Stanley P. Zurn - Page 23
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abandonment of his interest in the joint venture or the road
construction equipment, and, accordingly, he is not entitled to a
deduction for the joint venture interest or undepreciated value
of the machinery for the taxable years before the Court.
Concerning the amounts advanced to the joint venture, a debt
becomes deductible when it becomes worthless. Denver & R.G.W.
R.R. v. Commissioner, 32 T.C. 43 (1959), affd. 279 F.2d 368 (10th
Cir. 1960). Petitioner bears the burden of proving when and if a
debt is worthless. Rule 142(a); James A. Messer Co. v.
Commissioner, 57 T.C. 848 (1972). The question of worthlessness
is factual, and the standard has been described in the following
Debts are wholly worthless when there are reasonable
grounds for abandoning any hope of repayment in the
future. Dallmeyer v. Commissioner, 14 T.C. 1282, 1292
(1950), and it could thus be concluded that they have
lost their "last vestige of value." Bodzy v.
Commissioner, 321 F.2d 331, 335 (5th Cir. 1963). This
will usually entail proof of the existence of
identifiable events which demonstrate the valuelessness
of the debts. Riss v. Commissioner, 478 F.2d 1160 (8th
Cir. 1973); Crown v. Commissioner, 77 T.C. 582, 598
(1981); Hubble v. Commissioner, 42 T.C.M. 1537, 1544
Estate of Mann v. United States, 731 F.2d 267, 276 (5th Cir.
In mid-1986, petitioner entered into the joint venture with
Ms. Jackson and began advancing funds. Ms. Jackson had cash-flow
problems. Petitioner agreed to become involved with Ms. Jackson
although he was aware of her business history. He advanced
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