106 T.C. No. 16
UNITED STATES TAX COURT
INTERGRAPH CORPORATION AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21286-93. Filed May 8, 1996.
Held: Among other things, petitioner, in the year
of payment, is not entitled to a claimed sec. 166,
I.R.C., bad debt deduction with respect to its payment
as guarantor of a Japanese-yen-denominated loan made to
a Japanese subsidiary corporation. Where a guarantor
has a right of subrogation against, or a right of
reimbursement from, the primary obligor (regardless of
whether that right is expressly stated in the guaranty
agreement), the provisions of sec. 1.166-9(e)(2),
Income Tax Regs., apply, and the guarantor is not
entitled to a bad debt deduction until the right of
subrogation, or the right of reimbursement, is shown to
be worthless.
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