Santar S. Yei and Grace H. Yei - Page 6

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          that after the surrender of the Cirtex stock, Mr. Yei and members            
          of his family did not retain control of Cirtex.  Indeed, Cirtex's            
          corporate income tax returns (Forms 1120) for the corporation's              
          fiscal years ended November 30, 1989 and 1990 reflect that Mr. Yei           
          owned more than 50 percent of Cirtex's stock.                                
               Petitioners claim, in the alternative, that they are entitled           
          to a $60,000 loss deduction under section 165(a), contending that            
          the Cirtex stock became worthless in 1989.  Section 165(a) permits           
          the deduction of any loss sustained during the taxable year that is          
          not compensated for by insurance or otherwise.  Section 165(g)               
          provides that if a security which is a capital asset becomes                 
          worthless during the taxable year, the loss is treated as a loss             
          from the sale or exchange of a capital asset on the last day of the          
          taxable year.  Worthlessness of stock is determined both by lack of          
          liquidating value and the absence of any reasonable expectation              
          that the stock will become valuable in the future.  Morton v.                
          Commissioner, 38 B.T.A. 1270 (1938), affd. 112 F.2d 320 (7th Cir.            
          1940). Certain events such as bankruptcy, cessation of business,             
          liquidation of the corporation, or appointment of a receiver may             
          foreclose an expectation of future value.  Id.; see also Austin Co.          
          v. Commissioner, 71 T.C. 955 (1979).                                         
               In the instant case, no evidence was presented indicating that          
          Cirtex was insolvent in 1989.  Nor was any evidence presented as to          
          the occurrence of an identifiable event in 1989 that would                   
          foreclose the expectation of future value with respect to the                




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