-35--35-
of the pertinent regulation. Sec. 1.166-2(b), Income Tax Regs.,
provides:
(b) Legal action not required. Where the
surrounding circumstances indicate that a debt is
worthless and uncollectible and that legal action to
enforce payment would in all probability not result in
the satisfaction of execution on a judgment, a showing
of these facts will be sufficient evidence of the
worthlessness of the debt for purposes of the deduction
under section 166.
Petitioners did not produce any evidence at trial that would
indicate that, if the Raiders had instituted collection
proceedings, the result would not have been the satisfaction of
execution on the judgment.
The Raiders continued to do business with Speck until
sometime after 1990. While the mere continuation of business
with Speck is not determinative of the debt’s worth, it is a
factor to be considered. See, e.g., Record Wide Distrib., Inc.
v. Commissioner, T.C. Memo. 1981-12, affd. 682 F.2d 204 (8th Cir.
1982).
Petitioners have failed to show any identifiable event that
would have formed the basis for reasonably abandoning any hope of
recovery of $400,000 of the Speck debt in 1986. Respondent’s
disallowance of the bad debt deductions is sustained.
To reflect the foregoing and concessions of the parties,
Decisions will be entered
under Rule 155.
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