Melvyn L. Bell - Page 12

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          refund application so that they could use the refunds to pay bank           
          obligations that were 90 to 180 days overdue.  The Internal                 
          Revenue Service made tentative refunds to petitioners in the                
          amounts shown on the Form 1045.  The checks were endorsed by both           
          petitioners.  Petitioner used the tax refunds to make payments on           
          his overdue loans.                                                          
               After claiming the bad debt deduction for 1988, petitioner             
          continued to make advances to BEI and TELCOR.  During calendar              
          years 1989 and 1990, he advanced $2,665,795.75 and $868,270.41,             
          respectively, to BEI, and during calendar years 1989 and 1990, he           
          advanced a total $438,117.62 to TELCOR.  In 1990, petitioner made           
          a capital contribution of over $15 million to BEI that consisted            
          of ENSCO stock.                                                             
               In the notice of deficiency, respondent disallowed the                 
          business bad debt deduction for taxable year 1988.  Disallowance            
          of the 1988 deduction eliminated the NOL in 1988 and resulted in            
          the disallowance of the carryback losses to petitioners' 1985 and           
          1986 taxable years, creating deficiencies for those years.                  
               Petitioners' Federal income tax return for 1988 and the                
          refund application for 1985 and 1986 were prepared by Donald V.             
          Moore, Jr., a certified public accountant.  Mr. Moore also                  
          prepared the corporate tax returns for BEI.  The 1988 return and            
          the refund application were signed by petitioners.  Ms. Carvin              
          did not look at the 1988 return before signing it and was not               
          aware of the $5 million bad debt deduction claimed on the return.           
          Neither petitioner nor Mr. Moore explained the bad debt deduction           


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