- 20 -
Respondent asserts that petitioner's basis in the client
list was $9,283 and, thus, petitioner recognized a capital gain
of $4,217 upon its sale. Respondent does not include
petitioner's oral guaranty as part of petitioner's basis.
At the time the notice of deficiency was issued, petitioner
had not filed a Federal income tax return for the taxable year
1991. The substitute return did not reflect, and the notice of
deficiency did not make an adjustment with respect to, the sale
of the client list. To the extent that petitioner claims a loss
from this transaction, the burden of proof is on petitioner.
Rule 142(a); Welch v. Helvering, 290 U.S. at 115. On the other
hand, to the extent that respondent asserts that the transaction
resulted in a gain, and asserts an increased deficiency,
respondent bears the burden of proof. Rule 142(a); Estate of
Cordeiro v. Commissioner, 51 T.C. 195, 203 (1968).
The parties agree that the client list was sold in 1991 for
$13,500. The parties, however, are not in agreement with respect
to the basis of the client list. Accordingly, we must decide
whether either party has established petitioner's basis in the
client list.
Under section 331, amounts distributed in complete
liquidation of a corporation shall be treated as full payment in
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011