Big Hong Ng - Page 29

          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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