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place of business was in the Johnsons' residence. Service is
not an S corporation and, accordingly, it is unnecessary to
analyze this matter under the standards of section
280A(c)(1)(A).
With respect to petitioners' claims for bad debts, section
166 permits a deduction for a debt that becomes worthless
during the taxable year. Zimmerman v. United States, 318 F.2d
611, 612 (9th Cir. 1963). Only a bona fide debt, arising from
a "debtor-creditor relationship based upon a valid and
enforceable obligation to pay a fixed or determinable sum of
money", qualifies for a deduction under section 166. Sec.
1.166-1(c), Income Tax Regs. Whether a bona fide debtor-
creditor relationship exists is a question of fact to be
determined after consideration of all the facts and
circumstances. Fisher v. Commissioner, 54 T.C. 905, 909
(1970).
Although notes were executed in connection with the amounts
given to various individuals, petitioners have not shown that a
genuine debtor-creditor relationship existed between Service
and any of the alleged borrowers. In most instances, the loans
were made through the corporation to friends or acquaintances
of the Johnsons. When the amounts were not repaid, even though
there was "evidence of indebtedness", Mr. Johnson did not want
to pursue collection from friends. Under those circumstances,
where the sole shareholder(s) of a corporation cause a
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