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The issue for decision is whether petitioner is entitled to
a claimed $1.6 million nonbusiness bad debt deduction relating to
funds transferred to a closely held corporation.
Background
Petitioner resided in St. Cloud, Minnesota, at the time the
petition was filed.
On June 16, 1972, petitioner became holder of stock in
Environmental Protection Laboratories, Inc. (EPL), a newly formed
Minnesota corporation established, among other things, to develop
products relating to laboratory testing and to environmental
monitoring equipment.
Beginning in 1983 and through January of 1990, petitioner
was the controlling shareholder of EPL. One of petitioner's
business objectives for EPL was for EPL to become sufficiently
successful and profitable so that the stock in EPL could be sold
to a third party at a large profit.
In 1983, petitioner's son, Robert C. Coborn, Jr., became
EPL's president. Over the years, petitioner invested heavily in
EPL, in part, to financially support the corporation of which his
son was president.
In the early 1980's, it was estimated that EPL would need
$1.5 to $1.9 million in additional capital funds to implement for
EPL the business plan that petitioner, his son, and others had
developed.
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