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For the taxable year 1984, petitioner timely filed an
individual Federal income tax return. He also filed two amended
1984 Federal income tax returns dated November 25, 1991, and May
11, 1992. For the taxable year 1986, petitioner timely filed an
individual Federal income tax return. On his 1986 return,
petitioner claimed a business bad debt deduction of $874,177.
Because of the bad debt deduction and other losses not at issue
in this case, petitioner claimed a NOL carryback from 1986 to
1984 in the amount of $868,612, as set forth on his second
amended 1984 return. Respondent disallowed the 1986 bad debt
deduction and the resulting NOL carryback.
1982 $1 Million Loan from Guaranty National Bank
On August 20, 1982, VIP Investors (VIP), an Oklahoma limited
partnership, was formed to buy a Sheraton Hotel in Oklahoma City,
Oklahoma. On that date, a limited partnership agreement was
signed by the general partner, Terminal Drive Corp. (Terminal),
and by the 10 limited partners, one of whom was petitioner. At
that time, Terminal owned 10 percent of VIP, petitioner owned 45
percent, and the other limited partners together owned the
remaining 45 percent of VIP. Also on that date, VIP borrowed $1
million from Guaranty National Bank (Guaranty) in order to
purchase the Sheraton Hotel.
1984 Loan From Security Bank
On August 1, 1984, Terminal sold its 10-percent interest to
petitioner and assigned him its general partnership interest.
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