Joel Baker - Page 6

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          evidence in the record, including a copy of his daughter's 1991             
          Federal income tax return, we find that petitioner's daughter was           
          unmarried and resided with petitioner for more than one-half of             
          the year.  Under section 2(b)(1)(A), an unmarried individual may            
          file a return as "head of household" if that individual maintains           
          a household which constitutes for more than one-half of such                
          taxable year the principal place of abode of an unmarried son or            
          daughter of the taxpayer.  Therefore, petitioner is entitled to             
          head-of-household filing status for 1991.                                   
          Bad Debt Deduction in 1990                                                  
               On several occasions from 1981 to 1991, petitioner loaned              
          money to individuals, receiving interest-bearing notes in return.           
          On January 19, 1990, petitioner loaned $5,296.70 to James C.                
          Murphy, who died one month later without making any payments on             
          the loan.  Petitioner never collected on this debt, and claimed a           
          bad debt deduction in the amount of $5,200 on his 1990 return.              
               Section 166(a) generally allows a deduction for any debt               
          that becomes worthless during the taxable year.  Bad debts may be           
          characterized as either business bad debts or nonbusiness bad               
          debts.  Sec. 166(d).  Section 166(d)(1)(B) provides that                    
          nonbusiness bad debts are deductible as short-term capital                  
          losses.                                                                     
               While petitioner claimed the $5,200 deduction as a business            
          bad debt loss, respondent characterized the loss as a nonbusiness           
          bad debt, thereby limiting petitioner's deduction to $3,000 for             




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