Michael E. and Linda S. Murray - Page 3




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            and Franklin Funding Company of Florida, Inc. (Franklin),                                  
            respectively.  Petitioners now concede that they may not deduct                            
            either loss.                                                                               
                  Mr. Murray is Poinciana’s sole shareholder.  Poinciana owned                         
            and operated a mobile home park (the park) until the park was                              
            foreclosed in 1993.  Petitioners realized a $1,626,868 gain on                             
            the foreclosure but did not recognize this gain on their 1993                              
            Federal income tax return.  They reported instead the $317,424                             
            loss mentioned above.                                                                      
                                             Discussion                                                
                  We must decide whether petitioners may deduct in 1993 an                             
            unreported loss on the claimed worthlessness of Mr. Murray’s                               
            Poinciana stock.  Petitioners assert that the stock became                                 
            worthless as a result of the park’s foreclosure and that Mr.                               
            Murray’s basis in that stock at the time of worthlessness was                              
            $1,626,868; i.e., the same amount as the gain realized on the                              
            foreclosure.                                                                               
                  Section 165(g) provides that a taxpayer may deduct a loss on                         
            stock that becomes worthless during the taxable year.  In order                            
            to deduct such a loss, however, the taxpayer must prove:  (1) The                          
            basis of the stock and (2) that the stock became worthless in the                          
            year claimed.  See Figgie Intl., Inc. v. Commissioner, 807 F.2d                            
            59, 62 (6th Cir. 1986), affg. T.C. Memo. 1985-369; Steadman v.                             
            Commissioner, 50 T.C. 369, 377 (1968), affd. 424 F.2d 1 (6th Cir.                          





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