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open an arcade, where 3-Koam could place its video games. On
brief, petitioner argues that the loan application supports
Paik's and Houston's contention, because it lists "partial cash
needs for a business investment" as the purpose for obtaining the
loan proceeds.
We disagree. Petitioner's reliance on the loan application
is self-serving, because Paik supplied the bank officer with the
information found on such document. Furthermore, petitioner has
failed to prove that the advance of $30,000 created a bona fide
debtor-creditor relationship between Sue and 3-Koam. 3-Koam
failed to perform a credit check on Sue, nor did it obtain
collateral from Sue to secure the alleged loan. Furthermore, the
$30,000 promissory note that Sue signed had a 0 percent interest
rate, no maturity date, and no fixed schedule of repayments.
Moreover, not only did Sue fail to repay the $30,000, but
3-Koam never made any demand for the funds, nor did it take legal
action against her. These are the types of reasonable actions a
creditor would institute against a debtor. Newman v.
Commissioner, T.C. Memo. 1982-61. Thus, we note that a taxpayer
cannot justify a bad debt deduction merely because it elects not
to enforce the obligation. See Southwestern Life Ins. Co. v.
United States, 560 F.2d 627, 644 (5th Cir. 1977).
In sum, we find that petitioner failed to sustain its burden
of proving that 3-Koam made a bona fide loan of $30,000 to Sue.
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