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1990, petitioner had no hope of recovery as of the end of 1988.
In this regard, petitioner’s accountant claimed a $186,280 bad
debt for 1988. Apparently, petitioner’s accountant claimed only
the amount evidenced by documentation (notes and agreements),
even though petitioner had advanced $677,652 as of the end of
1988.
On this record, we hold there was no hope of repayment of
any portion of the $677,652 in payments made by petitioner.
Accordingly, petitioner properly claimed a bad debt loss for
1988, but the amount should be increased from the $186,280
claimed to $515,652 ($677,652 less $152,000),3 and it should be
characterized as a loss under section 166(a)--a business bad
debt.
Issue 3. Whether Petitioner Is Entitled to Losses Claimed in
Connection With the Leasing Transaction
Petitioner claimed an equipment leasing loss on each
Schedule C attached to his 1986 through 1989 Federal income tax
returns. The amounts in controversy are: 1986--$60,306 ($40,000
insurance payment, $1,000 legal fees, and $19,306 depreciation);
1987--$36,781 ($915 mortgage interest, $5,000 legal fees, and
$30,866 depreciation); 1988--$24,845 ($3,516 for insurance, $552
for other expenses, and $20,777 for depreciation); and 1989--
3 The remaining $152,000 represents capital investment and
is dealt with in other portions of this opinion.
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