John Favia - Page 2




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               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for the year in issue, and              
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.                                                                  
               After concessions, the issue for decision is whether                   
          petitioner has established that a $100,000 promissory note became           
          worthless as of the end of 1994.                                            

                                     Background                                       
               This case was submitted under Rule 122 on stipulated                   
          exhibits and without a trial.                                               
               At the time the petition was filed, petitioner resided in              
          Chicago, Illinois.                                                          
               On December 31, 1993, petitioner, a securities broker,                 
          entered into a note purchase agreement with Thinking Machines               
          Corp. (TMC).  In connection with the note purchase agreement,               
          petitioner provided TMC with $100,000 in cash in exchange for a             
          $100,000 promissory note from TMC.  Under the terms of the                  
          promissory note, TMC was obligated to pay petitioner interest at            
          12 percent per year until the $100,000 principal amount of the              
          promissory note becomes due on the earlier of March 31, 1995, or            
          on the date of the closing of a public or private stock offering            
          by TMC.                                                                     
               TMC was engaged in the design, development, manufacture, and           
          marketing of high performance supercomputers and related                    





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