- 33 -
leases at a substantial loss; (3) it was insolvent; (4) its
technology was without value; and (5) it had no past, present, or
prospective future earnings; i.e., it had no “realistic, viable
plan to pursue its business” other than the “incorrigible and
hopeless optimism of its founder and chairman, John Rendall.”
Although there is no doubt that Solv-Ex was in a serious
financial bind and faced an extremely uncertain future as of
December 31, 1997, for the reasons discussed infra we agree with
respondent that “[t]he facts do not establish that all reasonable
hope of any future satisfaction on the loan was lost in 1997”.
2. The Bankruptcy Reorganizations
Both the U.S. and Canadian bankruptcy proceedings
constituted reorganizations, not liquidating bankruptcies. When
a bankruptcy reorganization (e.g., under chapter 11 of the United
States Bankruptcy Code) continues without objection from the
creditors of the bankrupt, there is a strong presumption that the
reorganization is not hopeless and that the creditors will
receive at least partial repayment of the bankrupt’s debts. See
Mayer Tank Manufacturing Co. v. Commissioner, 126 F.2d 588, 591-
592 (2d Cir. 1942); Barrett v. Commissioner, T.C. Memo. 1996-199,
affd. without published opinion 107 F.3d 1 (1st Cir. 1997). In
the present case, that presumption is consistent with the
evidence.
Page: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 NextLast modified: May 25, 2011