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debt will be considered worthless only when it can be reasonably
expected that the debt is without possibility of future payment
and legal action to enforce the debt would not result in
satisfaction. Hawkins v. Commissioner, 20 T.C. 1069 (1953).
Petitioner bears the burden of proof, Rule 142(a), and must show
that the debt had value at the beginning of the taxable year in
question--in this case 1989--and that it became worthless during
and prior to the end of that year, Millsap v. Commissioner, 46
T.C. 751, 762 (1966), affd. 387 F.2d 420 (8th Cir. 1968).
We have found the amount of the debt, as assigned to AFIC in
1989, to be $93,595. Of that amount, petitioner concedes that
$853, the cash value of the Lamar policies, is not deductible as
a bad debt.
Petitioner proposes no findings of fact and makes no
arguments supporting its position that the debt became worthless
in 1989 other than that Cooper began serving a prison sentence
during 1989. The only evidence submitted by petitioner
pertaining to the worthlessness of the debt is Jack Lee’s
subjective testimony on the matter.9 Lee testified as follows:
Q. Well, prior to his going to prison, what effort
did you make -- after the business went defunct, what
efforts did you make to collect on the loan?
A. We went through a long history of George trying to
collect. He went from -- after the thing -- after
Cooper Ford went broke, then he bought the restaurant
9 Lee is chairman, chief executive officer, and part
owner of petitioner.
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