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A bad debt is deductible only in the year that it becomes
worthless. Denver & R.G. W. R.R. v. Commissioner, 32 T.C. 43
(1959), affd. 279 F.2d 368 (10th Cir. 1960). Petitioner has
shown that, in 1987, Kamas' debt to Resthaven became partially
worthless. We hold that petitioner's judgment and conclusion
about worthlessness were reasonable and are supported by the
record. Respondent argues that, if the loan became worthless, it
happened in 1992; i.e., when Kamas' bankruptcy discharge
occurred. We believe, however, that Kamas' 1992 bankruptcy
discharge was simply the result of his 1987 financial troubles,
and resulted in the worthlessness of the remainder of the loan.
Petitioners are entitled to a $55,000 bad debt deduction for
1987.
Legal Expenses
Petitioners claimed professional fees of $134,985 for 1987
and $80,885 for 1988. Respondent disallowed $88,199 and $37,419
for 1987 and 1988, respectively, determining that petitioners had
not established that these amounts were ordinary and necessary
legal expenses of the cemetery business. Respondent contends
that these payments were made in connection with petitioner's
divorce proceedings. Petitioners bear the burden of showing that
these expenses were ordinary and necessary business expenses of
Resthaven. Rule 142(a).
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