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is fixed by identifiable events that form the basis of reasonable
grounds for abandoning any hope of recovery. Crown v.
Commissioner, 77 T.C. 582, 598 (1981). To be worthless, not only
must a debt be lacking current value and be uncollectible at the
time the taxpayer takes the deduction, but also it must be
lacking potential value due to the likelihood that it will remain
uncollectible in the future. Dustin v. Commissioner, 53 T.C.
491, 501 (1969), affd. 467 F.2d 47 (9th Cir. 1972). Failure to
take reasonable steps to enforce collection does not prohibit the
taking of a bad debt deduction, if there is proof that such steps
would be futile. Perry v. Commissioner, 22 T.C. 968, 974 (1954).
In 1987 when petitioner attempted to collect the debt from
Mr. Kluzak, Mr. Kluzak stated that he was insolvent and might
have to declare bankruptcy. Petitioner testified that he checked
Mr. Kluzak's statements as best he could and decided that Mr.
Kluzak was insolvent and his note was uncollectible. He,
therefore, deducted the debt as worthless in 1987. On February
8, 1988, Mr. Kluzak's creditors filed an involuntary bankruptcy
petition against him in the U.S. Bankruptcy Court, District of
North Dakota. Mr. Kluzak was listed as owing $1,280,000 to
secured creditors, and $1,367,421 to unsecured creditors.
Petitioner was listed as an unsecured creditor in the amount of
$75,000. Mr. Kluzak's total assets equaled $8,500, with
estimated monthly income over estimated monthly expenses totaling
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