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respondent's contention that the transactions were investments
rather than bona fide loans. Suffice it to say that the weight
of the evidence supports the finding that petitioner and Sheldon
intended a debtor-creditor relationship, rather than an equity
relationship.
In order to qualify as a business bad debt, the debt must
have been created or acquired in connection with a trade or
business of the taxpayer (section 166(d)(2)(A)), or the loss must
have been incurred in petitioner's trade or business (section
166(d)(2)(B)). Petitioner must demonstrate that the loss
resulting from the worthlessness of the debt bears a "proximate
relationship" to a trade or business in which he was engaged.
This is a question of fact. Sec. 1.166-5(b), Income Tax Regs.
The test for determining whether a particular debt bears a
"proximate relationship" to the taxpayer's trade or business was
set forth by the Supreme Court as follows:
in determining whether a bad debt has a "proximate"
relation to the taxpayer's trade or business, as the
Regulations specify, and thus qualifies as a business
bad debt, the proper measure is that of dominant
motivation, and that only significant motivation is not
sufficient. * * * [United States v. Generes, 405 U.S.
93, 103 (1972)].
If the interest of the lender is predominantly that of an
investor, the debt will be characterized as a nonbusiness bad
debt, because management of one's own investments, no matter how
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