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silverware, and dishes). Petitioners were aware that other
creditors of the Dubatos were also dunning them for payment.
This included a meat supplier, a food supplier, and a State
revenue officer who, Mrs. Bauer saw, “came in and took the money
right out of the drawer for sales tax”. The Dubatos continued
living in Bullhead City for some part of 1994, but later on
during the year, they eventually moved. At the time of trial,
petitioners were unaware of the Dubatos’ whereabouts.
On their 1993 Federal income tax return, petitioners claimed
a $10,901 business bad debt deduction. In the notice of
deficiency, respondent, inter alia, disallowed the bad debt
deduction. At trial, petitioners conceded that their advances
were nonbusiness debts, and they now seek only a nonbusiness bad
debt deduction. All other adjustments in the notice of
deficiency have been resolved.
Discussion
The Commissioner’s determinations are presumed correct, and
petitioners bear the burden of proving that those determinations
are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933).
Section 166(a) permits a deduction for any bona fide debt
that becomes worthless within the taxable year. To qualify for
the bad debt deduction, there must be a debtor-creditor
relationship. Sec. 1.166-1(c), Income Tax Regs. Whether a bona
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