- 10 - 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).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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