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After a review of the record, we conclude that petitioners
are not entitled to an ordinary loss deduction under section 1244
in the amount of $32,500 for their purported Bis stock. Aside
from petitioner's self-serving testimony, petitioners offered no
documentary evidence to establish that the purported Bis stock
qualifies as section 1244 stock, and that petitioners ever paid
for or received any Bis stock. Petitioner admitted that they
have no records in their possession, i.e., stock certificates or
canceled checks, to establish their ownership and basis in Bis.
In their 1993 return, petitioners stated that the Bis stock
was purchased with cash. At trial, when asked whether petitioner
invested by check or by cash, he could not recall exactly but
stated that some payments were by checks and that he did not
"think" any cash was involved. At trial, petitioner stated that
he had one partner. The correspondence from his attorney at the
time of the formation of Bis indicated that there were four
investors.
Moreover, even if petitioners had established that they
owned section 1244 stock, there is no evidence in the record to
establish when such stock became worthless or that it was
worthless in 1993. Petitioner contends that Bis incurred the
loss when it forfeited a $60,000 security deposit given to the
Warwick Hotel to secure the lease. However, petitioner
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Last modified: May 25, 2011