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basis in its USMP stock. Sec. 165(g)(3). To prevail, petitioner
must establish that its USMP stock ceased to have both
"liquidating value" and "potential value" during the year in
which the worthlessness is claimed. Austin Co. v. Commissioner,
71 T.C. 955, 970 (1979); Steadman v. Commissioner, 50 T.C. 369,
376 (1968), affd. 424 F.2d 1 (6th Cir. 1970); Morton v.
Commissioner, 38 B.T.A. 1270, 1278 (1938), affd. 112 F.2d 320
(7th Cir. 1940).
A corporation does not have a liquidation value if the value
of its liabilities exceeds the value of its assets. Steadman v.
Commissioner, supra at 376-377. On the day after the sale, USMP
reported a net worth of $29,501. This figure, however, included
a reduction for petitioner's waiver of $110,000 in current
liabilities. Thus, before the sale, USMP had a negative net
worth of $80,499. Therefore, we conclude that in 1984 when
petitioner sold and claimed a deduction relating to its USMP
stock, such stock had no liquidating value.
A loss of potential value is ordinarily established by the
occurrence of an "identifiable event" that destroys any
reasonable expectation that the assets will exceed the
liabilities in the future. Id. at 376. An identifiable event
includes the sale of property. See, e.g., United States v. S.S.
White Dental Manufacturing Co., 274 U.S. 398, 401 (1927); Proesel
v. Commissioner, 77 T.C. 992, 1005 (1981). Respondent contends
that at the time of the sale USMP had potential value because the
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