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Taxable Year 1993
Since the foregoing computations confirm respondent’s
determination that petitioner had no investment basis remaining
in SPS after the pass-through adjustments for 1992, we sustain
respondent’s disallowance of the $36,464 deduction claimed for
petitioner’s share of losses attributable to SPS for 1993.
3. Conclusion
We have concluded that petitioners’ taxable income for 1991
was $20,515 lower than the amount determined by respondent.
Petitioners are entitled to the resulting reduction of the
deficiency for that year, to be determined in a Rule 155
computation.
Petitioners have not persuaded us that the deficiency
determinations for 1992 and 1993 are erroneous. Neither party
provided a coherent analysis of the tax consequences of the
business reincorporation transaction: Respondent’s position
seems to be either that there was in fact no such transaction or
that it had no effect on petitioners’ tax liability; petitioners
contended that the transaction created basis in petitioner’s SPS
stock, but did not acknowledge the tax cost of acquiring that
basis. Consequently, in sustaining respondent’s determinations
for 1992 and 1993, we have necessarily relied upon a legal
analysis that was neither pleaded nor argued by the parties.
A deficiency determination may be sustained upon any legal
ground that supports it, even though the grounds relied upon by
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