Stephen P. Arnold - Page 7

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          does not establish that petitioner had any other such sales of              
          stock during the relevant year.  In that petitioner has not                 
          disproved respondent’s determination that his stock proceeds are            
          taxable in full, with the exception of our findings above as to             
          basis, that those proceeds were the only sales proceeds received            
          by petitioner during the subject year, and that petitioner’s                
          gains and losses from his stock sales were short-term capital               
          gains and losses, we sustain respondent’s determination as to               
          this issue.                                                                 
          4.  Loss From Only Kids                                                     
               The pro rata share of an S corporation’s loss passes through           
          to its shareholders.  Sec. 1366(a)(1).  A shareholder may deduct            
          such a loss to the extent that it does not exceed the                       
          shareholder’s adjusted basis in (1) the shareholder’s stock in              
          the corporation plus (2) any debt owed by the corporation to the            
          shareholder.  Sec. 1366(d)(1).  A taxpayer such as petitioner               
          must establish that he has acquired basis in the referenced stock           
          and debt and, to the extent that he does, that his basis in those           
          items was not reduced to zero because of losses claimed in years            
          predating the subject year.  Hogan v. Commissioner, T.C. Memo.              
          1999-365.  Taxpayers who fail to prove that they have any basis             
          in an S corporation are considered to have a zero basis in that             
          corporation.  Thomson v. Commissioner, T.C. Memo. 1983-279, affd.           
          without published opinion 731 F.2d 899 (11th Cir. 1984).                    






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