                        T.C. Memo. 1996-221



                      UNITED STATES TAX COURT



                 PAUL G. GUBBINI, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23708-93.            Filed May 7, 1996.



     Marie L. DeMarco and J. Paul Raymond, for petitioner.

     Francis C. Mucciolo, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WELLS, Judge:   Respondent determined a deficiency of $58,883

in petitioner’s 1989 Federal income tax.    After concessions, the

issues remaining for decision are:   (1) Whether petitioner is

entitled to a business bad debt deduction pursuant to section

166(a)(1) for the worthlessness of certain loans and advances
                                 - 2 -

made by petitioner to Color Trick, Inc. (Color Trick); and (2)

whether petitioner may claim an ordinary loss pursuant to section

1244 attributable to the worthlessness of his stock in Color

Trick.   Unless otherwise noted, all section references are to the

Internal Revenue Code as in effect for the year in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.

                         FINDINGS OF FACT

     Some of the facts and certain exhibits have been stipulated

for trial pursuant to Rule 91.    The stipulated facts are

incorporated herein by reference and are found accordingly.

     At the time he filed the petition in the instant case,

petitioner resided in Dunedin, Florida.

     Beginning in 1978 and during the times relevant to the

instant case, petitioner was an anesthesiologist.       During 1980,

petitioner and certain other anesthesiologists formed a

partnership known as Anesthesia Associates of Dunedin (medical

group) that provided services at a local hospital.       Petitioner

handled operation of the medical group.       Petitioner worked

between 40 and 50 hours per week as an anesthesiologist and took

18 weeks of vacation per year.

     From 1980 until 1984 or 1985, petitioner invested with a

builder in the construction and sale of homes on speculation.

Additionally, petitioner and another physician in the medical

group owned an apartment building.       Petitioner maintained the
                               - 3 -

building, collected rents, and found tenants.    Petitioner sold

the building during 1991 to pay expenses connected with his

divorce.   During 1986, after being approached by an accountant,

petitioner, together with two other physicians, invested in a

company known as Cinevision.   Petitioner expected to reap a

profit if Cinevision’s business was successful.    Cinevision

experienced difficulties after purchasing additional equipment to

expand its business.   Petitioner was involved in meetings with

Cinevision's management in an attempt to resolve the

difficulties.

     A tenant in petitioner's apartment building introduced

petitioner to Leland Prentice, who held a patent for a simple and

inexpensive process of color printing (process).    Leland Prentice

had licensed the patent to Prentice Color, which in turn made an

agreement with A.B. Dick, a large printing equipment and process

distributor, to market the process to print shops.    Prentice

Color had gone bankrupt, allegedly due to A.B. Dick’s failure to

market the process, and a lawsuit was being pursued against A.B.

Dick to dissolve the agreement to market the process and to

recover damages for A.B. Dick’s alleged failure to market the

process.   The litigation was settled in 1991.

     Leland Prentice had the right to use the process in two

locations, but could not market it, and had come to Florida to

set up a print shop using the process.   Leland Prentice also

hoped to market the process once the lawsuit against A.B. Dick
                                 - 4 -

was resolved.    He, however, did not have the necessary resources

to exploit his rights in the patent.     Petitioner was willing to

put money into Leland Prentice’s business in order to share in

the profits when it became successful.

     During October or November 1987, Color Trick was organized

pursuant to Florida law.   Leland Prentice and his wife, Faye

Prentice, were issued 700 shares of Color Trick’s stock, Leland

Prentice’s son, Stanley Prentice, and his wife were issued 100

shares, and petitioner was issued 200 shares, a 20-percent

interest in the corporation.   Petitioner paid $5,000 for the

shares.   The directors of the corporation were Leland Prentice,

Faye Prentice, and petitioner.    Color Trick was an S corporation.

On January 28, 1988, Leland Prentice assigned the patent to Color

Trick.

     From 1987 through 1989, petitioner advanced funds and made

and guaranteed loans to Color Trick.     Petitioner continued to

make loans to Color Trick because he believed its business could

be profitable.   Petitioner received promissory notes for some of

the advances and loans.    Petitioner’s loans and advances to Color

Trick were used to finance its operations and to purchase

equipment.   From 1987 through 1989, petitioner devoted time and

effort to Color Trick’s business but received no compensation

from Color Trick.   During the period of its operation, Color

Trick experienced continuing difficulties due to lack of sales,

equipment problems, and an excessive number of employees.
                               - 5 -

     On November 23, 1988, Color Trick reassigned the patent to

Leland Prentice and his wife in exchange for 200 shares of its

stock, which were to be canceled.   On that date, two other

investors in Color Trick were each issued 100 shares of Color

Trick.   As a condition for advancing more money to Color Trick,

on November 30, 1988, Leland Prentice granted petitioner and

other investors a lien on the patent, and a financing statement

concerning the lien was filed with the Florida secretary of

state.   The lien on the patent was the only security petitioner

obtained for all of his loans and advances to Color Trick.

Petitioner also considered any damages that might be awarded in

connection with the lawsuit against A.B. Dick as a possible

source for the repayment of his loans and advances to Color

Trick.

     During 1988 and 1989, as petitioner continued to advance

funds to Color Trick, he acquired additional stock in Color Trick

and, by the end of 1989, he had acquired 60 percent of the stock

of Color Trick.   During 1989, in order to induce petitioner to

continue to advance funds to Color Trick, Leland Prentice and his

wife returned the remainder of their stock in Color Trick to the

corporation.   The stock was reissued to petitioner and other

investors.   The transfer of the shares allowed more of Color

Trick’s losses to be passed through to petitioner and the other

investors.   Leland Prentice continued to work in Color Trick’s

business after he had given up all of his stock in the
                                - 6 -

corporation.    Stanley Prentice and his wife also returned their

100 shares of stock in Color Trick to the corporation during

February 1989.

     Toward the end of 1989, petitioner concluded that Color

Trick could not generate sufficient income to pay its bills, that

its business could not be turned around, and that he could not

continue advancing money to the business.    Petitioner’s efforts

to sell Color Trick around that time were unsuccessful.    Except

for activities connected with winding down its business, Color

Trick ceased operations at the end of 1989.    Its equipment was

sold or foreclosed upon and available funds were used to repay

certain creditors, not including petitioner.

     Leland Prentice had no assets from which petitioner’s loans

could have been repaid.    Petitioner did not attempt to foreclose

on or to sell the patent.    The process had become obsolete by the

end of 1989 because of the widening availability of digital

printers.    Petitioner received no repayment of principal or

payment of interest with respect to the loans and advances he had

made to Color Trick.

     On his Federal income tax returns for 1987, 1988, and 1989,

petitioner claimed the following losses with respect to Color

Trick:

            Year                 Loss

            1987                $9,053
            1988                42,982
            1989                78,356
                                - 7 -

Petitioner reported the income or loss connected with Cinevision

as passive income or loss on his 1987 through 1989 returns.

     On his 1989 Federal income tax return, petitioner claimed a

business bad debt deduction with respect to his loans to Color

Trick in the amount of $269,129.    Petitioner’s Federal income tax

returns for taxable years 1987 through 1990 contain no other

reference to any lending activity of petitioner.

                               OPINION

     The first issue we consider is whether petitioner is

entitled to a business bad debt deduction pursuant to section

166(a)(1) for the worthlessness1 of petitioner’s loans and

advances to Color Trick.    That section provides, in general, for

the deduction of debts that become wholly worthless during a

taxable year.   Section 166(d), however, limits the general rule,

providing that, in the case of a taxpayer other than a

corporation, nonbusiness bad debts are to be treated as short-

term capital losses.2   In general, a nonbusiness bad debt is a


1

     Respondent does not contest the fact that petitioner's loans
to Color Trick became worthless during 1989.
2

     Sec. 166(d) provides:

SEC. 166(d).    Nonbusiness debts.--

     (1) General rule.--In the case of a taxpayer other than a
corporation--

                 (A) subsection (a) shall not apply to any
                                                     (continued...)
                               - 8 -

debt other than a debt (1) created or acquired in the trade or

business of the taxpayer or (2) the loss from the worthlessness

of which is incurred in a trade or business of the taxpayer.

Sec. 166(d)(2).   The question whether a debt is a nonbusiness bad

debt is a question of fact.   Sec. 1.166-5(b), Income Tax Regs.

Petitioner has the burden of showing that he was engaged in a

trade or business to which the debts in question are proximately

related.   Spillers v. Commissioner, 407 F.2d 530, 534 (5th Cir.

1969), affg. T.C. Memo. 1967-216; United States v. Byck, 325 F.2d

551, 552 (5th Cir. 1963); Deely v. Commissioner, 73 T.C. 1081,

1092 (1980).

     The question of whether a shareholder’s loans to his

corporation are business or nonbusiness bad debts frequently has

been litigated.   A worthless debt resulting from a loan by a


2
 (...continued)
          nonbusiness debt; and

                (B) where any nonbusiness debt becomes   worthless
           within the taxable year, the loss resulting   therefrom
           shall be considered a loss from the sale or   exchange,
           during the taxable year, of a capital asset   held for
           not more than 1 year.

     (2) Nonbusiness debt defined.--For purposes of
paragraph (1), the term “nonbusiness debt” means a debt other
than--

                (A) a debt created or acquired (as the case may
           be) in connection with a trade or business of the
           taxpayer; or

                (B) a debt the loss from the worthlessness of
           which is incurred in the taxpayer’s trade or business.
                                - 9 -

shareholder to his corporation may qualify as a business bad debt

if the shareholder was engaged in the business of promoting,

organizing, financing, and selling corporations.    Deely v.

Commissioner, supra at 1092.   If a shareholder is only an

investor, the debt will be treated as a nonbusiness bad debt

because the management of one’s investments does not constitute a

trade or business.   Id.   In Whipple v. Commissioner, 373 U.S.

193, 202-203 (1963), the Supreme Court set forth the following

guidelines for deciding the question:

     Devoting one’s time and energies to the affairs of a
     corporation is not of itself, and without more, a trade
     or business of the person so engaged. Though such
     activities may produce income, profit or gain in the
     form of dividends or enhancement in the value of an
     investment, this return is distinctive to the process
     of investing and is generated by the successful
     operation of the corporation’s business as
     distinguished from the trade or business of the
     taxpayer himself. When the only return is that of an
     investor, the taxpayer has not satisfied his burden of
     demonstrating that he is engaged in a trade or business
     since investing is not a trade or business and the
     return to the taxpayer, though substantially the
     product of his services, legally arises not from his
     own trade or business but from that of the corporation.
     * * *

          If full-time service to one corporation does not
     alone amount to a trade or business, which it does not,
     it is difficult to understand how the same service to
     many corporations would suffice. To be sure, the
     presence of more than one corporation might lend
     support to a finding that the taxpayer was engaged in a
     regular course of promoting corporations for a fee or
     commission * * * or for a profit on their sale * * *,
     but in such cases there is compensation other than the
     normal investor’s return, income received directly for
     his own services rather than indirectly through the
     corporate enterprise * * *
                              - 10 -

In Deely v. Commissioner, supra at 1093, we concluded that, based

on Whipple v. Commissioner, supra at 202-203, a taxpayer claiming

to be in the business of promoting, financing, and/or dealing in

corporations must show that the activity is conducted for a fee

or commission or with the immediate purpose of selling the

corporations at a profit in the ordinary course of that business.

A taxpayer who seeks a return from long-range investment gains

rather than from a quick sale of a corporation after it has

become established is more likely to be considered an investor

rather than a business promoter.    Deely v. Commissioner, supra at

1093-1095.   Whether petitioner is engaged in the trade or

business of promoting corporations is a question of fact.     Smith

v. Commissioner, 62 T.C. 263, 268 (1974); see also Commissioner

v. Groetzinger, 480 U.S. 23, 36 (1987).

     Petitioner claims that he was engaged in the trade or

business of a venture capitalist or business promoter and that

the loans and advances that he made to Color Trick were made in

the course of that trade or business.    Petitioner, however, has

not established that he was engaged in the trade or business of

promoting corporations in addition to his medical practice.    We

note that petitioner's medical practice was his primary

occupation, to which he devoted approximately 40 to 50 hours per

week, excluding vacations.   Additionally, petitioner admitted

that he was not in the business of lending money when he began

advancing funds to Color Trick.    Moreover, nothing in
                               - 11 -

petitioner’s Federal tax returns that are in the record indicates

that he earned income from rendering services as a promoter.

Although petitioner claims that he had a reputation in his

community as a promoter, there is little evidence in the record

to support that claim, and the absence of any indication that

petitioner was separately compensated for his activities renders

that evidence unpersuasive.    Deely v. Commissioner, supra at

1096.

     Petitioner points to his activities outside his medical

practice to show that he was engaged in the trade or business of

being a business promoter, but the activities do not indicate

that petitioner was in that trade or business.   Although

petitioner was involved in building and selling houses on

speculation prior to his dealings with Color Trick, the record

does not indicate how he was compensated for his efforts, that

is, whether he received compensation directly for his services,

or indirectly through the success of the ventures.   Moreover,

that activity had ceased in 1984 or 1985, and it therefore does

not indicate that petitioner was involved in a business of

developing properties for quick sale during 1987, when he became

involved with Color Trick.    Petitioner’s other activities, such

as his ownership of an apartment building and his investment in

Cinevision, do not indicate that he engaged in promoting

corporations for a fee or commission or for the profit to be

derived from quickly selling them after they were established.
                                - 12 -

Rather, petitioner appears to have sought long-term returns from

his ownership interests, which is the hallmark of the investor.

Deely v. Commissioner, supra.    Although petitioner was actively

involved in the management of the apartment building, there is no

evidence he was directly compensated for his services.   Moreover,

it does not appear that he planned to sell the apartment building

once it became established; rather, he sold it as a result of his

divorce proceedings.

     Similarly, petitioner apparently sought a return from

Cinevision in the form of enhanced value of his investment,

rather than from direct compensation for his services to the

corporation.   Petitioner, moreover, reported the income or loss

connected with Cinevision as passive income or loss on his 1987

through 1989 returns.   Petitioner’s activities with respect to

Cinevision, which consisted of meetings with its management to

discuss its difficulties, appear no different from those of an

investor seeking to protect his investment.   As we discuss below,

we reach the same conclusion with respect to petitioner’s

activities in connection with Color Trick.

     The record is also devoid of evidence of other indicia of a

business of promoting corporations, such as the active seeking

out of opportunities to promote corporations, advertising, the

maintenance of a separate office or books of account for such a

business, or the preparation of statements of profit and loss
                                - 13 -

from corporate promotion activities.     United States v. Henderson,

375 F.2d 36, 41 (5th Cir. 1967).

     Accordingly, we conclude that petitioner was not in the

trade or business of promoting corporations.    Moreover, even if

petitioner were engaged in a promoting business, we would not

conclude that the business encompassed his activities regarding

Color Trick.   Petitioner’s activities in connection with Color

Trick were more consistent with those of an investor rather than

those of a business promoter.    Petitioner’s loans and advances to

Color Trick were used to finance its operations and to purchase

equipment, which furthered Color Trick’s business.    Petitioner’s

rendering of advice and making advances to Color Trick did not in

themselves amount to a promotion of the corporation.     United

States v. Clark, 358 F.2d 892, 895 (1st Cir. 1966).

     Furthermore, petitioner’s testimony indicates that the only

return he expected for his investments in Color Trick was from

dividends or the long-term enhancement of his share holdings

generated from the profits to be derived from the success of

Color Trick's business.   Petitioner may also have hoped to share

in any recovery from a lawsuit against A.B. Dick in connection

with a license it was granted to market the process.    Petitioner

further appears to have expected some return from the

exploitation of the patent once A.B. Dick’s licensing agreement

was dissolved in connection with the litigation.     Petitioner took

no salary from Color Trick, and there is no evidence that he
                              - 14 -

expected or was entitled to any direct compensation for his

services.   Although petitioner contended that he did not do so

because of Color Trick’s financial problems, there is no evidence

that he was owed any salary for his services or that he deferred

collecting any salary due him.   We conclude from the record as a

whole that petitioner expected only an investor’s return from

Color Trick in the form of dividends or long-term enhanced value

of his shareholdings.

     It does not appear that petitioner planned to sell Color

Trick quickly once it became established.   Indeed, there is some

question whether the business could have been sold, because

Leland Prentice was allowed to use his process in only two

locations but was not allowed to market it.   Rather, an effort

was made to sell the business only after petitioner decided that

it would not be successful and that he could not continue

financing it.

     Petitioner also contends that he made advances to Color

Trick in order to protect his business reputation after he had

induced other physicians in the medical group to invest in Color

Trick.3   As noted above, we cannot conclude from the record in

the instant case that petitioner had a reputation as a business

3

     Petitioner does not contend that the investments in Color
Trick by other physicians with whom he practiced rendered his
advances to Color Trick proximately related to his medical
practice, or that his medical practice would be in any way
affected by the fate of Color Trick.
                              - 15 -

promoter.   It appears to us that, in making the advances,

petitioner’s motivation was to protect his reputation as an

investor.   Petitioner also contends that he made advances to

Color Trick in an effort to protect the investments of the other

physicians who had loaned money to Color Trick.    Advancing money

to a corporation to protect the investments of others, however,

is an indication that the taxpayer is not a promoter.    United

States v. Clark, supra at 896.

     Petitioner also contends that his advances and loans to

Color Trick exceeded his initial investment in its stock by 60

times and that this circumstance indicates the lack of an

investment motive for the loans and advances.   We do not consider

the circumstance pointed to by petitioner indicative of the lack

of an investment motive given that petitioner (1) acquired

additional stock in Color Trick during 1988 and 1989, (2) held 60

percent of its stock by the end of 1989 and (3) was not entitled

to compensation for his services to Color Trick.   It seems quite

plausible to us that petitioner’s loans and advances were made to

protect his increasing and substantial equity stake in the

corporation.

     Based on our consideration of the entire record in the

instant case, we hold that petitioner’s loans and advances to

Color Trick, which became worthless in 1989, are nonbusiness bad

debts.   Whipple v. Commissioner, 373 U.S. at 203-204; United
                              - 16 -

States v. Byck, 325 F.2d at 554-555; Deely v. Commissioner, 73

T.C. at 1092-1093.

     Petitioner alternatively contends that he is entitled to

claim, pursuant to section 1244, an ordinary loss of $50,000 due

to the worthlessness of his stock in Color Trick.4   Section

165(g) provides generally that the loss resulting from the

worthlessness of a security (including stock) that is a capital

asset is capital in nature, and the allowability of such a loss

consequently is governed by the provisions of section 1211(b).

The allowable amount of the loss is the adjusted basis of the

security provided in section 1011 for purposes of determining the

loss from the sale or other disposition of property.   Sec.

165(b).

     Section 1244(a), however, allows an individual taxpayer to

treat a loss from “section 1244 stock” as an ordinary loss where

it would otherwise be treated as a loss from the sale or exchange

of a capital asset.   As relevant to the instant case, the

aggregate amount of the loss that may be treated as an ordinary

4

     Respondent contends that petitioner raised this issue too
late in the course of the instant case for us to consider it.
Respondent points out that the issue was not raised in the
petition, any amendment thereto, or in petitioner’s trial
memorandum, and contends that it would be unfair and prejudicial
to respondent for us to consider the issue, which respondent
asserts was raised for the first time at trial. Because we
decide below that petitioner has not established his entitlement
to claim a loss pursuant to sec. 1244, we need not consider
whether respondent was surprised and prejudiced by the raising of
the issue at trial.
                              - 17 -

loss pursuant to section 1244 cannot exceed $50,000.    Sec.

1244(b).   The term “section 1244 stock” is defined to mean stock

of a domestic corporation where:   (1) At the time of the stock's

issuance, the corporation had not received money or other

property in excess of $1 million for its stock, as a contribution

to capital, or as paid-in surplus; (2) the stock was issued for

money or other property (other than stock or securities); and (3)

the corporation during its most recent 5 taxable years (or, if

less, the period during which the corporation has been in

existence) derived more than 50 percent of its aggregate gross

income from sources other than royalties, rents, dividends,

interest, annuities, and sales or exchanges of stocks or

securities.   The third test, however, does not apply where the

amount of deductions allowed exceeds the amount of the

corporation’s gross income.   Sec. 1244(c).   The Commissioner is

empowered to prescribe the regulations necessary to carry out the

purposes of section 1244.   Sec. 1244(e).   Pursuant to that

authority, the Commissioner has issued regulations requiring a

taxpayer to have records sufficient to establish that the

taxpayer is entitled to the loss and satisfies the requirements

of section 1244.5   Sec. 1.1244(e)-1(b), Income Tax Regs.   We have

5

     The Commissioner’s regulations previously required taxpayers
claiming a loss pursuant to sec. 1244 to attach an information
report to the return in which the loss was claimed showing the
address of the corporation issuing the stock, the manner in which
                                                   (continued...)
                               - 18 -

held that strict compliance with the requirements of section 1244

and the regulations issued pursuant to it is necessary to obtain

the benefits of the section.    Mogab v. Commissioner, 70 T.C. 208,

212 (1978); Morgan v. Commissioner, 46 T.C. 878, 889 (1966).

     Petitioner contends that he received certain stock in Color

Trick that previously had been held by each of Leland Prentice

and his wife and/or Stanley Prentice and his wife in exchange for

repaying a $110,000 debt of Color Trick.6   Petitioner bases his

claim of a section 1244 loss on that transaction.   Petitioner,

however, has not established his basis in his Color Trick stock

for purposes of computing the amount of his loss pursuant to



5
 (...continued)
the stock was acquired, the nature and amount of the
consideration paid, and, if the stock was acquired in a
nontaxable transaction in exchange for property other than money,
the type of property transferred, its fair market value on the
date of transfer to the corporation, and its adjusted basis on
that date. Sec. 1.1244(e)-1(b)(1), (2), and (3), Income Tax
Regs., amended by T.D. 8594, 1995-1 C.B. 146. Petitioner did not
file such an information report with his 1989 return. In 1995,
however, the Commissioner eliminated the requirement of an
information report, amending the regulation to require only that
taxpayers maintain adequate records to establish their
entitlement to claim a loss pursuant to that section. T.D. 8594,
1995-1 C.B. at 147; see also Notice 94-89, 1994-2 C.B. 560. The
amendment is effective for all open taxable years beginning after
Dec. 31, 1953. T.D. 8594, 1995-1 C.B. at 147. Consequently,
petitioner’s failure to file an information report is not fatal
to his claim of entitlement to a loss pursuant to sec. 1244.
6

     In view of   the circumstances discussed below and our holding
that petitioner   has not otherwise established his entitlement to
the benefits of   sec. 1244, we need not address whether that stock
was "issued" to   petitioner in the manner required by sec.
1244(c)(1)(A).
                              - 19 -

section 1244.   Petitioner testified that he did not receive

additional stock in Color Trick for the money he advanced to it,

but that the shares were “kickers”.    Elsewhere on brief,

petitioner treats only his $5,000 payment for his initial

purchase of Color Trick’s stock as the amount of his investment

in its stock.   Petitioner has not attempted to reconcile the

inconsistency of his positions at trial and on brief with his

section 1244 claim.

     Furthermore, Color Trick was an S corporation, and,

consequently, the losses that were passed through to petitioner

reduced his basis in its stock.   Sec. 1367(a)(2).   The basis-

adjustment rules of section 1367 are applied before application

of sections 165(g) and 166(d) in a taxable year of the

shareholder in which a security or debt becomes worthless.

Petitioner does not dispute that, on its 1987, 1988, and 1989

returns, Color Trick reported losses of $45,263, $214,910, and

$138,267, respectively.   On his returns for 1987 through 1989,

petitioner claimed losses in connection with Color Trick totaling

$130,391.   Petitioner has not shown that there was any basis

remaining in his Color Trick stock after taking into account the

foregoing losses claimed on his returns that would enable him to

claim a loss with respect to its worthlessness.

     Additionally, petitioner contends that many records

pertaining to Color Trick were dispersed after Color Trick ceased

operations.   We note, however, that the loss of records does not
                              - 20 -

alter petitioner’s burden of proof, but, in such a case, we shall

consider credible secondary evidence.   Malinowski v.

Commissioner, 71 T.C. 1120, 1125 (1979).   Petitioner relies on

certain documents of Color Trick (viz, its articles of

incorporation and minutes of shareholders’ meetings), certain

testimony, and certain of his Federal income tax returns to

establish his entitlement to a section 1244 loss.   Certain other

records, however, have not been offered by petitioner, such as

his stock certificates or the stock transfer records of Color

Trick.   We do not accept the statements in petitioner’s Federal

income tax returns as proof of the facts asserted by petitioner.

A tax return is merely a statement of the taxpayer’s claim and

does not establish the truth of the matters set forth therein.

Wilkinson v. Commissioner, 71 T.C. 633, 639 (1979); Roberts v.

Commissioner, 62 T.C. 834, 837 (1974); Halle v. Commissioner, 7

T.C. 245, 247-248 (1946), affd. 175 F.2d 500 (2d Cir. 1949).

Accordingly, we hold that the evidence on which petitioner relies

is insufficient to establish his entitlement to the benefits of

section 1244.   Moreover, petitioner has failed to maintain

records sufficient to establish that he is entitled to the loss

claimed with respect to his stock in Color Trick and that he

satisfies the requirements of section 1244.   Sec. 1.1244(e)-1(b),

Income Tax Regs.
                             - 21 -

     Accordingly, we hold that petitioner is not entitled to

claim an ordinary loss pursuant to section 1244 in connection

with the worthlessness of his stock in Color Trick.

     To reflect the foregoing and concessions,

                                        Decision will be entered

                                   for respondent.
