- 29 -
1958), affg. in part and revg. in part T.C. Memo. 1956-247;
Austin Co. v. Commissioner, supra at 969. The standard for
deciding when stock becomes worthless varies according to the
circumstances of each case. Boehm v. Commissioner, supra; Lucas
v. American Code Co., 280 U.S. 445, 449 (1930). The taxpayer's
attitude and conduct are considered, but are not dispositive.
Boehm v. Commissioner, supra at 293; Aagaard v. Commissioner, 56
T.C. 191, 209 (1971).
b. Collapse of Vernon and Dondi Financial
Respondent contends that Dondi Financial became insolvent by
1985 because the real estate market crashed in 1984, Vernon paid
millions of dollars of compensation to Vernon officers and
directors from 1983 to 1986, and Vernon paid other flamboyant
expenses. We disagree. We think other, more significant facts
show that Dondi Financial stock did not become worthless in 1985.
The FHLBB order required Vernon to change its financial practices
to meet Federal regulatory standards. The FHLBB order required
Vernon to prepare a comprehensive plan detailing business
strategies and operations through June 30, 1989. These actions
show that an effort was made by the FHLBB and Vernon to keep
Vernon operating. It is reasonable to conclude that Dondi
Financial stock had value as long as Vernon operated. We
conclude that Vernon had value until the FHLBB appointed a
receiver and ordered its liquidation and Dondi Financial declared
bankruptcy in May 1987.
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