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counter in 1998 and averaged at or near $1.25 a share for the
trading days immediately prior to the end of May 1998. On July
28, 1998, the stock traded at $.875 a share.
Petitioners’ 1997 Return and Amended Returns
On the Schedule D, Capital Gains and Losses, attached to
their original 1997 return, filed October 15, 1998, petitioners
used a LIFO (last stock purchased, first stock sold) method for
determining Mr. Rendall’s basis in the 634,100 shares of Solv-Ex
common stock pledged to and sold by Merrill Lynch. Petitioners
reported total basis for those shares of $1,305,714 and total
gain of $2,923,765 ($4,229,479 - $1,305,714).
On April 14, 1999, March 18, 2002, and January 22, 2003,
petitioners filed four amended returns (the first through fourth
amended returns).11 All of the amended returns report a net loss
for 1997 and claim a refund of $45,400, petitioners’ total tax
payments for that year. There are differences among them,
however, particularly with respect to both the amounts of loss
and the bases for the loss.
The first amended return differs from the original return by
claiming a nonbusiness bad debt deduction (short-term capital
loss) for the worthlessness of the $2 million loan. The second
11 Both the third and the fourth amended returns were filed
on Jan. 22, 2003.
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