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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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