Estate of Robert L. Wagner, Deceased, Ruth R. Wagner, Personal Representative, and Ruth R. Wagner, et al. - Page 1

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                                 T.C. Memo. 1998-338                                  

                               UNITED STATES TAX COURT                                

             REPRESENTATIVE, AND RUTH R. WAGNER, ET AL.,1 PETITIONERS v.              
                    COMMISSIONER OF INTERNAL REVENUE, RESPONDENT                      

               Docket Nos.  8581-96, 25799-96,    Filed September 23, 1998.           
                         25800-96, 25801-96.                                          

                    RTA, an S corporation within the meaning of sec.                  
               1361(a), I.R.C., reported a loss to its shareholders on                
               account of a failed investment in certain technology.                  
               The shareholders deducted their pro rata shares of that                
               loss on their returns.  Respondent disallowed those                    
               deductions on the ground that the loss was not                         
               evidenced by a closed and completed transaction in the                 
               year the loss was claimed on account of the reasonable                 
               prospect of a recovery under a lawsuit against the                     
               supplier of the technology.                                            
                    Held:  Respondent’s determination is sustained                    
               because petitioners have failed to prove that RTA’s                    
               chances for success on the lawsuit were remote or                      

          1    Cases of the following petitioners are consolidated                    
          herewith:  Walter W. Manley II, docket No. 25799-96; Richard T.             
          Wagner and Margie S. Wagner, docket No. 25800-96; Charles E.                
          Lecroy II and Karen A. Lecroy, docket No. 25801-96.                         

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