Dale H. and Edith Littlefield Sundby - Page 11

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               Assuming arguendo that petitioners were able to prove that a           
          bona fide debt was created with respect to the July 21, 1995,               
          transaction, petitioners still would not be entitled to the bad             
          debt deduction.  Petitioners have failed to show that they are              
          entitled to deductions that on their face would be allowable to             
          Navis, if at all.  The promissory note was made between                     
          Search2000 and Navis.  Because Navis was incorporated under the             
          laws of the State of California and there are other indicia of              
          its separate status, we shall treat it as a separate entity.  See           
          Moline Properties, Inc. v. Commissioner, 319 U.S. 436, 438-439              
          (1943).                                                                     
               Since the promissory note was made payable to Navis, it is             
          Navis that would be entitled to the bad debt deduction, if any              
          were to be allowed, and petitioners have not shown that the note            
          was transferred to them personally.  Moreover, petitioners have             
          not shown that any S corporation election was in effect for Navis           
          for the year in issue.                                                      
               On the basis of the foregoing, we hold that petitioners may            

               7(...continued)                                                        
          materially participate in the business of lending.  Petitioners             
          have not provided this Court with any evidence which supports               
          their contention that Mr. Sundby was in the trade or business of            
          being a lender during 1995, 1996, or 1997.  Petitioners have                
          failed to show that Mr. Sundby continually or regularly engaged             
          in lending for income or profit.  Even though Mr. Sundby was                
          president of both Search2000 and Navis, full-time service to a              
          corporation does not necessarily amount to engaging in a trade or           
          business (other than the trade or business of being an employee).           
          See Whipple v. Commissioner, 373 U.S. 193, 203 (1963).                      





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