- 7 -
Government concedes that the advances made in this case
constitute bona fide loans. Section 1.166-2(a), Income Tax
Regs., provides that, in determining the worthlessness of the
debt, "the district director will consider all pertinent
evidence, including the value of the collateral, if any, securing
the debt and the financial condition of the debtor."
As recognized by the Supreme Court in United States v. S.S.
White Dental Manufacturing Co., 274 U.S. 398, 400-401 (1927),
quoting from and relying upon Article 141 of Treasury Regulations
45, the loss "must usually be evidenced by [a] closed and
completed" transaction. The Court also quoted with approval
Article 151 of those regulations to the effect that a sufficient
showing of worthlessness has been made "[w]here all the
surrounding and attendant circumstances indicate that a debt is
worthless and uncollectible and that legal action to enforce
payment would in all probability not result in the satisfaction
of execution on a judgment."7 Id. at 401.
The worthlessness of a debt is a factual question confined
to the particulars of each case. Boehm v. Commissioner, 326 U.S.
287, 292-293 (1945); Dustin v. Commissioner, 53 T.C. 491, 501
(1969), affd. 467 F.2d 47 (9th Cir. 1972). Although
7 Regulations currently in effect and applicable during the
taxable year are substantially identical in all significant
respects to the regulations quoted above in United States v. S.S.
White Dental Manufacturing Co., 274 U.S. 398 (1927). Sec. 1.166-
2(b), Income Tax Regs.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011