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One of respondent's grounds for disallowance is that
petitioner has not proven that he made the $53,189 payment. The
evidence presented in this case includes a loan history statement
from Weimar Bank. The $53,189 is reflected as payment made on
the Weimar Bank indebtedness. Furthermore, petitioner presented
evidence in the form of a letter, directing payment of a
commission (owed petitioner from a title company in an unrelated
real estate sale) in the amount of $53,189 to Weimar Bank.
Moreover, the evidence includes a copy of a check payable to
Weimar Bank on behalf of petitioner from Capitol of Texas Title
Company--escrow account, in the amount of $53,189. Accordingly,
we find that petitioner did make the $53,189 payment.
Respondent's next argument is that the payment did not give
rise to a bad debt deduction because petitioners have not proven
that their right to subrogation against Klutts, the other
guarantor, was worthless. A requirement for a bad debt deduction
is that the guarantor must be unable to recover from the debtor.
See Putnam v. Commissioner, supra.
It is unclear that petitioner's payment of part of his
obligation as guarantor on the Weimar Bank indebtedness is
treated as a bad debt becoming worthless in the year of payment.
Sec. 1.166-9(a), Income Tax Regs. However, the $53,189 payment
was made as co-guarantor of the Weimar Bank debt. Accordingly,
petitioner has rights against Klutts, his co-guarantor for 50
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