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In the notice of deficiency respondent allowed petitioner a
loss attributable to SPS in the amount of $879 for 1992. This
determination necessarily implies that petitioner acquired at
least $879 of basis in his stock of or loans to SPS during that
year. Neither the record nor the arguments on brief disclose how
this amount was determined. However, in view of the position
taken by respondent during these proceedings that petitioner
acquired no basis in SPS as a result of transfers of property
from WIS pursuant to the business reincorporation transaction, we
construe the determination in the notice of deficiency as a
concession that petitioner made an additional investment of $879
at some time during 1992 in an unrelated transaction.
Consequently, by the close of 1992, petitioner’s combined basis
in SPS stock and debt was $31,526, before taking account of pass-
through losses for the year.
The transfer by WIS of cash and accounts receivable to SPS
during December 1991 and January 1992 in exchange for all of
SPS’s stock constituted a transaction described in section 351.
Sec. 351(a), (c). Neither corporation recognized gain on the
exchange, and WIS took a basis in the SPS stock equal to the sum
of its bases in the cash and accounts receivable. Sec.
358(a)(1). As a cash method taxpayer, WIS had no basis in the
unrealized receivables. Consequently, its exchanged basis in the
SPS stock preserved the unrealized gain in respect of the
receivables for later taxation. On the distribution of the SPS
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