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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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