- 49 - Respondent’s reliance on G�nther’s German commercial report for its FYE April 30, 1992, is likewise unsupported. Petitioner has amply demonstrated that G�nther’s FYE April 30, 1992, commercial report used the book values of G�nther’s assets instead of fair market values and that it did not realistically present G�nther’s true financial condition or adequately state the value of petitioner’s investment in G�nther. We hold that, because G�nther’s liabilities substantially exceeded the fair market value of its assets as of May 31, 1992, G�nther lacked liquidation value as of May 31, 1992. 3. Did G�nther Lack Potential Value as of May 31, 1992? A corporation lacks potential value when there is no reasonable expectation that assets will exceed liabilities in the future. Steadman v. Commissioner, 50 T.C. at 376. Generally, a lack of potential value is established by showing that an identifiable event, such as bankruptcy, liquidation, the appointment of a receiver, or the cessation of normal business operations, effectively has destroyed the corporation’s potential value. Id. at 376-377; Morton v. Commissioner, 38 B.T.A. at 1279. Where, however, a corporation’s liabilities so greatly exceed the value of the corporation’s assets and the corporation’s assets and business are such that no reasonable expectation of profit to the shareholders exists, the inability of a taxpayer to point to an identifiable event as proof of aPage: Previous 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 Next
Last modified: May 25, 2011