Harry D. Bledsoe and Annie L. Bledsoe - Page 10

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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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