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deduction is based upon the alleged worthlessness of his right of
subrogation which arose when petitioner was forced to honor a
guarantee of his partnership's debt. Thus, resolution of the
1984 deficiency depends upon the validity of the claimed 1986 bad
debt deduction.1
Specifically, the issues for decision are:
(1) Whether petitioner “paid” a debt from VIP Investors to
Security Bank in his capacity as a guarantor during the 1986
taxable year; and, if so
(2) whether an alleged debt from VIP Investors to
petitioner, created by the right of subrogation, became worthless
during the 1986 taxable year; and, if so
(3) whether the debt which arose by right of subrogation was
a business or a nonbusiness bad debt.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and attached exhibits are incorporated
herein by this reference. Petitioner, Robert A. Read, resided in
Tulsa, Oklahoma, at the time he filed his petition.
1 It is well settled that this Court may determine the
correct amount of a NOL for a year not in issue as a preliminary
step in making determinations for the taxable year or years at
issue. Sec. 6214(b); Lone Manor Farms, Inc. v. Commissioner, 61
T.C. 436, 440 (1974), affd. without published opinion 510 F.2d
970 (3d Cir. 1975); ABKCO Indus., Inc. v. Commissioner, 56 T.C.
1083, 1088-1089 (1971), affd. on other issue 482 F.2d 150 (3d
Cir. 1973), and cases cited therein.
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