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losses described in section 1366(a), and, under section
1367(b)(2)(A), a taxpayer's basis in any indebtedness of the
corporation is similarly reduced after the shareholder's basis in
the stock is exhausted.
Petitioner here is faced with two problems. First, he must
establish his bases in his stock and in the indebtedness of the
corporation to him. Second, he must establish that his bases in
these items had not been reduced to zero because of losses
claimed in prior years.
Even if we view the record most charitably in petitioner's
favor, petitioner cannot establish that he had any bases
remaining in his stock or in the indebtedness of the corporation.
Turning first to the debt, we start with the claim that the
amount of the loans represented by the notes totaled
approximately $52,000. But, it is clear that the $5,500 notes of
August 15 and November 7, 1985, and the $3,000 note of January 8,
1987, were renewals of earlier notes. In addition, $1,450 of a
$3,450 note of November 7, 1985, was used to repay an earlier
loan from the bank. The maximum advanced to the corporation
would have been $36,550 ($52,000 minus $15,450). We also know
that before 1990, petitioner was repaid $36,000. Petitioner's
basis in his loans to EBS, therefore, could not have been more
than $550.
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