- 25 -
activities of BEI to petitioner. We have looked through the
corporate form of a holding company and attributed the business
activity of promoting to the shareholder. Whether we ignore the
holding company would depend on the shareholder's personal
involvement in the corporation and the shareholder's business
activity separate from the corporation. See Farrar v.
Commissioner, T.C. Memo. 1988-385. Petitioner made all
significant decisions regarding the amount of financing the
company would receive and which business enterprises to acquire.
Also, there is some evidence of petitioner's independent
involvement in rehabilitating financially troubled businesses.
Accordingly, the fact that petitioner did not directly own the
BEI and TELCOR subsidiaries or directly hold them for sale does
not render petitioner's argument that the advances were business
debt groundless.
While petitioner's involvement with the various businesses
was insufficient to establish that he was in the business of
promoting and selling businesses, there was some basis for
believing that the advances were made for business purposes and
not for investment purposes. We find that the characterization
of the advances as a business debt is not frivolous, fraudulent,
or phony and that the bad debt deduction has some basis in fact
or law within the meaning of section 6013(e)(2)(B). Accordingly,
we find that the bad debt deduction was not grossly erroneous.
We need not address the other conjunctive requirements of section
6013(e)(1) that are in issue in this case. Petitioner Darlene
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011