- 24 -
paid approximately DM 125,000 to one of Flint’s subsidiaries
pursuant to the promissory note.
VIII. G�nther’s Value as of May 31, 1992
As of May 31, 1992, G�nther's liabilities (excluding the
intercompany account payable of $6,564,124 owed to Flint and the
reserve for G�nther’s projected FYE April 30, 1993, operating
loss of $3.2 million) exceeded the fair market value of its
assets by at least $7 million. As of May 31, 1992, and for the
foreseeable future, G�nther was unable to pay its guaranteed bank
loans and other obligations when due.
IX. Deductions Claimed
For FYE May 31, 1992, petitioner claimed a worthless stock
deduction of $7,374,438 (petitioner’s adjusted basis in G�nther’s
stock without regard to our discussion herein) under section 165
and a bad debt deduction of $6,564,124 (the intercompany account
balance as of May 31, 1992) under section 166.
For FYE May 31, 1993, petitioner claimed an additional
worthless stock deduction of $2,435,876 and a bad debt deduction
of $815,105. The worthless stock deduction equaled the amount of
the first waiver subject to reinstatement, less the amount
claimed as a bad debt deduction on petitioner’s FYE 1992 return.
The bad debt deduction equaled the intercompany account balance
as of May 31, 1993.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011