John T. Barrett, Jr. and Jane W. A. Barrett - Page 22

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          was ongoing, and the final deadline for claims was extended until           
          the following year so that the IRS could file its proof of claim.           
          Many of the claims against Drexel arose from securities                     
          litigation, and the amount of Drexel’s liability in connection              
          with those claims could not be known until the litigation was               
          settled or proceeded to judgment.  Contrary to petitioners’                 
          contention, the size of the claims made against Drexel are not              
          necessarily probative of the state of its financial condition in            
          1990.  For instance, we note that the IRS filed a Federal tax               
          claim against Drexel in the amount of $5.3 billion, which                   
          apparently was settled for, inter alia, a payment of $183 million           
          in 1992 and a payment of $106 million in interest over the next 6           
          years.  Finally, Drexel filed a petition for reorganization                 
          pursuant to chapter 11, which, absent evidence that the creditors           
          have suggested dismissal, often carries a strong presumption that           
          the reorganization was not hopeless.  Mayer Tank Manufacturing              
          Co. v. Commissioner, 126 F.2d 588, 592 (2d Cir. 1942); see Simon            
          v. Commissioner, T.C. Memo. 1978-485.  The record in the instant            
          case indicates to us that the events that occurred in 1990 do not           
          require a conclusion that all reasonable hope that the note would           
          be paid, at least in part, could be abandoned in that year.                 
          Estate of Mann v. United States, supra at 276.                              
               Petitioner’s subjective perceptions of Drexel’s financial              
          condition on February 13, 1990, are insufficient to support                 
          petitioners’ claim that the note became worthless during 1990.              




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