- 4 -
OUT IN THE NEXT FEW DAYS, WILL EITHER PAY OUT THIS LOAN OR
GREATLY REDUCE." Additionally, on the face of the second note
was a handwritten notation, "Paid WMiller 10-23-89".
Attached to the second note was an assignment by petitioner,
dated December 22, 1988, of all "rights, title and interest to
the within* note to FARMERS AND MERCHANTS BANK, with recourse on
me". The text to the asterisk footnote is: "Note from D. B.
Metalworks, Inc. to Farmers and Merchants Bank dated July 13,
1988 and maturing October * * * [the day is blank], 1988, in the
amount of $22,879.75 plus interest."
During either 1987 or 1988, Metalworks ceased business
operations. During October 1989, petitioner "paid the balance
due on the note".
Schedule C of petitioners' Federal income tax return for
taxable year 1989 listed "Finance services" as petitioner's
principal business or profession and claimed bad debt deductions
in the total amount of $38,100. Petitioners deducted $28,080 for
"payment on the note", $7,020 for loans that became uncollectible
in 1989, and $3,000 for amounts paid to a restaurant referred to
as Annabelle's for its capital stock.
Respondent determined that the foregoing payments were
personal and were not made in connection with petitioner's trade
or business and therefore disallowed the bad debt deductions
claimed by petitioners in the amount of $38,100. Respondent
recharacterized such amount as short-term capital loss.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011