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As discussed above, petitioner bears the burden of proving
that he is entitled to deductions and therefore must provide
sufficient evidence to substantiate his claims. In cases where
shareholders of a corporation may seek to claim stock loss
deductions pursuant to section 1244, the corporation should
maintain records indicating "The persons to whom stock was
issued, the date of issuance to these persons, and a description
of the amount and type of consideration received from each".
Sec. 1.1244(e)-1(a)(2)(i), Income Tax Regs.
Petitioner has submitted no evidence that the Corporation
ever issued stock. In fact, the Amendment to the Certificate of
Incorporation, dated March 17, 1989, expressly states that "The
corporation has issued no shares."1 Even if the Court were to
find that stock had been issued, however, petitioner has not
substantiated the amount of money or the basis of any property he
transferred to the Corporation in exchange for such stock.
Therefore, we reject petitioner's claim that he is entitled
to a stock loss deduction pursuant to section 1244.
III. Additions to Tax Under Section 6651(a)(1)
1 Petitioner claims that he owned 75 percent of the stock of
the Corporation. His statements regarding ownership of the other
25 percent of the stock, however, have not been a model of
clarity. When asked at trial who owned the remaining 25 percent,
he replied: "[M]y second brother [owned] 10 percent, and my
third brother [owned] five percent -- or 20 percent." By
contrast, the Corporation's 1989 Federal income tax return
indicated that one person, not two, owned the remaining
25-percent interest in the Corporation.
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