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Appendix
I. Computation of Debt Bases
A. Respondent
With respect to the 1999 tax year, respondent’s position
results in (1) a debt basis of $358,707 for petitioners in docket
No. 8981-03 at the close of 1999, reflecting a reduction of basis
in the $800,000 advance only by an allowable loss of $441,293,
and (2) a debt basis of $386,056 for petitioners in docket No.
8983-03 at the close of 1999, reflecting a reduction of basis in
the $800,000 advance only by an allowable loss of $413,944 for
petitioners’ 1999 tax year.
With respect to the 2000 tax year, respondent’s position
results in (1) a debt basis of $718,762 for petitioners in docket
No. 8981-03 at the close of 2000, reflecting a reduction of basis
in the $1,100,000 advance only by an allowable loss of $381,238,
and (2) a debt basis of $703,202 for petitioners in docket No.
8981-03 at the close of 2000, reflecting a reduction of basis in
the $1,100,000 advance only by an allowable loss of $396,798.
B. Petitioners
With respect to the 1999 tax year, petitioners contend that
the basis of each $800,000 advance was first reduced by the
$500,000 repayments on January 5, 1999, and then further reduced
by $300,000 of pro rata company losses, resulting in a zero debt
basis at the close of 1999.
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