- 26 -
any bad debt is the adjusted basis provided in section 1011. As
pertinent here, section 1011(a) defines the term "adjusted basis"
as the basis determined under section 1012, adjusted as provided
under section 1016, and section 1012 provides that the basis of
property is its cost.
Claimed Nonbusiness Bad Debts of Mr. Parra
At the conclusion of the trial in this case, respondent
conceded that the October 5 and the October 7 notes were loans
and that petitioner is entitled to treat the respective principal
amounts of those notes as nonbusiness bad debts for 1989. As we
understand petitioner's position, he contends that, in addition
to the principal amounts conceded by respondent with respect to
the October 5 and October 7 notes, he is entitled for 1989 to
treat as a nonbusiness bad debt the interest due on the October 5
and the October 7 notes.15 Respondent disputes petitioner's
contention. We agree with respondent.
The record does not establish that petitioner, a cash basis
taxpayer, included in income for any year interest payments, if
any, on the October 5 and the October 7 notes. Consequently,
petitioner has failed to show that he has any basis in that
interest.
15 It is not clear from the record whether petitioner deducted
the interest that he paid on the ADCFCU loan, the Norwest loan,
and/or the White Sands loan under sec. 163(a), as limited by sec.
163(h). In any event, we do not understand petitioner to contend
that he is entitled for 1989 to an interest expense deduction
with respect to those loans.
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011