- 2 - operating assets and mineral leases in order to generate cash to pay creditors, and faced with other difficulties (e.g., an SEC investigation, delinquent SEC mandatory filings, and class action lawsuits), SE Corp. emerged from bankruptcy in 1998 still owning its technology and various U.S.-based assets and personnel, and with plans to commercialize its technology in the near future. On Dec. 31, 1997, SE Corp.’s common stock was trading at $3 a share. The issues for decision, all involving taxable year 1997, are: (1) Whether Ps are taxable on ML’s sale of pledged shares; (2) if taxable on that sale, whether they may compute PH’s basis in the shares under a LIFO (as opposed to a FIFO) method for computing basis; (3) whether they are entitled to a $2 million business (or, alternatively, nonbusiness) bad debt deduction for the worthlessness of PH’s $2 million loan to SE Corp.; and (4) whether they are entitled to a worthless stock loss deduction for the worthlessness of PH’s SE Corp. common stock. 1. Held: Ps are taxable on ML’s sale of pledged shares. 2. Held, further, PH’s bases in the pledged shares sold by ML must be computed on a FIFO basis. 3. Held, further, Ps are not entitled to any bad debt deduction for the worthlessness of PH’s $2 million loan to SE Corp. 4. Held, further, Ps are not entitled to a worthless stock loss deduction for the worthlessness of PH’s SE Corp. common stock. Charles E. Anderson, for petitioners. Vicki L. Miller, for respondent.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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