Nathan Boatner - Page 4

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            (the notes) purporting to document the advances as loans from                               
            petitioner to James Trading.  The notes had no fixed maturity                               
            dates or schedules of payments.  James Trading made no payments                             
            on the notes.  James Trading became insolvent and ceased doing                              
            business on or about September 15, 1992.  Petitioner claimed a                              
            bad debt deduction, based on the alleged worthlessness of the                               
            notes, in the amount of $57,666 for the 1992 taxable year.                                  
            Respondent determined that the notes did not constitute a bona                              
            fide debt and thus denied petitioner's bad debt deduction.                                  
                                               OPINION                                                  
                  Petitioner claims that the notes became worthless in 1992                             
            when James Trading became insolvent, and therefore he is entitled                           
            to a business bad debt deduction in that year.  In addition,                                
            petitioner claims that the pass-through net losses from James                               
            Trading are ordinary losses because petitioner was a "dealer" in                            
            securities.  Furthermore, petitioner maintains that respondent is                           
            estopped from reclassifying his net losses for the year in                                  
            question as capital losses.  Respondent contends that the                                   
            advances were not bona fide debts and therefore not deductible.                             
            Respondent also claims that petitioner was an "investor" during                             
            1992; thus, all losses from securities transactions in that year                            
            were capital losses.  Finally, respondent contends that                                     
            respondent is not estopped from reclassifying petitioner's net                              
            losses.                                                                                     





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