Oliver Q. Foust and Talietha Foust - Page 5

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            income, losses, and deductions on their individual tax returns.                                
            Sec. 1366(a)(1).  However, a shareholder is only entitled to                                   
            claim losses and deductions to the extent that they do not exceed                              
            the sum of the shareholder's adjusted basis in the corporation's                               
            stock and any indebtedness of the corporation to the shareholder.                              
            Sec. 1366(d)(1).  Accordingly, petitioners must prove that they                                
            had sufficient basis in Vosburg to absorb the loss and deduction                               
            claimed.                                                                                       
                  This Court has looked to section 1012 when defining "basis"                              
            for purposes of a shareholder's stock in an S corporation.  See,                               
            e.g., Estate of Leavitt v. Commissioner, 90 T.C 206, 212 (1988),                               
            affd. 875 F.2d 420 (4th Cir. 1989); Borg v. Commissioner, 50 T.C.                              
            257, 263 (1968).  Section 1012 provides that "The basis of                                     
            property shall be the cost of such property".  In addition, the                                
            "cost" is "the amount paid for such property in cash or other                                  
            property."  Sec. 1.1012-1(a), Income Tax Regs.  Thus, petitioners                              
            must demonstrate the requisite economic outlay necessary for                                   
            shareholders to claim basis.  See, e.g., Estate of Leavitt v.                                  
            Commissioner, 875 F.2d at 422; Underwood v. Commissioner, 535                                  
            F.2d 309, 311 (5th Cir. 1976), affg. 63 T.C. 468 (1975).                                       
                  In an attempt to substantiate their basis in Vosburg,                                    
            petitioners offered a series of checks written on various                                      
            corporate bank accounts.  One of the checks was written on the                                 
            corporate bank account of Golden State Convalescent Hospitals,                                 
            Inc. (GSCH), in the amount of $25,000.  The check is signed by                                 




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