- 16 -
States v. Byck, 325 F.2d at 554-555; Deely v. Commissioner, 73
T.C. at 1092-1093.
Petitioner alternatively contends that he is entitled to
claim, pursuant to section 1244, an ordinary loss of $50,000 due
to the worthlessness of his stock in Color Trick.4 Section
165(g) provides generally that the loss resulting from the
worthlessness of a security (including stock) that is a capital
asset is capital in nature, and the allowability of such a loss
consequently is governed by the provisions of section 1211(b).
The allowable amount of the loss is the adjusted basis of the
security provided in section 1011 for purposes of determining the
loss from the sale or other disposition of property. Sec.
165(b).
Section 1244(a), however, allows an individual taxpayer to
treat a loss from “section 1244 stock” as an ordinary loss where
it would otherwise be treated as a loss from the sale or exchange
of a capital asset. As relevant to the instant case, the
aggregate amount of the loss that may be treated as an ordinary
4
Respondent contends that petitioner raised this issue too
late in the course of the instant case for us to consider it.
Respondent points out that the issue was not raised in the
petition, any amendment thereto, or in petitioner’s trial
memorandum, and contends that it would be unfair and prejudicial
to respondent for us to consider the issue, which respondent
asserts was raised for the first time at trial. Because we
decide below that petitioner has not established his entitlement
to claim a loss pursuant to sec. 1244, we need not consider
whether respondent was surprised and prejudiced by the raising of
the issue at trial.
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