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Petitioners did not introduce a copy of their 1980 Federal income
tax return to show how they treated the Arizona Marine
transaction.
Petitioners put "everything" they received from Arizona
Marine and Riviera "in the same storage deal". Petitioner
husband testified "I just figured I could probably sell it and
get my money back." At some point, petitioners leased the molds
to other boat builders. Eventually, petitioners got the molds
back from the lessees.
In 1985, petitioners claimed the $205,029 nonbusiness bad
debt deduction for the Arizona Marine and Riviera assets because
petitioners "perceived no value in that stuff at all at that
point in time." Petitioner husband further testified that in
1985, he came to the conclusion that:
I was not going to get any money out of this equipment
and there was two things that happened here, Your
Honor. One is I had gone through an audit in like 1976
with the IRS. When the IRS got through with the audit,
I ended up with a $32,000 tax credit and I had never
used all that tax credit up. So when I shut [Riviera]
down and Arizona Marine at the time, the losses, I
mean, I couldn't use them. So in 1985 was the first
time that I could even use any of these losses. So
determining that there was no value to any of that
equipment or stuff left, I went ahead and put it on my
income tax in 1985.
Subsequent years in '86 and '87 I sold some of the
stuff and, if you'll look at those tax returns, you'll
see I reported the income I received from the sale of
that equipment and molds.
Petitioners received $20,000 in 1986 and $25,000 in 1988
from these sales. Other than petitioner husband's general
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