Herschel H. and Roberta S. Hoopengarner - Page 16

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          T.C. Memo. 1989-390; Williams v. United States, 245 F.2d 559, 560           
          (5th Cir. 1957).                                                            
               Petitioners have not shown a reasonable basis for concluding           
          that the loans taken against the properties should be included as           
          increases to basis.  We are not convinced that the full amounts             
          of the loans were paid into the construction projects.  Given the           
          circumstances of this case and the inexactitude apparent from               
          petitioners’ evidence, we have no reasonable evidentiary basis to           
          make an approximation as to the amount of net operating losses.             
          We could choose a raw percentage and apply that percentage to the           
          total amount of the loans.  However, our choice of a percentage             
          would be mere guesswork with no reasonable evidentiary basis.               
               Petitioners dispute the computations and theory set forth by           
          Revenue Agent John Grennan.  In analyzing whether petitioners had           
          substantiated their claimed NOLs, the Revenue Agent thought that            
          petitioners might have had cancellation of indebtedness income              
          when the foreclosures on the properties occurred.  Due partially            
          to the possibility of cancellation of indebtedness income, the              
          net operating losses were not substantiated.                                
               Petitioners argue that they did not have cancellation of               
          indebtedness income because they were insolvent when the                    
          foreclosures occurred.  Furthermore, since they did not have                
          cancellation of indebtedness income, petitioners argue that they            
          had net operating losses.  While the Court is sympathetic to                






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