George R. and Donelle C. Hawthorne - Page 11




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          constitute gains from the sale or exchange of property under                 
          section 301(c)(3)(A) because petitioners have failed to establish            
          the respective bases that Mr. Hawthorne had in the shares of                 
          common stock which he owned in Centerior Energy and in Portland              
          General.  Consequently, according to respondent, there is no                 
          basis in any of those shares against which to apply the respec-              
          tive cash distributions at issue that he received from those                 
          companies pursuant to section 301(c)(2).  We agree with respon-              
          dent.4                                                                       
               Petitioners have not introduced any evidence regarding Mr.              
          Hawthorne's respective bases in the shares of common stock of                
          Centerior Energy and of Portland General which he owned and with             
          respect to which those companies made cash distributions to him              
          during 1993.  On the record before us, we find that petitioners              
          have failed to satisfy their burden of establishing that $609.91             
          of the cash distributions totaling $1,440 that Mr. Hawthorne                 
          received from Centerior Energy and all of the cash distributions             
          that he received from Portland General during 1993 are not                   
          includible in petitioners' income for 1993.  On that record, we              

          4  We note that the corrected copy of Form 1099-DIV which                    
          Portland General sent to Mr. Hawthorne explained the tax                     
          treatment of amounts that were identified in that form as "NON-              
          TAXABLE DISTRIBUTIONS", as follows:                                          
               This part of the distribution is nontaxable because it                  
               is a return of your cost (or other basis).  You must                    
               reduce your cost (or other basis) by this amount for                    
               figuring gain or loss when you sell your stock.  But if                 
               you get back all your cost (or other basis), you must                   
               report future nontaxable distributions as capital                       
               gains, even though this form shows them as nontaxable.                  
               * * *                                                                   

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