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In the notices of deficiency, respondent determined that
Thomas received distributions from Southern Auto of $41,331 in
1993 and $59,945 in 1994. These figures are different from the
figures in Southern Auto’s work papers introduced into evidence
at trial. One work paper indicates that in 1993 the distribution
was $52,386 and another that it was $54,480. For 1994, the
distribution was $54,341. On brief, respondent continues to
contend that the correct figures are $41,331 and $59,945.
Because petitioners did not explain or substantiate the figures
in the work papers, we base our rulings on the amounts determined
by respondent.
Thomas’ basis at the beginning of 1993 was zero. His 1993
pro rata share of the corporation’s income of $25,617 is to be
added to his basis under section 1367(a)(1)(A). The distribution
to Thomas was $41,331, which exceeds his adjusted basis by
$15,714. The $15,714 is taxable as capital gains. Sec. 1368(b).
Thomas’ basis at the beginning of 1994 was zero. His 1994 pro
rata share of the corporation's income of $46,770 is to be added
to his basis. His adjusted basis is then reduced by $1,865 for
his pro rata share of Southern Auto's casualty loss, for a total
adjusted basis of $44,905. Sec. 1367(a)(2)(B). The 1994
distribution of $59,945 exceeds this adjusted basis by $15,040.
The $15,040 is taxable as capital gains. Accordingly, we sustain
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