Stanley P. Zurn - Page 14

                                        -14-                                          
               Here again, petitioner bears the burden of showing that he             
          was in a trade or business or an activity entered into for                  
          profit.  In order to do that under the circumstances of this                
          case, he would have to show that he was a joint venturer with Ms.           
          Jackson and/or her business enterprises or that he entered into             
          his transaction with Ms. Jackson and/or her entities as part of             
          an activity entered into for profit.                                        
               Section 165(c) permits the deduction of losses "incurred in            
          a trade or business", sec. 165(c)(1), or "incurred in any                   
          transaction entered into for profit, though not connected with a            
          trade or business", sec. 165(c)(2).  Although paragraphs (1) and            
          (2) of section 165(c) both deal with losses, one deals with                 
          losses incurred in a trade or business and the other with losses            
          not connected with a trade or business.  In that regard, section            
          165(c)(1) concerns operating losses of a profit-seeking activity,           
          and section 165(c)(2) involves a loss due to a nonbusiness                  
          reason, such as abandonment.  For a loss to be deductible under             
          either paragraph (1) or (2) of section 165(c), however, the                 
          taxpayer must be engaged in a trade or business or involved in a            
          transaction for profit.                                                     
               Section 166(a)(1) provides for the deduction of any debt               
          that becomes worthless during the taxable year.  Section 166(a)             
          does not apply to a nonbusiness debt, which is defined in section           
          166(d)(2) as any debt other than (A) a debt created in connection           






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