-6-
On October 1, 1984, Mr. Adkins, Mr. Templeman, and
petitioner executed a contract in which Mr. Adkins agreed to
transfer his 50-percent partnership interest in J & M to
petitioner. In exchange, petitioner agreed to assume and pay all
of Mr. Adkins' share of J & M's outstanding liabilities. Prior
to October 1, 1984, petitioner and Mr. Templeman had applied for
and received a $700,000 loan in order to satisfy J & M's
outstanding liabilities.
Sometime before October 1, 1984, Mr. Adkins developed severe
heart problems. Mr. Adkins' medical condition prevented him from
executing the October 1, 1984, agreement on an earlier date.
Sometime in 1985, Tag Coal paid petitioner $44,806.72
against the amount advanced by petitioner on August 30, 1984.
Tag Coal was ultimately unsuccessful in recovering the
substantial payments owed to it under its contract with
Commonwealth. Consequently, on September 11, 1989, Tag Coal
filed a petition for bankruptcy under chapter 7 with the
bankruptcy court for the Eastern District of Kentucky. At the
time that the petition was filed, Tag Coal owed petitioner
$131,163.79 in respect of the amount advanced by petitioner on
August 30, 1984.
On an amended income tax return (Form 1040X) for 1989,
petitioners claimed that the amount advanced to Tag Coal and not
repaid; i.e. $131,163.79, was a business bad debt. On an amended
income tax return (Form 1040X) for 1990, petitioners claimed a
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011