- 14 -
underlying obligation. Rude v. Commissioner, 48 T.C.
165 (1967). This Court will not permit the taxpayer to
transform a nondeductible personal obligation into a
deductible corporate debt when to do so would
circumvent the effectiveness of sec. 6672. But see
First Natl. Bank of Duncanville v. United States, * * *
[481 F. Supp. 633 (N.D. Tex. 1979)].
We hold for respondent on this issue.
3. $12,000 and $5,000 Amounts
Petitioner argues he is entitled to deduct the $12,000 and
$5,000 amounts as business bad debts because the deductions arose
from actions that he had taken to secure the receipt of his
earnings from EPC. Respondent concedes that both amounts are
deductible as nonbusiness bad debts.
We agree with respondent. We have previously addressed and
rejected petitioner's claim concerning the $12,000 amount,
holding that he may deduct this amount as a nonbusiness bad debt.
For the same reasons that pertain thereto, we hold likewise with
respect to the $5,000 amount. Petitioner has failed to persuade
us that he incurred the $5,000 debt for reasons other than
investment.
4. Applicability of Accuracy-Related Penalty
Respondent determined that petitioner was liable for an
accuracy-related penalty under section 6662(a) for each year
because he substantially understated his income tax. See sec.
6662(d). As applicable herein, section 6662(a) imposes an
accuracy-related penalty equal to 20 percent of the portion of an
underpayment that is attributable to substantial understatement.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011