Robert A. Read - Page 8

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          and MBG.  On November 5, 1987, VIP obtained a default judgement             
          against M&G and MBG in the amount of $709,660 plus interest.  On            
          January 9, 1989, VIP filed an affidavit of judgment in the case.            
          The record, however, is devoid of any evidence regarding the                
          financial condition of either M&G or MBG.  There was no evidence            
          that those entities were insolvent or without assets from which             
          to collect at any time, much less in 1986, the claimed loss year.           
               The issue is whether petitioner is entitled to a NOL                   
          carryback from 1986 to 1984.  The answer to this question depends           
          upon whether petitioner is entitled to a business bad debt                  
          deduction in 1986 under section 166(a).  That bad debt deduction            
          stems from petitioner's alleged payment of the Security note that           
          he guaranteed.  Petitioner claims that he paid the Security note            
          in 1986 and therefore is entitled to a business bad debt                    
          deduction in 1986.  Petitioner contends, and respondent concedes,           
          that if petitioner is entitled to a business bad debt deduction             
          in 1986, then he is entitled to carryback the resulting NOL                 
          pursuant to section 172 to the taxable year 1984, the year in               
          issue.  Respondent disallowed petitioner's bad debt deduction and           
          argues that (1) any debt which may have been owed by VIP to                 
          petitioner, due to petitioner's right of subrogation arising from           
          his guarantee of the Security note,2 did not become worthless in            

               2  Although not explicitly stated in any documents in the              

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