Big Hong Ng - Page 34

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               The record clearly reveals that Strong Hope's only business            
          activity was the rental of the Stockton Street property in San              
          Francisco, and that the indebtedness to Strong Hope Limited and             
          Permanent Union Limited was related to that activity.  We                   
          accordingly find that Strong Hope's indebtedness was connected with         
          its business in the United States.                                          
               To conclude, we hold that Strong Hope realized discharge of            
          indebtedness income of $516,903 in 1989.                                    
          Issue 9.  Stockton Property Basis                                           
               For purposes of calculating the amount of gain realized by             
          Strong Hope under section 336(a) on the distribution of the                 
          Stockton Street property to Ms. Ng, respondent reduced Strong               
          Hope's adjusted basis in the Stockton Street property.  In this             
          regard, respondent contends that Strong Hope understated the                
          accumulated depreciation by $45,820 when it reported the sale of            
          its interest in the property, and second, that a roofing expense of         
          $10,729 which Strong Hope added to basis was not substantiated.             
          Strong Hope does not contest respondent's depreciation adjustment.          
          However, with respect to the roofing expense, Strong Hope asserts           
          that respondent knows that this expense was incurred.  The evidence         
          is not sufficient to substantiate the claimed roofing expense.              
          Accordingly, we sustain respondent's adjustments to Strong Hope's           
          basis in the Stockton Street property.                                      








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