- 11 - the corporation to petitioner also became worthless. At that time, it was clear that the debt to petitioner would never be repaid. Petitioner argues that the debt became worthless in 1989 when the Florida attorney informed him that the judgment was not collectible because of lack of assets held by the judgment debtors. However, petitioner did not present any evidence to demonstrate what circumstances, if any, existed between 1985 and 1989 to suggest that there was any chance of recovering the judgment. Accordingly, the Court holds that the debt of $122,682.75 owed to petitioner became worthless in 1985. The second question is whether the indebtedness to petitioner was a business or a nonbusiness indebtedness. Section 166 distinguishes between business bad debts and nonbusiness bad debts. Sec. 166(d); sec. 1.166-5(b), Income Tax Regs. Business bad debts may be deducted against ordinary income and are deductible whether such debts become wholly or partially worthless during the year. Nonbusiness bad debts may be deducted only as short-term capital losses and only if the debts become wholly worthless in the year claimed. Sec. 166(d). A bad debt is characterized as business rather than nonbusiness if the debt bears a proximate relationship to the taxpayer's trade or business. Sec. 1.166-5(b), Income Tax Regs. In determining whether such relationship exists, the proper measure is thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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