- 9 -
treatment for any portion of his basis in TIC/Multilogic stock
that may have been increased by capital contributions.
II. Section 166--Bad Debts
Petitioner next argues, in the alternative, that the
expenses originally deducted as a section 1244 worthless stock
loss are deductible as a business bad debt under section 166. In
addition, petitioner argues that the $30,550 paid for the release
of the two computer leases, which was originally deducted as a
long-term capital loss on petitioner's 1991 return, should also
be deductible as a business bad debt under section 166.4
Respondent contends that petitioner is not entitled to business
bad debt treatment because: (1) The payments to or for the
benefit of Mr. Kelley do not represent a bona fide debt; and (2)
assuming that the payments did result in a bona fide debt, the
debt owed to petitioner was a nonbusiness bad debt. We agree
with respondent's first argument and do not consider the question
of whether the payments to or for the benefit of Mr. Kelley
represent a business versus a nonbusiness bad debt.
Generally, taxpayers may deduct the value of bona fide debts
owed to them that become worthless during the year. Sec. 166(a).
4Respondent contends that petitioner's claim with respect to
the release of the computer leases should be denied as untimely
and not properly raised. Because we find no merit to
petitioner's position it is unnecessary to address the merits of
respondent's argument.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011