breach of contract after the developer refused to pay about $2.7 million of the negotiated $3.6 million purchase price.

Zuckerman then countersued for fraud, alleging he was deliberately misled by the former owners about the poor financial condition of the venerable 130-year-old magazine. Zuckerman has claimed he has lost about $25 million on the Atlantic since he took over in May 1980 and began an ambitious effort to bolster its circulation and advertising.

But lawyers at Hill & Barlow, the prestigious Boston law firm representing the former owners, have sought to depict Zuckerman as a shrewd, sophisticated entrepreneur who knew exactly what he was doing -- and, because of the tax writeoffs, was never worried about prospective losses. To demonstrate this, they introduced evidence showing Zuckerman billed the Atlantic for such "discretionary" expenditures as a $64,000 bash he threw to celebrate the magazine's 125th anniversary, for a $4,600 Pakistani rug he bought for his office, and for a flight on the Concorde, costing several thousand dollars, to interview then London Sunday Times editor Harold Evans about editing the Atlantic. Zuckerman also billed the Boston-based magazine more than $7,000 a year for his own use of his New York apartment, on the grounds that he conducted some magazine business there, according to evidence entered into the court record.

The former owners have not disputed that, at the same time, Zuckerman made huge investments designed to improve the magazine's editorial quality, including increasing from $75,000 to $600,000 the annual budget for free-lance articles. But, the lawyers for the former owners argued, Zuckerman had an actual incentive to run up expenses. About $2 million in Atlantic losses flowed through to his personal tax returns during 1982 and 1983, helping him to avoid paying taxes in those years, according to Foppiano's testimony.

In addition, Foppiano said, Zuckerman has reported an additional $24 million in accumulated or "carryover" losses from the Atlantic on his personal tax returns, although he hasn't had to use them yet because he had already wiped out his tax liabilities in 1984 and 1985 through other means. These "carry-over losses" have a tax life of 15 years, he said, meaning that Zuckerman has until the year 2000 to use them.

Foppiano said that Zuckerman drew an annual income from his businesses in excess of $1 million during the years he examined. But Zuckerman's tax losses were so enormous that they allowed him to escape even the "alternative minimum tax" that Congress inserted into the law to try to prevent wealthy people from escaping taxes, Foppiano said.

Zuckerman "received a real bargain" when he bought the Atlantic, said Gael Mahony, the lawyer for the former owners, during closing arguments in the case Thursday. "Mr. Zuckerman is getting the tax benefit."

But Zuckerman's lawyer Kozol, during his closing arguments to the jury, called those assertions "nothing short of preposterous." He argued that Zuckerman never needed the tax writeoffs from the Atlantic because he already had more than enough losses -- in excess of $100 million -- from his real estate business.

According to many of the participants, the case has long since transcended the monetary issues at stake and turned into a bitter clash of pride, ego and cultural background, pitting the Brahman former owners of the Atlantic against Zuckerman, a Canadian immigrant and self-made millionaire.

What has surprised many observers is the tenacity of both sides. The original breach of contract suit was filed in the spring of 1980 when Zuckerman did not make the first of three $900,000 installments due the former owners. Zuckerman countersued shortly thereafter, and the case has been bogged down in legal maneuvering ever since, including six years of discovery, depositions and delays. The legal skirmishes culminated in a hard fought trial that began March 16 and dragged on until last Thursday.

After hearing instructions from U.S. Judge David Nelson, the jury elected to take the weekend off and begin deliberations Monday.

Kozol during his closing arguments waved what he called several "smoking gun" memos that Zuckerman found in the magazine's files after taking over and which he has claimed proved that the former owners had deceived him into purchasing a "bottomless pit." This included one 1979 memo by one of the former owners, former publisher Garth Hite, to the magazine's treasurer urging that he "make the bottom line as good as possible" and "shave a point here ... or there" to minimize the magazine's losses.

He then asked the jury to award Zuckerman $10 million in damages "to let these people know ... that no threats, no power, no six years of litigation is going to deter Mr. Zuckerman. He had the resources to see this through and he's had the guts to see it through."

But Mahony charged that Zuckerman only leveled the fraud charges as a means of pressuring Campbell and the other owners into lowering the agreed-upon purchase price.

"Mr. Zuckerman is accustomed to getting what he wants," he said, raising his voice. "He thought ... if a fight won't deter Marion Campbell, then maybe a really ugly fight will.

"If you want to put a name on what this case is all about, it's 'Zuckerman hardball'. "