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Commissioner, T.C. Memo. 1995-494. As the Court explained in
Putnam:
The reality of the situation is that the debt is an
asset of full value in the creditor's hands because
backed by the guaranty. The debtor is usually not able
to reimburse the guarantor and in such cases that value
is lost at the instant that the guarantor pays the
creditor. But that this instant is also the instant
when the guarantor acquires the debt cannot obscure the
fact that the debt "becomes" worthless in his hands.
[Putman v. Commissioner, supra at 89.]
Whether a debt is worthless is a factual determination, on
which the taxpayer bears the burden of proof. Estate of Mann v.
United States, 731 F.2d 267, 275 (5th Cir. 1984); Crown v.
Commissioner, 77 T.C. at 598. This ordinarily entails proof of
identifiable events that establish that the debt will not be paid
in the future. Estate of Mann v. United States, supra at 276. A
taxpayer's subjective opinion that a debt is uncollectible,
standing alone, is not sufficient evidence that the debt is
worthless. Fox v. Commissioner, 50 T.C. 813, 822 (1968), affd.
per curiam by an unreported order (9th Cir. 1970). Rather,
taxpayers must arrive at a conclusion of worthlessness through
the exercise of sound business judgment, basing their judgment
upon as complete information as is reasonably obtainable. Andrew
v. Commissioner, 54 T.C. 239, 248 (1970). Although evidence
demonstrating that the debtor is insolvent points to a conclusion
that a debt is worthless, see Gorman Lumber Sales Co. v.
Commissioner, 12 T.C. 1184, 1192 (1949), insolvency does not
establish conclusively that a debt is worthless, Cimarron Trust
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