- 7 - ness, the regulation provides that the discharging payment is a nonbusiness bad debt. Sec. 1.166-9(b), Income Tax Regs. The question of whether a debt is a business or nonbusiness bad debt is essentially a question of fact, the resolution of which depends upon whether the debt is "proximately" related to the trade or business of the taxpayer. Sec. 1.166-5(b)(2), Income Tax Regs. In determining whether a bad debt had a "proximate" relation to the taxpayer's trade or business, the Supreme Court has stated that the proper measure is the dominant motivation of the taxpayer in making the loan. United States v. Generes, 405 U.S. 93, 103 (1972). The taxpayer's motive is assessed at the time the guaranty was made. Harsha v. United States, 590 F.2d 884 (10th Cir. 1979). Petitioner first argues that, had decedent not agreed to secure a loan for International Mining, the corporation would have failed, negatively affecting petitioner's and decedent's business dealings in the community. Petitioner argues that the dominant motivation in making the loan was to protect the real estate business. Petitioner offers only her own testimony to support this argument and offers no facts that suggest that, when International Mining did fail, any of the real estate business interests were negatively affected. Petitioner and decedent next contend that their dominant motivation in lending the money to International Mining was to protect their "good name" in the community where they lived. Petitioner and decedent argue thatPage: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011