Stephen F. Scofield and Nancy E. Scofield - Page 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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