-52-
to petitioner. To the contrary, the evidence as a whole shows
that it is very unlikely that the debt will ever be paid.
Accordingly, we find that petitioner has not met his burden
of proving that he did not receive income from the discharge of
indebtedness in 1991, and that respondent has met the burden of
proving the increased deficiency.
Issue 5. Whether Petitioners Realized a Short-Term Capital Loss
in 1991
Development sold a house to Ben (Ben) and Kathy (Kathy)
Johnson (the Johnsons), taking back a note. On September 30,
1990, Development distributed the note it took on the sale to
petitioner, recording the distribution as a $22,000 increase to
the shareholder loan account.
Petitioners reported a loss of $28,248 on Schedule D of
their 1991 Individual Income Tax Return (Form 1040) as the total
of three separate losses: A nonbusiness bad debt loss of $14,500
from Ben Johnson; a loss of $7,249 from "J. Bradley"; and a loss
of $6,499 from "Ext Wall Vent".
Respondent determined that the $28,248 loss was not
allowable because petitioners did not establish that the items
were worthless or that petitioners incurred any loss for that
year. Petitioners assert that the reported items are losses from
nonbusiness bad debts that became worthless during the taxable
year and are deductions that are allowable under section 166.
Section 166(a) provides there shall be allowed as a
deduction any debt that becomes worthless during the taxable
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