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return in 1993, but petitioners concede that the amended return
was not filed until after respondent issued the statutory notice
determining the deficiencies in the instant case.
Furthermore, petitioners did not properly elect out of the
installment method for purposes of reporting the sale of the
shares, nor did they properly report the sale on that method.
Petitioners claim that petitioner made a good faith effort to
ascertain the worthlessness of the note and that his effort
should be sufficient to show that he was not negligent. However,
petitioner’s conclusion as to the worthlessness of the note was
based on little other than his subjective opinion, which is
insufficient to sustain a deduction. Fox v. Commissioner, 50
T.C. at 822.
On Schedule D of their 1990 return, petitioners reported a
long-term capital loss with respect to the note in the amount of
$29,945, calculated by subtracting the face amount of the note,
$166,361, from a basis of $196,306. Petitioners’ basis in the
shares was only $116,504. Petitioners have not attempted to
explain how they established the claimed basis in the note or to
otherwise justify the amount and nature10 of the loss claimed.
10
Petitioners argue that the note became worthless during
1990; however, the Code provides for the treatment of a worthless
debt as a deduction, sec. 166(a), or, in the case of a
nonbusiness bad debt, as a short-term capital loss, sec. 166(d).
Petitioners have not attempted to reconcile their argument with
the position taken on their 1990 return.
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