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Riviera transactions, the disposition of the alleged notes
occurred on October 31, 1979. The transactions relating to
Arizona Marine occurred on May 9, 1980. The losses suffered, if
any, would have been required to be reported on either
petitioners' 1979 or 1980 Federal income tax returns. The record
does not contain these returns. Accordingly, it is unclear how
petitioners treated these transactions on their returns.
In order to claim either of these alleged losses,
petitioners were required to establish the amount of that loss by
reference to their adjusted bases in the assets. Because we find
that petitioners did not establish their bases, the amount of
their losses, if any, cannot be computed. Sec. 165(b); Millsap
v. Commissioner, supra; Fisher v. Commissioner, supra. Although
nothing further need be said in light of these findings, we
address some of petitioners' contentions below.
Petitioners suggest that section 166 might apply to the
transactions at issue. In general, section 166(a) allows a
deduction for a debt which become worthless during the taxable
year. To be entitled to the deduction, the taxpayer must prove
the existence of a bona fide debtor-creditor relationship which
obligates the debtor to pay the taxpayer a fixed or determinable
sum of money. A contribution to capital cannot be considered
debt. Calumet Indus., Inc. v. Commissioner, 95 T.C. 257, 284
(1990); sec. 1.166-1(c), Income Tax Regs. The loss on the
worthlessness of a nonbusiness bad debt is deductible only as a
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