Paul G. Gubbini - Page 19

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          section 1244.  Petitioner testified that he did not receive                 
          additional stock in Color Trick for the money he advanced to it,            
          but that the shares were “kickers”.  Elsewhere on brief,                    
          petitioner treats only his $5,000 payment for his initial                   
          purchase of Color Trick’s stock as the amount of his investment             
          in its stock.  Petitioner has not attempted to reconcile the                
          inconsistency of his positions at trial and on brief with his               
          section 1244 claim.                                                         
               Furthermore, Color Trick was an S corporation, and,                    
          consequently, the losses that were passed through to petitioner             
          reduced his basis in its stock.  Sec. 1367(a)(2).  The basis-               
          adjustment rules of section 1367 are applied before application             
          of sections 165(g) and 166(d) in a taxable year of the                      
          shareholder in which a security or debt becomes worthless.                  
          Petitioner does not dispute that, on its 1987, 1988, and 1989               
          returns, Color Trick reported losses of $45,263, $214,910, and              
          $138,267, respectively.  On his returns for 1987 through 1989,              
          petitioner claimed losses in connection with Color Trick totaling           
          $130,391.  Petitioner has not shown that there was any basis                
          remaining in his Color Trick stock after taking into account the            
          foregoing losses claimed on his returns that would enable him to            
          claim a loss with respect to its worthlessness.                             
               Additionally, petitioner contends that many records                    
          pertaining to Color Trick were dispersed after Color Trick ceased           
          operations.  We note, however, that the loss of records does not            




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