Angelo F. DeJoy - Page 6

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          corporations.  See sec. 1012.  Distributions by S corporations              
          without accumulated earnings and profits, on the other hand,                
          decrease the shareholders’ bases in their stock in the                      
          corporations.  See sec. 1367(a)(2)(A).                                      
               Under section 165, taxpayers may take deductions for losses            
          sustained in sales or exchanges of capital assets and for                   
          worthless securities.  See sec. 165(a), (f), and (g).  Such                 
          losses and deductions are limited, however, to the extent                   
          prescribed by the Code.  Taxpayers other than corporations may              
          offset capital gains by capital losses.  See sec. 1211(b).                  
          Capital losses in a given year are limited by the amount of the             
          capital gains plus $3,000.  See id.  In addition, taxpayers are             
          allowed flow-through losses and deductions in connection with S             
          corporations only to the extent of their adjusted bases in the S            
          corporations.  Individual taxpayers may carry over excess capital           
          losses to subsequent years.  See sec. 1212(b).                              
               In this case, the evidence does not adequately establish               
          petitioner’s tax bases in, or the worthlessness of, petitioner’s            
          stock in the S corporations to entitle petitioner to the losses             
          claimed.  Although the payments petitioner made on behalf of his            
          S corporations would increase petitioner’s bases in the stock of            
          the S corporations, petitioner has not adequately established his           
          bases in the stock.  For example, petitioner has not established            
          whether the $148,574 purported corporate loan to petitioner was             

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