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at the end of 1991 but only that they did not wish to bear the
risk associated with any further investment.
E. Conclusion
Petitioners have failed to prove that RTA’s claim against
EDS and its shareholders was speculative or wholly without merit.
RTA instigated a lawsuit, which, at least initially, it
prosecuted diligently and, in any event, eventually settled on
favorable terms. We believe that the evidence does not establish
a closed and completed transaction with respect to the TTS
investment in 1991 because there was a reasonable prospect of
recovery on the lawsuit at the end of 1991. Accordingly, no loss
deduction is allowable to RTA for 1991.
V. Conclusion
We have concluded that RTA did not suffer a deductible loss
with respect to the TTS during 1991. Therefore, no deductible
loss may be passed through to the shareholders in that year.
Respondent’s determinations of deficiencies in the shareholders’
Federal income tax liabilities are sustained.
Decisions will be entered
for respondent.
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Last modified: May 25, 2011