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profitable venture. I don't know if it's called a bad debt, but
it's an expense." We interpret petitioner's statement as an
assertion that the surrendered deposit somehow gave rise to a
deduction under the general provisions of either section 162(a)
or section 212. Section 212 generally permits a taxpayer to
deduct ordinary and necessary expenses incurred either for the
production of income or for the management, conservation, or
maintenance of property held for the production of income. There
is no indication in the record that petitioner sought to purchase
the property in question as part of his trade or business or with
the intent to produce income. Petitioners have failed to meet
their burden of proving that they are entitled to the claimed
deduction. Rule 142(a). We, therefore, sustain respondent on
this issue.
2. Schedule D Gains and Losses
(a) Demand Note
On November 8, 1989, petitioner agreed to lend $5,700 to the
Connecticut Gold Chip Co. (CGCC). In return, petitioner received
a demand note. The note provided that the principal was payable
on or after December 31, 1989, upon the demand of the payee or
holder. The note further provided that a late payment penalty
was payable at the rate of 5 percent on any unpaid principal as
of December 31, 1989, and upon default, interest would accrue at
an annual rate of 18 percent on any unpaid balance. Petitioner
did not receive any repayments of principal or interest on the
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