ABC Beverage Corp., f.k.a. Beverage America, Inc. - Page 17

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          loan because it did not have the cashflow.4  Third, soon after              
          Bottlers learned that G&K would not be able to purchase the                 
          facilities, Bottlers combined with Brooks Beverage to become                
          BevAm, and the Properties structure no longer was necessary.                
          Finally, an appraisal revealed the bottling facilities were worth           
          just under $8 million.  These specific, identifiable events                 
          combined to result in the worthlessness of the Properties loan in           
               Respondent argues that Properties was a going concern with             
          potential value in 1995 and that therefore, the Properties loan             
          was not partially worthless during that year.  See Crown v.                 
          Commissioner, 77 T.C. 582 (1981); Findley v. Commissioner, 25               
          T.C. at 318.  Respondent argues that Properties had sufficient              
          income and/or sufficient assets to satisfy its loan obligations.            
          Respondent sets forth several ways in which Properties could have           
          met its obligations.  For example, respondent argues that                   

               4Respondent argues that there is no evidence that Bottlers             
          failed to pay Properties the full amount of rent due on the                 
          lease.  We disagree.  We found the testimony of Mr. Trebilcock,             
          the chairman and president of Bottlers, to be credible on this              
          point.  Petitioner also introduced Properties’ accounting records           
          as evidence that Bottlers did not pay the full amount of rent for           
          1994 and 1995.  Moreover, had Bottlers paid Properties the full             
          amount of rent, Properties eventually might have not had the cash           
          to pay Bottlers the principal on the Properties loan anyway                 
          because Properties might be required to pay taxes on the rental             
          income it received from Bottlers, depleting its cash.  This cash            
          depletion was precisely what the management group was attempting            
          to avoid by having Bottlers pay Properties only a portion of the            
          rent due.                                                                   

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