John T. Barrett, Jr. and Jane W. A. Barrett - Page 16

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          Commissioner, 478 F.2d 1160, 1166 (8th Cir. 1973), affg. on this            
          issue and remanding on another issue 56 T.C. 388 (1971).  “The              
          decision must be made in the exercise of sound business judgment,           
          based upon as complete information as is reasonably obtainable.”            
          Andrew v. Commissioner, 54 T.C. 239, 248 (1970) (citing Blair v.            
          Commissioner, 91 F.2d 992, 994 (2d Cir. 1937)).  Generally, the             
          taxpayer must show one or more “identifiable events” that                   
          demonstrate the worthlessness of the debt.  American Offshore,              
          Inc. v. Commissioner, 97 T.C. 579, 593 (1991).                              
               If the debtor is solvent in the sense that its assets exceed           
          its liabilities, ordinarily no bad debt deduction is allowable to           
          the creditor.  Perry v. Commissioner, 22 T.C. 968, 973-975                  
          (1954); Bennett v. Commissioner, 20 B.T.A. 171, 173-174 (1930).             
          Although evidence demonstrating that the debtor is insolvent                
          points to the conclusion that the debt is worthless, see Gorman             
          Lumber Sales Co. v. Commissioner, 12 T.C. 1184, 1192 (1949),                
          insolvency is not conclusive evidence that a debt is worthless.             
          Cimarron Trust Estate v. Commissioner, 59 T.C. 195, 200 (1972).             
          The fact that the credit of a debtor is not good, and that it               
          does not have sufficient cash or other quick assets to pay its              
          debts immediately, does not necessarily make a debt worthless.              
          Bennett v. Commissioner, supra at 173-174; Ernst v. Commissioner,           
          18 B.T.A. 928, 929 (1930).  Even if a debtor is shown to be                 
          insolvent, if it is still actively engaged in business, its                 
          insolvency does not necessarily establish the worthlessness of              




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