- 26 -
1.166-5(a)(2), Income Tax Regs; Andrew v. Commissioner, 54 T.C.
239, 245 (1970). Whether a debt has become worthless within a
particular year is a question of fact, Perry v. Commissioner, 22
T.C. 968, 973 (1954), to be determined on the basis of objective
factors, not on the taxpayer's subjective judgment as to the
worthlessness of the debt. Fox v. Commissioner, 50 T.C. 813, 823
(1968), affd. per curiam without published opinion 25 AFTR 2d 70-
891, 70-1 USTC par. 9373 (9th Cir. 1970). Generally, the year of
worthlessness must be fixed by identifiable events which form the
basis of reasonable grounds for abandoning any hope of recovery.
Crown v. Commissioner, 77 T.C. 582, 598 (1981).
The Court of Appeals for the Seventh Circuit has set forth
some of the relevant factors to be considered in determining
whether a debt is worthless. These factors include the debtor's
serious financial reverses, insolvency, lack of assets,
persistent refusals to pay on demand, ill health, death,
disappearance, abandonment of business, bankruptcy, and
receivership, as well as the debt's unsecured and subordinated
status and expiration of the statute of limitations. Cole v.
Commissioner, 871 F.2d 64, 67 (7th Cir. 1989), affg. T.C. Memo.
1987-228. Some of the factors indicating that a debt is not
worthless are the creditor's failure to pursue payment
(especially if the debtor is a relative or friend), willingness
to make further advances, availability of collateral or
guarantees by third parties, the debtor's earning capacity, minor
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