- 15 -
were capital contributions, and, therefore, no genuine debt
existed to which section 166 could apply. Alternatively,
respondent contends that, assuming that the advances were valid
loans, the loans were nonbusiness bad debt, and petitioners are
not entitled to deduct partially worthless nonbusiness debt under
section 166(d). As a second alternative argument, respondent
maintains that the purported debt did not become partially
worthless in 1988. Petitioner Darlene Carvin concedes that the
bad debt deduction is not allowable and seeks relief under the
innocent spouse provisions of section 6013(e).
Because petitioner claims partial worthlessness for the
taxable period under consideration, the only relief available to
him would be through a finding that the advances constituted
business debt within the meaning of section 166(a). Accordingly,
we focus on that aspect of the case. To qualify as a business
bad debt, petitioner must show that he was engaged in a trade or
business and that the bad debt was proximately related to that
trade or business. Putoma Corp. v. Commissioner, 66 T.C. 652,
673 (1976), affd. 601 F.2d 734 (5th Cir. 1979); sec. 1.166-5(b),
Income Tax Regs. Promoting, organizing, financing, and selling
corporations may constitute a trade or business for purposes of
section 166. Deely v. Commissioner, 73 T.C. 1081, 1093 (1980),
supplemented by T.C. Memo. 1981-229; Newman v. Commissioner, T.C.
Memo. 1989-63; Farrar v. Commissioner, T.C. Memo. 1988-385. On
the other hand, the management of one's investment, regardless of
how extensive, is not a trade or business, and a loan from a
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