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Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner also
must prove his entitlement to the disputed deductions.
Deductions are a matter of legislative grace. New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934).
1. $50,000 and $47,350 Amounts
Petitioner claimed on his 1991 and 1992 Forms 1040 that he
was entitled to deduct $50,000 and $47,350, respectively, under
section 1244. Petitioner has abandoned this claim and now claims
that he may deduct these amounts as business bad debts under
section 166. Petitioner contends that the Bank lent him the
$500,000 at issue, and that he lent this amount to EPC mainly to
secure income that it was paying him as rent and salary.
Petitioner concludes that the cessation of EPC caused its debt to
him to become worthless, triggering his entitlement to a business
bad debt deduction. Petitioner concedes that he has no written
documentation to support his claim of a loan to EPC but states
that he regularly lent money to EPC in this manner.
Respondent determined that petitioner was not allowed to
deduct either the $50,000 or the $47,350 amount. According to
respondent, the Bank lent the money to EPC. Respondent conceded
at trial that petitioner is entitled to deduct a $12,000
nonbusiness bad debt for the amount that he paid the SBA to
satisfy his liability on the Loan.
We agree with respondent. We have found as a fact that the
Bank lent the $500,000 to EPC, and we read the record as having
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