- 16 -
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
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011