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loans to petitioners reflect meeting dates of December 18, 1997,
April 20, 1999, and November 12, 1999, the dates of petitioners’
promissory notes.
Petitioners also executed partners minutes reflecting an
April 1, 1997, meeting of the Paulan partners (a date prior to
any of the Paulan bank borrowings or advances to Sidal or
petitioners). Those minutes, in effect, provide advance
authorization for any future Paulan loans to petitioners for the
purpose of enabling them to relend the funds to Sidal and for
those loans to take the form of direct payments to Sidal.
None of the Sidal or Paulan minutes described herein
(collectively, the minutes) were drafted and executed earlier
than June 2000, and the minutes describing an October 31, 2000,
Sidal board of directors meeting were drafted and executed
sometime after October 31, 2000.
Stock Basis
Petitioners’ adjusted tax bases in their Sidal stock were
zero as of January 1, 1999, 2000, and 2001.
OPINION
I. Introduction
Respondent disallowed each petitioner’s deduction of his 50-
percent share of Sidal’s ordinary losses for 1999 and 2000 on the
ground that petitioners had zero bases for their respective
investments in Sidal. Each petitioner’s basis in Sidal depends
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