- 46 - 1. Did G�nther Have Value During FYE 1991? As shown in the consolidated report column of G�nther’s balance sheet as of May 31, 1991, G�nther had a positive net worth of $1,405,422. Respondent does not dispute that G�nther had value during FYE May 31, 1992; it argues only that petitioner has failed to prove G�nther was worthless on May 31, 1992. 2. Did G�nther Lack Liquidation Value As of May 31, 1992? A corporation lacks liquidation value when its liabilities exceed the value of its assets. Steadman v. Commissioner, supra at 376-377. Following an investigation, petitioner concluded that G�nther’s liabilities substantially exceeded the aggregate fair market value of G�nther’s assets and that petitioner would receive nothing upon G�nther’s liquidation.30 In fact, petitioner has demonstrated to our satisfaction that its conclusion was accurate and that its management searched diligently for any of G�nther’s assets that had a fair market value in excess of book value which could be liquidated to pay down the guaranteed bank loans and mitigate petitioner’s losses from its investment in G�nther. 30G�nther’s consolidated balance sheet as of May 31, 1992, shows a deficit in shareholder’s equity of $17,010,232. Our conclusion that the intercompany advances were contributions to capital and not debt requires an adjustment in that figure, but, even after adjustment, G�nther still had a substantial net deficit as of May 31, 1992.Page: Previous 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 Next
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