16
1154 (5th Cir. 1972), affg. T.C. Memo. 1969-274. Objective facts
weigh more heavily than the guarantor's statements of intent in
ascertaining his or her motive. Kelson v. United States, 503
F.2d 1291, 1293 (10th Cir. 1974).
Petitioners contend that they may deduct $750,000 as a bad
debt for payments petitioner made to settle claims against him as
guarantor of loans the bank made to Northeast. Petitioners argue
that petitioner's dominant motive in guaranteeing the debt was to
secure or protect his trade or business of being an employee of
Northeast and his employability and reputation in the newsprint
industry rather than to protect his investment in Northeast.
Respondent contends that petitioner provided the guaranty
primarily to protect his investment in Northeast.
b. Whether Petitioner's Dominant Motive for the
Guaranty Was To Benefit His Trade or Business or
To Protect His Investment in Northeast
Northeast paid no salary to petitioner in 1979. He
guaranteed the $1.2 million line of credit to Northeast on
January 11, 1980, about the time that he estimated that his
investment in Northeast as a going concern was worth $1 million.
We think petitioner's willingness to work 25 hours a week for
Northeast for no salary shows that he wanted capital appreciation
from Northeast, not income.
Petitioner argues that he guaranteed Northeast's line of
credit so that it would continue to operate, and that he would
have been substantially compensated by Sigma for work he was
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