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28, 32 (1992). We evaluate whether a claimed deduction is
grossly erroneous as of the time of filing of the tax return.
Bokum v. Commissioner, 992 F.2d at 1142.
Ms. Carvin argues that the bad debt deduction was grossly
erroneous because the debt was not a business debt that arose out
of a trade or business of petitioner’s. In particular, Ms.
Carvin argues that neither petitioner nor BEI was engaged in the
trade or business of buying and selling companies.
Alternatively, Ms. Carvin maintains that if such a business
existed, it was the trade or business of BEI, and the activities
of BEI cannot be attributed to petitioner as the sole
shareholder. Ms. Carvin does not argue that petitioner's
positions that the advances were bona fide debt or that the
advances became partially worthless in 1988 were grossly
erroneous. Respondent argues that although petitioner's argument
that he was engaged in the business of rehabilitating distressed
companies for resale is incorrect, that argument is reasonable,
and therefore the section 166 deduction was not grossly
erroneous.
Petitioner maintains that he organized BEI as a conduit
through which he could purchase, promote, finance, manage, and
sell corporations. Petitioner has been involved in numerous
business enterprises since 1960. In taxable year 1988, he had
direct or indirect interests in over 35 businesses. Petitioner
testified that he formed BEI with the intention of acquiring
financially troubled companies, turning them into profitable
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