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unincorporated stores to which the rebates were given had weak
financial conditions; rather, the financial condition of Kapsco is
the financial condition that is pivotal. In fiscal year 1991,
before the rebates were given, Kapsco had retained earnings of
$154,868, total shareholders' equity of $299,322, and a $107,987
loss. However, evidence of operating losses, without more, does
not establish worthlessness of a debt. See Trinco Indus., Inc. v.
Commissioner, 22 T.C. 959, 965 (1954). The mere fact that losses
exist or that an obligation will be difficult to collect does not
determine worthlessness. Riss v. Commissioner, 56 T.C. 388, 407
(1971), affd. 478 F.2d 731 (8th Cir. 1973).
We are satisfied that Kapsco had sufficient liquidity at the
end of fiscal year 1991 to cover the written off accounts
receivable (Kapsco had a $341,925 cushion of its current assets
over its current liabilities to pay its accounts payable, even
before the rebates at issue). Accordingly, petitioner has failed
to prove that Kapsco's accounts payable were uncollectible.
3. NPC
There is no evidence that NPC's accounts payable to petitioner
were partially worthless. Petitioner gave rebates of $56,548 and
$115,000 in fiscal years 1991 and 1992, respectively, to NPC.
NPC's financial condition was certainly the weakest of the three
entities to which the rebates were given. However, even here,
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