Tower Loan of Mississippi, Inc. - Page 16

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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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