does not give rise to any deductions or investment tax credits.
Respondent is sustained on this issue.
Issue 2. Carter
Section 166(a) allows a deduction for any debt which becomes
worthless within the taxable year. The deduction is allowable
only in respect of a bad debt owed to the taxpayer. Sec. 1.166-
1(a), Income Tax Regs. A bona fide debt is a debt arising from a
debtor-creditor relationship based upon a valid and enforceable
obligation to pay a fixed or determinable sum of money. Sec.
1.166-1(c), Income Tax Regs. Petitioner bears the burden of
proving, first, that a bona fide debt existed, and second, that
it became worthless in 1984. Rule 142(a); Crown v. Commissioner,
77 T.C. 582 (1981).
In determining whether a debtor-creditor relationship
represented by a bona fide debt exists, the Court considers the
facts and circumstances. Fisher v. Commissioner, 54 T.C. 905,
909 (1970). The test in making such a determination is whether
the debtor is under an unconditional obligation to repay the
creditor and whether the creditor intends to enforce repayment of
the obligation. Id. at 909-910; sec. 1.166-1(c), Income Tax
Regs. The objective indicia of a bona fide debt include whether
a note or other evidence of indebtedness existed and whether
interest was charged. See Clark v. Commissioner, 18 T.C. 780,
783 (1952), affd. 205 F.2d 353 (2d Cir. 1953). Also considered
are the existence of security or collateral, the demand for
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