Flint Industries, Inc. and Subsidiaries - Page 49




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               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 a               






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