Court Opinion

ID: 4332804
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:52:49.18275+00
Date Added: 2024-06-11T14:20:12.908173
License: Public Domain

T.C. Memo. 2000-201

                         UNITED STATES TAX COURT

            RICHARD L. AND KELLY D. ROBSON, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 15716-97.                          Filed June 29, 2000.

     William D. Sutter, Jr., for petitioners.

     Henry N. Carriger, for respondent.

                MEMORANDUM FINDINGS OF FACT AND OPINION

        MARVEL, Judge:   Respondent determined a deficiency of

$14,782 in petitioners’ Federal income tax for the taxable year

1993.     The sole issue for decision1 is whether petitioners

     1
      The only other issue raised by the notice of deficiency is
computational.
                               - 2 -

realized a capital gain during 1993 as a result of a liquidating

distribution under section 331(a)(1).2

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts is incorporated herein by this

reference.   Petitioners resided in York, Nebraska, when they

filed their petition in this case.     References to petitioner are

to Richard L. Robson.

     Petitioner has worked in the insurance industry since his

graduation from college in 1963 with a degree in education.     On

or about March 4, 1980, petitioner and James Klute (Klute)

decided to purchase all of the stock of Mid-Nebraska Insurors,

Inc. (Mid-Nebraska), a local insurance agency.    To effect that

purchase, Mid-Nebraska borrowed $33,175 from York State Bank and

Trust Co. (York).   Mid-Nebraska then lent the proceeds to

petitioner and Klute, and they used them to purchase the stock of

Mid-Nebraska.   To evidence Mid-Nebraska’s loan to them,

petitioner and Klute signed a certificate of indebtedness (note)

in which they jointly and severally promised to pay Mid-Nebraska

     2
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure. For convenience, all monetary amounts are rounded to
the nearest dollar.
                                - 3 -

$33,175 with interest at 15 percent per year on the unpaid

balance.    Immediately after the purchase, petitioner and Klute

each owned 50 percent of the stock of Mid-Nebraska.

     Mid-Nebraska struggled financially.    It borrowed additional

funds from York, from Klute’s spouse (Mrs. Klute), and from his

company, Klute Land & Cattle Co., Inc. (Klute Land & Cattle).

Klute eventually decided to terminate his relationship with Mid-

Nebraska.    Consequently, on or about February 17, 1983, Mid-

Nebraska redeemed all of Klute’s stock, he resigned all of his

positions with that corporation, and it released him from any

further liability on the note and any debts or notes Mid-Nebraska

owed York.    Mid-Nebraska also agreed to pay $22,000 to Mrs. Klute

and $23,000 to Klute Land & Cattle in payment of the money it

owed them.    Mid-Nebraska paid the $22,000 to Mrs. Klute.   Of the

$23,000 owed to Klute Land & Cattle, Mid-Nebraska paid Klute

$8,000 on or about February 17, 1983, and gave him a note for the

balance due, payable in three annual installments of $5,000 each

commencing March 1, 1984.    Klute ultimately received only one

$5,000 payment.

     After the redemption of Klute’s stock, petitioner was Mid-

Nebraska’s sole shareholder, and he alone was responsible for

repayment of the $33,175 loan from Mid-Nebraska.    Neither Mid-

Nebraska’s payments to Klute, Mrs. Klute, and Klute Land & Cattle

nor its failure to pay the sums owed Klute affected petitioner’s
                               - 4 -

basis in Mid-Nebraska.   He was not liable for, nor was he

required to make, any of those payments.

     Mid-Nebraska continued to struggle financially.   Petitioner

borrowed money from his spouse and against his life insurance and

his 401(k) plan to put into Mid-Nebraska.   It is not clear,

however, how much additional money petitioner ultimately put into

the business, or whether Mid-Nebraska’s bookkeepers and

accountants treated the money as capital contributions or loans

to the corporation on its books and records, or whether Mid-

Nebraska repaid to petitioner any of that money before September

8, 1992.

     During 1988 or 1989, Dean Sack (Sack), York’s president,

chairman of the board, and principal owner, advised petitioners

to purchase the office space in the condominium building in which

Mid-Nebraska had located its offices (office condominium).     To

effect the purchase of the office condominium and to satisfy

certain bank lending policies, York lent Mid-Nebraska $16,000.

Mid-Nebraska then lent the money to petitioners, and they used it

to make a downpayment toward the purchase of the office

condominium.   Petitioners borrowed the balance of the $89,000

purchase price of the office condominium from York, and they

agreed to make monthly payments toward repayment of that loan.

Petitioners purchased the office condominium in their own names,

and they considered it to be a personal asset.   From the time
                               - 5 -

Sack approached petitioners about the purchase of the office

condominium through at least some time after the audit of their

1993 return, petitioner did not understand the nature of or

rationale for the financial arrangements made regarding that

purchase.

     Mid-Nebraska also periodically borrowed money from York for

operating expenses.   In August 1992, petitioner asked York to

cover a $19,000 overdraft to USF&G Insurance Co.   York refused.

Instead, Sack informed petitioner that York would take over Mid-

Nebraska’s business, but York would allow petitioner to operate

the insurance business as an employee of the bank.   During the

preliminary discussion of the terms of York’s acquisition of Mid-

Nebraska’s business, Roger Sack, Sack’s son, told petitioner that

York would fire petitioner if he attempted to retain an attorney

to advise him about the transaction.   Sack determined all of the

terms of the acquisition, and petitioner had no voice in the

matter.

     On August 17, 1992, Sack, on behalf of York, and petitioner

signed a letter of intent.   The letter of intent stated, among

other things, that “It is hereby acknowledged that Mid-Nebraska

Insurors is deficient in working capital and proposes to sell

their corporation, including all assets, to the York State Bank
                              - 6 -

for $30,000, and the cancellation of their note payable to the

York State Bank for approximately $97,000.”   The letter of intent

further stated, among other things:

     This is a temporary agreement made subject to further
     details but with the understanding that Dick Robson has
     the option to buy the corporation back from the bank at
     any time for the amount the bank has paid for it plus
     earnings of 1% per month for the time they have had
     their money invested in the corporation.

     In connection with the acquisition, York wrote a letter

dated August 31, 1992, to the State of Nebraska Department of

Banking and Finance (bank regulators) seeking their approval for

York’s purchase of Mid-Nebraska’s business.   In that letter, York

represented that “the Bank will acquire the business and certain

fixed assets from the present corporation for an amount not to

exceed one and one-half times the gross annual commissions.”    The

bank regulators expressed approval for the transaction in a

letter to York dated September 3, 1992, in which they cautioned

York that it could not purchase the stock of Mid-Nebraska.

     On September 8, 1992, Sack, on behalf of York, and

petitioner, on behalf of Mid-Nebraska, executed an agreement

regarding the “Acquisition of Mid-Nebraska Insuror’s fixed assets

and good will” (acquisition agreement).   The acquisition

agreement states, among other things:

     York State Bank and Trust Company will pay the seller
     an amount equal to the total of the following, not to
     exceed $167,000:

     Bank overdraft on closing day;
                               - 7 -

     Principal plus accrued interest on YSB term loan;
     Payoff amount of vehicle loan;
     Accounts Receivable;
     An additional amount equal to the excess of Accounts
     Payable over Accounts Receivable.

     At the option of York State Bank and Trust Company,
     seller will assign all rights to leases for Fixed
     Assets (Office F and F), and execute a Bill of Sale for
     Furniture and Fixtures.

     Seller will assign all rights to Agency Contracts with
     insurance carriers.

       *      *       *        *       *       *       *

     All future commission income of the seller will be the
     property of the buyer with the exception of Life
     Insurance Commission and/or Renewals, which shall
     remain the property of the seller. * * *

     Dick Robson agrees to enter into an Agreement for
     Employment with York State Bank and Trust Company,
     d/b/a Mid-Nebraska Insurors. Included in such
     Agreement shall be a non-competition clause covering a
     period of two years after termination of employment for
     any reason, whether voluntary or otherwise. * * *

     York State Bank and Trust Company agrees with the
     Seller that for a period of three years an option will
     be granted the Seller to repurchase the assets covered
     under this agreement for a total equal to the
     unrecovered investment in the original purchase price
     plus a sum equal to 12% per annum for each year or part
     thereof in which the York State Bank and Trust Company
     has any unrecovered investment. * * *

     From September 8, 1992, until petitioner repurchased the

insurance agency in 1994, York operated an insurance business

under the name “Mid-Nebraska Insurors”.    When York acquired that

business, Mid-Nebraska owed liabilities of over $158,890, of

which it owed York $151,890 for loans and an overdraft in the

corporate bank account.   Following York’s acquisition of Mid-
                                - 8 -

Nebraska’s business, York wrote off the $151,890 and paid $7,000

of Mid-Nebraska’s accounts payable, for a total purchase price of

$158,890.

     On April 22, 1993, petitioner, on behalf of Mid-Nebraska,

and Sack, on behalf of York, executed an addendum to the

acquisition agreement purportedly changing the allocation of the

sale price on assets other than fixed assets as follows:

                  Item                     Amount

            Employment agreements          $16,372
            Customer list                  130,978
            Noncompete                       1,489
              Total                        148,839

     Petitioner signed and filed Mid-Nebraska’s Form 1120, U.S.

Corporation Income Tax Return, for the year ended December 31,

1992 (1992 return), on October 15, 1993.   The 1992 return

reported, among other things, a capital gain of $125,645 and

ordinary gain of $13,760 from the sale of property consisting of

“vehicle, accts receivable, non-compete, employment agreements,

customer list, goodwill”.    Form 4797, Sales of Business Property,

filed with the 1992 return showed the following calculation of

the capital gain and ordinary gain:
                               - 9 -

Gross sale price                                       $158,890
Less:
 Cost or other basis
  plus expense of sale                  $33,245
 Less depreciation                       13,760
Adjusted basis                                               19,485
 Total gain from sale of property                           139,405
 Less:
  Ordinary gain (depreciation claimed
    on section 1245 property)                            13,760
Capital gain                                            125,645

Form 8594, Asset Acquisition Statement, filed with the 1992

return showed the allocation of the total $158,890 sale price as

follows:

                       Aggregate fair        Allocation of
       Assets           market value          sale price

    Class I (Cash)         $2,000                  $2,000
    Class II                 --                      --
    Class III             184,251                 156,890
     Total                186,251                 158,890

Form 8594 also showed a breakdown of the intangible amortizable

class III assets as follows:

                                             Allocation of
       Assets          Fair market value      sale price

     Employment
      agreements            $20,000               $16,372
     Customer list          155,000               130,978
     Noncompete              1,200                 1,489
       Total                176,200               148,839

Thus, $8,051 of the class III assets is not classified on the

Form 8594.

     Schedule L, Balance Sheet, filed with the 1992 return

reflected the following assets, liabilities, and stockholders’

equity at the beginning and end of that year:
                               - 10 -

       Item                    Beginning of year      End of year

 Assets:
  Cash                                  $295              --
  Trade notes and
   accounts receivable              10,034                --
  Loans to stockholders            131,940             $111,484
  Buildings & other
   depreciable assets less
    accumulated depreciation        20,383                  816
  Other assets (goodwill)           13,700                --
   Total assets                    176,352              112,300

 Liabilities and
  stockholders’ equity:
  Accounts payable                  35,653               28,898
  Loans from stockholders           19,500                --
  Mortgages, notes, bonds
   payable in 1 year or more       137,250                --
  Capital stock:
    Common stock                    10,000               10,000
 Retained earnings--
    Unappropriated                  (26,051)              73,402
   Total liabilities and
    stockholders’ equity           176,352              112,300

     Petitioner signed and filed Mid-Nebraska’s Form 1120, U.S.

Corporation Income Tax Return, for the year ended December 31,

1993 (1993 return), on or about September 15, 1994.   The 1993

return indicated that it was a final return.

     A Schedule L, Balance Sheet, filed with the 1993 return

reflected the following assets, liabilities, and stockholders’

equity at the beginning and end of the year:
                                  - 11 -

         Item                     Beginning of year      End of year

 Assets:
  Loans to stockholders                $111,484            $111,484
  Buildings & other
   depreciable assets less
    accumulated depreciation                816                 816
    Total assets                        112,300             112,300

 Liabilities and
  stockholders’ equity:
  Accounts payable                       28,898              28,898
  Capital stock:
    Common stock                         10,000              10,000
 Retained earnings--
    Unappropriated                       73,402              73,402
   Total liabilities and
    stockholders’ equity                112,300             112,300

     The State of Nebraska statutorily dissolved Mid-Nebraska on

or about April 16, 1993, for failure to pay fees and occupation

taxes.    When Mid-Nebraska was dissolved, petitioner was its

president and sole shareholder.

     When Mid-Nebraska ceased business, its books showed the

following asset accounts and balances:

Account No.              Description                     Balance

   106               Loan shareholder                     $1,800
   107               Robson building account              16,200
   111               Personal insurance                    7,876
   112               Accounts receivable-Robson           52,432
   113               Receivable Shareholder               33,175
     Total                                               111,483

Account No. 113 reflected the original amount that petitioner and

Klute owed Mid-Nebraska for the purchase of the stock of Mid-

Nebraska.       Hereinafter, accounts Nos. 106-107 and 111-113
                               - 12 -

collectively will be referred to as the loans to shareholder

accounts.

     On audit respondent determined that petitioners had

unreported income from a capital gain of $50,227 they received as

a result of the liquidation of Mid-Nebraska.   Respondent

calculated that net capital gain as follows:

     Assets per balance sheet at dissolution:
      Loans to shareholder                    $111,484
      Net depreciable assets                       816
       Total assets                                         $112,300
     Less liabilities per balance sheet
      at dissolution:
       Accounts payable                                      28,898
        Net liquidating dividend                             83,402
     Less basis in stock                                     33,175
       Capital gain from liquidating
        distribution                                         50,227

                               OPINION

     Amounts distributed to a shareholder in complete liquidation

of a corporation are treated as full payment in exchange for the

stock of the corporation.   See sec. 331(a)(1).   The gain or loss

to a shareholder from a liquidating distribution is determined

under section 1001 by subtracting the cost or other basis of the

stock from the amount of the distribution.   See sec. 331(c); sec.

1.331-1(b), Income Tax Regs.   Where a corporation cancels a debt

owed to it by a shareholder in connection with a complete

liquidation, the amount of the debt is treated as a distribution

under section 331(a)(1).    See Alexander v. Commissioner, 61 T.C.

278, 289 (1973) (citing Weisberger v. Commissioner, 29 B.T.A. 83
                              - 13 -

(1933)); see also Merriam v. Commissioner, T.C. Memo. 1995-432,

affd. without published opinion 107 F.3d 877 (9th Cir. 1997);

Levy v. Commissioner, T.C. Memo. 1960-22 (corporation made a de

facto distribution to its sole shareholder relating to the

complete liquidation of the corporation in the amount he owed the

corporation for advances it had made to him).

     Petitioners deny that petitioner received any liquidating

distribution from Mid-Nebraska.    Thus, they contend, he realized

no capital gain during 1993 relating to the dissolution of that

corporation.   Respondent, on the other hand, contends that the

statutory dissolution of Mid-Nebraska caused a de facto

liquidation of that corporation’s assets.    Thus, respondent

asserts, petitioner received a net liquidating distribution

during 1993 from Mid-Nebraska of $83,402.    Respondent maintains

that, after subtracting his basis in the Mid-Nebraska stock of

$33,175, petitioner realized a capital gain of $50,227 relating

to the dissolution of that corporation.

     Petitioners admit that when Mid-Nebraska ceased business,

the corporate books showed balances in the loans to shareholder

accounts totaling $111,483 and that the balance sheet filed with

Mid-Nebraska’s final return showed as an asset loans to

shareholder totaling $111,484.    Nevertheless, they insist that

Mid-Nebraska never lent any money to them or paid any of their

personal expenses.   Rather, they claim, the loans to shareholder
                                - 14 -

accounts reflected on the corporate books when York acquired Mid-

Nebraska’s business must have been made in error.

     From their briefs, it appears that petitioners are under the

mistaken belief that respondent has the burden of proof in the

instant case.     Generally, however, the Commissioner’s

determinations are presumed correct, and taxpayers have the

burden of proving that the Commissioner's determinations are

erroneous.3    See Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933); Page v. Commissioner, 823 F.2d 1263, 1271 (8th Cir.

1987), affg. in part and dismissing in part T.C. Memo. 1986-275.

     Other than their descriptive titles, the record contains no

evidence explaining the nature of the loans to shareholder

accounts.     Furthermore, evidence relating to the accuracy of the

loans to shareholder accounts consisted solely of petitioner’s

testimony.    We are not required to accept the self-serving

testimony of interested parties, however, particularly in the

absence of persuasive corroborating evidence.     See Day v.

Commissioner, 975 F.2d 534, 538 (8th Cir. 1992), affg. in part,

revg. in part and remanding T.C. Memo. 1991-140; Niedringhaus v.

Commissioner, 99 T.C. 202, 212 (1992); Tokarski v. Commissioner,

87 T.C. 74, 77 (1986).

     3
      The burden of proof provisions of sec. 7491 do not apply
here because the examination in this case began before July 22,
1998. See Internal Revenue Service Restructuring & Reform Act of
1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 685, 724.
                              - 15 -

     It is not enough for petitioners to claim that the entries

recording loans to shareholder must have been made in error.     The

record makes it abundantly clear that petitioner was ignorant

about financial and accounting concepts when he purchased Mid-

Nebraska’s stock and continuing at least through   the audit of

petitioners’ 1993 return.   It is also obvious that petitioner

made no effort to acquaint himself with Mid-Nebraska’s financial

records or the accounting entries made on those records or the

data reported on the corporate tax returns.

     Petitioner testified that he did not know of what the loans

to shareholder accounts consisted and that he was not even aware

that Mid-Nebraska’s books reflected loans to shareholder until

after York took over the corporation’s business.   He testified

further, however, that he did not understand the corporate books

and relied totally on in-house bookkeepers to keep the corporate

books and on outside accountants to prepare the corporate tax

returns.   He stated additionally that when he reviewed the

corporate books, he checked only for the amount of premiums he

had written each month.

     Petitioner failed to present any testimony from individuals

involved in preparing Mid-Nebraska’s books and tax returns who

could explain the nature of the loans to shareholder accounts

included on Mid-Nebraska’s books or otherwise establish that the

accounting entries were made in error.   The failure of a party to
                              - 16 -

introduce evidence that is within his or her control gives rise

to a presumption that the evidence, if provided, would be

unfavorable to the party who has control over the evidence.    See

O'Dwyer v. Commissioner, 266 F.2d 575, 584 (4th Cir. 1959), affg.

28 T.C. 698 (1957); Cluck v. Commissioner, 105 T.C. 324, 338

(1995); Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.

1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947).

Accordingly, we find that petitioners did not establish

satisfactorily that the loans to shareholder accounts depicted on

Mid-Nebraska’s books when it ceased its business resulted from

erroneous bookkeeping entries or constituted compensation.     See

Hash v. Commissioner, 273 F.2d 248, 250-251 (4th Cir. 1959),

affg. T.C. Memo. 1959-96; Allen v. Commissioner, 117 F.2d 364,

368 (1st Cir. 1941), affg. a Memorandum Opinion of this Court;

see also Bartel v. Commissioner, 54 T.C. 25 (1970).

     Petitioners contend additionally, in essence, that even if

the bookkeeping entries on Mid-Nebraska’s books showing loans to

petitioner were accurate, the loans to shareholder accounts no

longer existed in 1993 when the State of Nebraska statutorily

dissolved Mid-Nebraska.   According to petitioners, loans to

shareholders constitute accounts receivable, and York acquired

all of Mid-Nebraska’s accounts receivable during 1992; therefore,

petitioners contend, Mid-Nebraska had no asset consisting of

loans to shareholders to distribute to petitioner when the State
                              - 17 -

of Nebraska statutorily dissolved Mid-Nebraska.    Respondent,

however, contends that York acquired only Mid-Nebraska’s

marketable assets, i.e., its customer list and accounts

receivable, and that those assets did not include the accounts.

According to respondent, the only Mid-Nebraska receivables York

acquired consisted of money owed to Mid-Nebraska for insurance

premiums.

     Petitioners rely on the statement in the letter of intent

that Mid-Nebraska “proposes to sell their corporation, including

all assets, to York” as proof that York acquired the loans to

shareholder accounts reflected on Mid-Nebraska’s books when it

took over Mid-Nebraska’s business.     That document, however,

specifically stated that its terms were temporary and subject to

further detail.   Therefore, we do not find it conclusive proof

that York intended to acquire, or actually acquired, the loans to

shareholder accounts when it acquired Mid-Nebraska’s business.

     Petitioners also rely on the acquisition agreement as proof

that York acquired the loans to shareholder accounts.     We find

that document ambiguous, however.    The acquisition agreement

stated that York was acquiring “Mid-Nebraska Insuror’s fixed

assets and good will.”   We are aware that the agreement stated

further that the purchase price of the acquisition would be an

amount not exceeding $167,000 calculated on the total of

specified items of which “Accounts Receivable” is included.      The
                               - 18 -

agreement, however, did not define what items constituted

accounts receivable or otherwise indicate whether the loans to

shareholder accounts were included or excluded.     Petitioners

contend that the term “accounts receivable” includes loans to

shareholders.    We, however, find the meaning unclear.

     Black’s Law Dictionary (7th ed. 1999) defines the term

“account receivable” to mean “An account reflecting a balance

owed by a debtor; a debt owed by a customer to an enterprise for

goods or services.”    Kohler’s Dictionary for Accountants (6th ed.

1983) further defines the term to mean “A claim against a debtor,

generally on open account, its application usually limited to

uncollected amounts of completed sale of goods and services;

distinguished from deposits, accruals, and other items not

arising out of everyday transactions.”      (Emphasis added.)   One

accounting textbook explains that

     The term “receivables” refers to amounts due from
     individuals and other companies. Receivables are
     claims that are expected to be collected in cash.
     Receivables are frequently classified as (1) accounts,
     (2) notes, and (3) other.

          Accounts receivable are amounts owed by customers
     on account. They result from the sale of goods and
     services. * * *

     *       *         *       *        *       *      *

          Other receivables include nontrade receivables
     such as interest receivable, loans to company officers,
     advances to employees, and income taxes refundable.
     These are unusual; therefore, they are generally
                              - 19 -

     classified and reported as separate items in the
     balance sheet. [Weygandt et al., Accounting Principles
     324 (3d ed. 1993); emphasis added.]

See also Gehl Co. v. Commissioner, 795 F.2d 1324, 1330 (7th Cir.

1986) (“The term accounts receivable normally refers to an amount

that is due in return for goods or services supplied.” (Emphasis

added.)), affg. in part and setting aside in part on another

ground T.C. Memo. 1984-667.   The record does not show whether

Sack intended the term “accounts receivable” in the acquisition

agreement to encompass all accounts which are broadly classified

as receivables or to be limited to its more common application of

a trade receivable.

     Petitioner’s testimony that York acquired all of Mid-

Nebraska’s assets was premised solely on his own understanding of

the transaction.   However, he had absolutely no control over what

assets York wanted and acquired.   There is no evidence that

either Sack or his son specifically identified which of Mid-

Nebraska’s assets York wanted to acquire when they drafted the

letter of intent or the acquisition agreement.   Petitioner’s

ignorance of financial and accounting concepts renders his

testimony alone insufficient to establish that York procured the

loans to shareholder accounts when it acquired Mid-Nebraska’s

business, and the documents on which petitioners rely are

inconclusive.
                              - 20 -

     As further support for respondent’s position that York did

not acquire the loans to shareholder accounts, we note that

“Loans to stockholder” of $111,484 are listed as an asset at

yearend on both the Schedules L filed with Mid-Nebraska’s tax

returns for 1992 and 1993.   Statements on a Federal tax return

are admissions under rule 801(d)(2) of the Federal Rules of

Evidence and will not be overcome without cogent evidence that

they are wrong.   See, e.g., Waring v. Commissioner, 412 F.2d 800,

801 (3d Cir. 1969) (“The valuation [of license agreement] given

in the return was an admission, and although it is not

conclusive, the Tax Court was entitled to judge its weight as

evidence.”), affg. per curiam T.C. Memo. 1968-126; United States

v. Hornstein, 176 F.2d 217, 220 (7th Cir. 1949) (cost of goods as

shown on return were chargeable to taxpayer until he offered

credible evidence that figures were in error); Estate of Hall v.

Commissioner, 92 T.C. 312, 337-338 (1989) (values of stock

reported on estate tax return are admission by taxpayer, and

lower value could not be substituted without cogent proof that

reported values were erroneous); Lare v. Commissioner, 62 T.C.

739, 750 (1974) (“Statements made in a tax return signed by a

taxpayer may be treated as admissions.”), affd. without published

opinion 521 F.2d 1399 (3d Cir. 1975).   Petitioners have failed to
                              - 21 -

submit cogent evidence to overcome the admission on the corporate

returns that Mid-Nebraska continued to own the loans to

shareholder accounts after York acquired Mid-Nebraska’s business.

     Petitioners have not proven that the loans to shareholder

accounts did not exist when Mid-Nebraska ceased business.

Accordingly, we sustain respondent’s determination that

petitioners realized capital gain during 1993 from a liquidation

distribution petitioner received from Mid-Nebraska when it was

statutorily dissolved in that year.

     Although petitioners claim to have made additional capital

contributions to Mid-Nebraska between February 1982 and September

8, 1992, they have failed to establish that they are entitled to

a greater basis for petitioner’s stock than the amount allowed by

respondent.   Accordingly, we hold that petitioner’s basis in the

Mid-Nebraska stock was $33,175 when the corporation was

dissolved.

     We have carefully considered all remaining arguments made by

the parties for a result contrary to that expressed herein,4 and,

to the extent not discussed above, find them to be irrelevant or

without merit.

     4
      On brief, petitioners do not address the inclusion or
accuracy of the net depreciable assets or the accounts payable
amounts shown above. Accordingly, we treat those amounts as
conceded by petitioners. See Rule 151(e)(4) and (5); Petzoldt v.
Commissioner, 92 T.C. 661, 683 (1989); Money v. Commissioner, 89
T.C. 46, 48 (1987).
                        - 22 -

To reflect the foregoing,

                                     Decision will be entered

                                 for respondent.