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whether the gain from sale of three companies over the years was
reported as capital gain or as ordinary income.
On their 1988 financial statement, petitioners listed their
interest in BEI as an investment and not as inventory. In
addition, on BEI's tax return it was reported that the
corporation was engaged in the management of investments.
Petitioner did not hold himself out and/or view himself as a
dealer in corporations.3
Accordingly, petitioner was not in the business or lending
money or buying and selling corporations. Ultimately, we must
conclude that if the advances constitute debt, rather than
equity, that it was non-business debt and would not qualify for a
deduction under section 166(d) because it was not wholly
worthless at the end of 1988, a fact that petitioner does not
dispute. Due to our holding, it is unnecessary to consider
whether the advances constituted debt or equity.
3 There was discussion in the briefs of the parties,
primarily respondent and Ms. Carvin, as to whether petitioner was
engaged in the business of lending money. At trial, petitioner
maintained that in addition to the purported loans he provided to
BEI, he also lent money to his other businesses and to unrelated
individuals and entities. In his reply brief, petitioner stated,
"Petitioner's business, as regarding the deductions at issue, was
the business of buying, rehabilitating and selling companies, not
the business of lending money." Petitioner only half-heartedly
argued that he was in the trade or business of lending money.
Petitioner did not make the advances to BEI in the course of a
money lending business, and he was not in the business of lending
money.
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