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lieu of pledge has been secured by personal assets of Joseph D.
Osterbauer."
By July 1984 International Mining had ceased operations.
All of the other investors disappeared, and decedent was left to
wind up the affairs of International Mining. In order to pay off
the $40,000 loan to the Bank, petitioner and decedent rolled over
the $40,000 loan with other personal loans and refinanced the
loans by the rollover. In other words, they consolidated the
loan with other personal loans and refinanced the loans by
consolidation. Petitioner testified at trial that upon investi-
gation, it was found that the stock put up by Mr. Meader as
collateral had no value. The consolidated loan was eventually
paid off by the sale of decedent's Cessna aircraft.
OPINION
We must decide whether petitioner's and decedent's payments
of International Mining's debts are deductible as business or
nonbusiness bad debts under section 166. It is undisputed that
petitioner and decedent suffered a loss on the worthlessness of
the debt due them from International Mining.
Section 166 provides in relevant part as follows:
SEC. 166(a). General Rule.--
(1) Wholly worthless debts.--There shall be
allowed as a deduction any debt which becomes
worthless within the taxable year.
* * * * * * *
(d) Nonbusiness Debts.--
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