- 4 - (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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
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