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Stockton Street property. There is nothing in the record to
suggest that Strong Hope had business activities outside the U.S.
Upon the purported sale of its one-half interest in the
Stockton Street property to Ms. Ng, Strong Hope filed a final tax
return for 1989 and reported no tax liability for that year.
Emerald Lee, the accountant who prepared Strong Hope's return,
testified that she was informed that Strong Hope was going to be
liquidated. Additionally, Ms. Ng stated in a 1990 Form 5471,
"Information Return of U.S. Persons With Respect To Certain Foreign
Corporations," that:
Strong Hope has distributed all of its assets in early
1990. The company has remained dormant for the remainder
of calendar year 1990[,] * * * no longer conducts
business of any kind and has no assets.
The fair market value of Strong Hope's interest in the
Stockton Street property was $1.1 million. Ms. Ng assumed a
$400,088 mortgage and had a $2 basis in her Strong Hope stock. The
liquidation of Strong Hope results in a gain of $699,910.
Accordingly, we hold that Ms. Ng realized a gain of $699,910 from
the liquidation of Strong Hope.
Issue 5. Investment Interest Deduction
Respondent determined that Ms. Ng had $120 of interest income
in 1989, and that her investment interest deduction was limited
(pursuant to section 163(d)) to $2,000, plus the amount of net
investment income, or a total of $2,120. Respondent thus
disallowed $59,992 of claimed interest expense. Ms. Ng did not
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