- 4 - legislative grace, and petitioners bear the burden of proving that they are entitled to any deduction claimed. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). As we understand petitioners' position, they contend that (1) the $50,000 punitive damages award constituted a nonbusiness debt owed to petitioner by Mr. Erkel, (2) that debt became worthless during 1991, and (3) they are therefore entitled to a $50,000 nonbusiness bad debt deduction for 1991. Respondent does not dispute that the $50,000 punitive damages award constituted a debt owed to petitioner by Mr. Erkel within the meaning of section 166. However, respondent contends that petitioners are not entitled under section 166 to a deduction for 1991 with respect to that debt because (1) they failed to establish that the punitive damages award became a worthless debt during 1991 within the meaning of that section, (2) they did not include any portion of the punitive damages award in their gross income for Federal income tax purposes, and (3) they failed to establish that they had any basis in the punitive damages award.4 4 Respondent notes on brief that it is not clear to her whether petitioners are also taking the position that they are entitled to a $50,000 deduction for 1991 under the general loss provisions of sec. 165(a) for the punitive damages award at issue. Conse- quently, respondent also contends on brief that if petitioners were advancing any such position, it would be unsupported and must be rejected. While we do not agree with respondent that petitioners also are relying on sec. 165(a) in this case, we do agree with respondent that any such position would be without merit.Page: Previous 1 2 3 4 5 6 7 Next
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