Kenneth D. Shepherd and Martha A. Gregory - Page 11

                                       - 11 -                                         
          petitioners have not shown that such debt became wholly worthless           
          in 1990 or 1991.4                                                           
               After considering all of the relevant facts, we find that,             
          regardless of whether the promissory note signed by petitioner              
          husband created a bona fide debt, petitioners have not shown that           
          the debt became totally worthless in 1990 or 1991.  The record              
          contains no evidence of any attempts by petitioner wife to                  
          enforce repayment of the loan.  Although petitioners were not               
          married at the time petitioner husband signed the loan agreement,           
          their marriage only 2-1/2 months after the debt's repayment date            
          indicates that petitioner wife decided not to collect an                    
          otherwise collectible debt from her new husband.  See Davies v.             
          Commissioner, 54 T.C. 170, 176 (1970).  In the absence of any               
          credible proof supporting a finding that the loan became                    
          uncollectible in 1990 or 1991, we find that petitioners failed to           
          carry their burden in that respect.                                         
               Petitioner husband testified that the loan was incurred to             
          finance his marketing of the golf club cleaning machine and his             
          failure to sell any of these units foreclosed any chance that he            
          would be able to repay the loan, thus making it worthless.  There           



          4         We note that the original claim for a bad debt                    
          deduction was in 1990, a taxable year not before the Court.  This           
          case concerns only petitioners' claimed bad debt deduction in               
          1991.  Our decision controls the deductibility of the debt in               
          1991 regardless of whether the debt first became worthless in               
          1990 or 1991.                                                               




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next

Last modified: May 25, 2011