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father in connection with the $94,000 that petitioner’s father
had provided for transfer to K&C.
On their 1987 joint Federal income tax return, petitioners
claimed a business bad debt deduction with respect to $128,841
that had been transferred to K&C. After mathematical
modifications required by Schedule A, Form 1045, petitioners
claimed on their 1987 joint Federal income tax return a net
operating loss (NOL) of $127,533 based upon the above $128,841
claimed business bad debt deduction. The claimed net operating
loss of $127,533 was carried forward to petitioners’ joint
Federal income tax returns for 1988, 1989, and 1990.
Petitioners untimely filed their 1989 joint Federal income
tax return in September of 1991.
Respondent disallowed petitioners' claimed $128,841 business
bad debt deduction for 1987 and the related $127,533 NOL that
petitioners carried forward to 1988, 1989, and 1990. Respondent
also determined for 1989 an addition to tax with respect to the
late filing of petitioners’ 1989 joint Federal income tax return
under section 6651(a) and for 1990 an accuracy-related penalty
under section 6662(a).
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-
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