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ever repaid and whether or not that loan should be treated in
substance as a corporate distribution that would have reduced
petitioner’s stock bases to zero.
Further, aside from his bases in the stock of the S
corporations, petitioner has not established the worthlessness of
such stock. The mere fact that petitioner’s S corporations had
ceased operating and owed outstanding sales and employment tax
liabilities does not necessarily establish the worthlessness of
the related corporate stock. We conclude that petitioner is not
entitled to the claimed capital losses for 1990 and 1991.
With regard to the section 6651 late filing additions to
tax, we find petitioner’s testimony credible and persuasive.
Under the facts of this case, the disappearance of the accounting
firm with many of petitioner’s and the S corporations’ business
and financial records and petitioner’s significant personal and
family problems constitute reasonable cause for the untimely
filing of petitioner’s Federal income tax returns for the years
in issue. We do not sustain respondent’s imposition of the
section 6651 late filing addition to tax.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011