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buyers personally guaranteed $220,000 in payables that USMP owed
petitioner. Respondent ignores, however, that the buyers
received assets that were nearly equivalent to the liabilities
that they guaranteed. Moreover, the buyers guaranteed
liabilities that were already owed petitioners, and USMP would
have been insolvent in the buyers' hands but for petitioner's
waiver of $110,000 in payables. After USMP experienced declining
sales revenue, high and uncontrollable labor costs, and 2
consecutive years of net losses, petitioner accepted the nominal
sum of $6.17 and relinquished its right to $110,000 in payables
for which USMP was liable. In essence, petitioner paid the
buyers to take USMP.
Respondent also contends USMP had potential value, because
the buyers continued to operate the company. The continued
operation of a corporation, however, does not by itself establish
value in stock. Steadman v. Commissioner, supra at 378.
Therefore, we conclude that in the year of sale, the stock had no
potential value. Accordingly, we hold that petitioner's USMP
stock became worthless in 1984.
All other contentions made by the parties are either
irrelevant or without merit.
To reflect the foregoing,
Decision will be entered
for petitioner.
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Last modified: May 25, 2011