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v. Commissioner, 66 T.C. 652, 673 (1976), affd. 601 F.2d 734 (5th
Cir. 1979); sec. 1.166-5(b), Income Tax Regs. Whether the
taxpayer is engaged in a trade or business is a question of fact.
Dorminey v. Commissioner, 26 T.C. 940, 945 (1956).
In Whipple v. Commissioner, 373 U.S. 193 (1963), the Supreme
Court determined that a taxpayer, in order to obtain a business
bad debt deduction, must establish that he was in a trade or
business and that the loss from the worthless debt is proximately
connected with such trade or business. The Supreme Court in that
case stated that where the only return is that of an investor,
the taxpayer has not met his burden of demonstrating that he is
engaged in a trade or business. Whipple v. Commissioner, supra
at 202; see also Millsap v. Commissioner, 387 F.2d 420 (8th Cir.
1968), affg. 46 T.C. 751 (1966).
Petitioner has not satisfied his burden of proving that he
was in the business of lending money. Petitioner claimed the
$70,000 loss for a restaurant newsletter business, but admitted
at trial that the note had nothing to do with this business.
Petitioner testified that he had made loans "many times before",
but could recall only one other specific instance where he loaned
money. Petitioner further testified that the loan was an
"investment". Petitioner did not get a financial statement from
Mr. Kluzak, though he testified that he received an oral credit
reference from a credit bureau in Fargo. Petitioner asked for no
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