- 7 -
the year. Sec. 1211(b)(1). Respondent concedes the validity and
the amount of the loan, as well as its worthlessness as a bad
debt. The issue to be decided, therefore, is whether petitioner
is entitled to claim the bad debt as a business bad debt.
Bad debts are properly characterized as business bad debts
if they are incurred in connection with a trade or business of
the taxpayer. Sec. 166(d)(2). Petitioner argues that he was in
the trade or business of lending money. During the year in
issue, petitioner worked as a school counselor and reported wages
from that activity. Petitioner's 1990 income tax return does not
reflect any other activity which would lead us to the conclusion
that he was in the trade or business of lending money. Based
upon the record before us, we find that petitioner has failed to
present sufficient evidence to establish that he is entitled to a
deduction for a business bad debt. Deely v. Commissioner, 73
T.C. 1081, 1096 (1980). Therefore, we sustain respondent's
determination that the loss in question constituted a nonbusiness
bad debt.
Theft Loss in 1991
Petitioner was divorced in 1972, and fell into arrears on
child support payments to his former wife. By September 21,
1987, however, petitioner had paid all amounts in arrearage.
Nevertheless, on January 29, 1988, petitioner's former wife
obtained an ex parte order to withhold a portion of petitioner's
wages at a rate of $500 per month until purported child support
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011