Tower Loan of Mississippi, Inc. - Page 18

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          Coopers’ house and sold it in 1988.  Accordingly, petitioner has            
          failed to meet its burden of proof.                                         
               We add that if the 1989 note is viewed as a separate debt              
          from the earlier debt, petitioner has failed to show that such              
          debt had value when created, or when acquired by AFLIC.  Without            
          that showing, a deduction is not permitted.  See, e.g., Garrett             
          v. Commissioner, 39 T.C. 316, 317 (1962).                                   
               Finally, petitioner has failed to prove AFIC’s basis in the            
          note, which is required in order to take a section 166 deduction.           
          Sec. 166(b).  Normally, for section 166(b) purposes, a taxpayer’s           
          basis in property is the cost of such property.  Secs. 1011 and             
          1012.  The assignment agreement stated that the assignment was              
          “For a valuable consideration, the receipt and sufficiency of               
          which is hereby acknowledged”.  Lee testified that AFIC                     
          reimbursed AFLIC for the amount of the debt; i.e., that AFLIC               
          furnished consideration for the debt.  However, we have found no            
          evidence of any such payments and would not, therefore, be able             
          to determine the amount allowable as a deduction under section              
          166.  Accordingly, we sustain respondent’s disallowance of                  
          petitioner’s bad debt deduction.                                            

                                             Decision will be entered                 
                                        under Rule 155.                               

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