- 23 - protect one's employment or salary. Weber v. Commissioner, T.C. Memo. 1994-341. "[I]t must be clear from the record that the primary reason for making the advances which gave rise to the debts was business related rather than investment related". Smith v. Commissioner, 60 T.C. 316, 319 (1973). Generally, returns from investing result from appreciation and earnings on the investment rather than from personal effort or labor. United States v. Generes, supra at 100-101. Conversely, one's role or status as an employee is a business interest. It typically involves the exertion of effort and labor in exchange for a salary. Id.; see also Litwin v. United States, 983 F.2d 997 (10th Cir. 1993); Smartt v. Commissioner, supra. If the dominant motive was to increase the value of petitioner's stock in the auto dealership, then the loan was a nonbusiness investment. If the dominant motive was to increase or protect the taxpayer's salary, then the loan was a business debt. If both outcomes occurred, then a consideration of all of the relevant facts, emphasizing the objective factors and giving controlling weight to no one single factor (the Generes approach), should be utilized. Litwin v. United States, supra; Smartt v. Commissioner, supra. Respondent has conceded that the $400,000 business bad-debt deduction claimed on petitioner's 1990 Federal income tax return arises from the $400,000 payment on the floor plan loan, which isPage: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Next
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