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under section 166. Dixie Dairies Corp. v. Commissioner, 74 T.C.
476, 493 (1980); sec. 1.166-1(c), Income Tax Regs. Petitioners
bear the burden of proof on all issues. Rule 142(a).
In her notice of deficiency, respondent disallowed
petitioners' deduction of the intercompany account balance in
FY 1984 on the grounds that either (1) the amounts reflected in
this account were contributions to capital rather than debts, or,
alternatively, (2) if they were bona fide debts, they did not
become worthless during FY 1984. Because we sustain respondent's
determination on the alternative ground that petitioners have not
shown that any debt evidenced by such amounts became worthless
during the relevant tax year, we need not reach the question of
the true character of the amounts at issue. For purposes of this
Opinion, we shall assume that they were debts.
Petitioners defend the determination of the officers of WFGI
that the intercompany debt was worthless largely for the same
reasons that the officers cited in support of it at the time. We
are not persuaded that those reasons prove that the debt became
worthless during FY 1984. They are marred by inconsistencies,
questionable inferences, and failure to use available information
of obvious importance.
In order to establish that the intercompany debt was
worthless, petitioners must prove that no portion of it was
reasonably recoverable. The excess of other liabilities over
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