- 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
Last modified: May 25, 2011