Reza and Connie M. Rezazadeh - Page 10

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          became worthless within the taxable year.  Sec. 1.166-1(c),                 
          Income Tax Regs.; Andrew v. Commissioner, 54 T.C. 239, 244-245              
          (1970).  The Court is satisfied that there was a debtor-creditor            
          relationship and that the corporation owed a genuine debt to                
          petitioner.3                                                                
               The first question is the year in which the $122,682.75 debt           
          became worthless.  Respondent contends that the debt became                 
          worthless in 1985.  Petitioner contends the debt became worthless           
          in 1989.  The Court agrees with respondent.  In 1985, the                   
          corporate receiver reported there were no assets of the judgment            
          debtors upon which the judgment could be collected and that                 
          collection efforts would not be worthwhile.  The receiver was of            
          the opinion that the judgment was virtually worthless.  Based on            
          the receiver's opinion, the receivership was terminated, and the            
          judgment was transferred to petitioner.  The Court finds that,              
          when the receiver established, in 1985, that the corporation had            
          no assets other than the worthless judgment, the debt owing by              

          3                                                                           
               At trial, counsel for respondent asserted, for the first               
          time, that petitioner's advances of $111,000 constituted capital            
          contributions to the corporation.  The Court rejects that                   
          contention.  The Court is satisfied that the "investment                    
          certificates" constituted loans and were not capital                        
          contributions.  With respect to the $11,682.75 in legal expenses            
          paid by petitioner, the Court concludes that those expenses were            
          so closely related to the advances petitioner made to the                   
          corporation that such expenses "assume identical characteristics"           
          as the $111,000 advances, so that the two components of                     
          petitioner's claimed deductions are accorded identical treatment.           
          See Blauner v. Commissioner, T.C. Memo. 1967-156; see also Ander            
          v. Commissioner, 47 T.C. 592 (1967).                                        




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