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gasohol plant. Respondent agrees that this loan would be
deductible to the extent that it became worthless in 1987. We
must decide whether any part of Resthaven's loan to Kamas became
worthless in 1987. Sec. 166(a). Petitioners bear the burden of
proving that Resthaven's loan to Kamas became worthless in 1987.
Rule 142(a).
Respondent argues that there were no identifiable events in
1987 that would support a finding that $55,000 of the $110,000
debt was worthless. Respondent contends that the only event
which would have evidenced the loan's worthlessness was Kamas'
bankruptcy discharge in 1992 and that the events relied on by
petitioners are speculative. We disagree.
In 1987, the gasohol plant project did not proceed because
it lost its government backing. Petitioner asked Kamas to pay
the loan back, and Kamas could not pay the principal or the
interest. During 1987, petitioner also discovered that Kamas had
substantial financial obligations to a bank. Because the bank
could not collect its debt from Kamas, petitioner believed that
Resthaven would not collect its debt. By late 1987, the loan to
Kamas was approximately 1 year old and no payments had been made.
After discussions with his accountant, petitioner expected that
Resthaven would collect only half of the $110,000 debt.
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