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would not have been timely since it would not have been “[a]t the
time of the sale” as required by section 1.1012-1(c)(3)(i)(a),
Income Tax Regs. See also Hall v. Commissioner, 92 T.C. 1027,
1039 (1989) (taxpayer not permitted to avoid application of the
FIFO method by waiting “until the end of a year to allot specific
sales to his general inventory of stocks in such a manner as to
be most beneficial to him taxwise”).
We hold that petitioners have failed to introduce credible
evidence that they adequately identified, on a LIFO basis, any
portion of the 634,100 pledged shares sold by Merrill Lynch.
Therefore, we sustain respondent’s application of the FIFO method
for determining Mr. Rendall’s basis in those shares. Because the
number of pledged shares constituting shares Mr. Rendall
purchased for 1 cent a share in 1980 at the initial offering of
Solv-Ex common stock (2.5 million) was well in excess of the
634,100 pledged shares sold by Merrill Lynch, respondent properly
determined that Mr. Rendall’s FIFO basis in the sold shares was
$6,341 (634,100 x 1 cent), and that petitioners’ long-term
capital gain on the sale of those shares was $4,223,138
($4,229,479 - $6,341).
IV. Bad Debt Deduction
A. Law
Section 166(a)(1) allows a deduction for “any debt which
becomes worthless within the taxable year.” To provide credible
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