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355 applies, and therefore he did not take an exchanged basis in
that stock pursuant to section 358. Sec. 358(a)(1), (c); see
sec. 7701(a)(44). It therefore follows that petitioner received
the SPS stock in a distribution governed by section 301, at a
basis equal to the fair market value of the stock. Sec. 301(d).
On the limited record before us, we conclude that the fair
market value of SPS’s issued capital stock was equal to the value
of the net assets transferred to SPS in the exchange, viz,
$30,647. See United States v. Davis, 370 U.S. 65, 72 (1962);
Philadelphia Park Amusement Co. v. United States, 130 Ct. Cl.
166, 126 F. Supp. 184, 189 (1954). Although the most important
asset of SPS would have been the “human capital” that petitioner
and his associates brought to the business, and although the
inauspicious circumstances under which SPS was organized might
well have raised doubts about its ultimate success, the effect of
these factors upon the value of the corporation’s stock cannot be
determined from the record. Therefore, petitioner’s initial
basis in the portion of the SPS stock he retained was $30,647.7
7 We observe that the tax results to petitioner of our
determination of the value of SPS stock received by him would be
the same if we determined that value to be zero or some other
figure. This is because the amount includable in petitioner’s
income as a result of his receipt of the SPS stock would in all
likelihood exactly equal his additional basis in the stock for
the purpose of computing his share of the allowable loss incurred
by SPS for 1992. See text infra pp. 20-21.
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