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yielding $42,500 that petitioner owed to Swirl. He then
subtracted the remaining $42,500 from the $350,000 yielding
$307,500. Petitioner deducted $308,0005 for his bad debt from
Swirl.
2. Respondent's Calculation
Respondent and petitioner used the same three transactions
to calculate petitioner’s 1988 bad debt deduction. However,
respondent used loan balances from a March 31, 1989, balance
sheet. Respondent used the $154,175 balance on the facilities
mortgage that petitioner owed to Swirl. Respondent subtracted
the $94,500 balance on the May 1985 loan that Swirl owed to
petitioner, yielding $59,675 that petitioner owed to Swirl.
Respondent subtracted $59,675 from petitioner’s October 1986
$350,000 loan to Swirl, yielding $290,325. Thus, respondent
contends that if petitioner had a bad debt, then petitioner may
deduct only $290,325.
3. Analysis
The following compares petitioner’s and respondent’s
computations:
5 Petitioner apparently made a $500 error, which he has not
explained.
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