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promissory note, and petitioners claim with regard thereto for
1990 a $184,874 business bad debt deduction under section 166 and
NOL carryback deductions for 1988 and 1989.
OPINION
Generally, taxpayers are allowed deductions for bona fide
debts owed to them that become worthless during a year. Sec.
166(a). Bona fide debts generally arise from valid debtor-
creditor relationships reflecting enforceable and unconditional
obligations to repay fixed sums of money. Sec. 1.166-1(c),
Income Tax Regs. For purposes of section 166, contributions to
capital and equity investments in corporations do not constitute
or qualify as bona fide debts. Kean v. Commissioner, 91 T.C.
575, 594 (1988).
The question of whether transfers of funds to closely held
corporations constitute debt or equity in the hands of the
recipient corporations must be decided on the basis of all the
relevant facts and circumstances, and taxpayers generally bear
the burden of proving that the transfers constituted loans by the
taxpayers to the corporations and not equity investments. Rule
142(a); Dixie Dairies Corp. v. Commissioner, 74 T.C. 476, 493
(1980).
Courts have established a list of nonexclusive factors to
consider when evaluating the nature of transfers of funds to
closely held corporations, as follows: (1) The names given to
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