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Public Library's copies of the publications in which the ads
appeared. Nevertheless, the Court is satisfied from petitioner's
testimony that he incurred advertising expenses of this type.
Applying Cohan v. Commissioner, supra, and "bearing heavily" on
petitioner, we allow an advertising expense deduction of $1,200.
2. Bad Debt of $1,700
Under section 166, a deduction is allowed for a debt which
becomes worthless during the taxable year. Petitioner claimed a
bad debt deduction of $1,700 by reason of the failure of Roger
Wright, for whom he prepared brochures detailing Mr. Wright's
expertise in tracing horse bloodlines, to pay petitioner’s
agreed-upon fee of $1,700 for preparing the brochures. The
unpaid fee for preparing the brochures, like wages or salary,
would have been ordinary income to petitioner upon payment;
petitioner did not report as income, for 1992 or any prior year,
any of the fee alleged to be owed.
Under applicable law, the unpaid fee is not deductible as a
bad debt. Sec. 1.166-1(e), Income Tax Regs. provides:
Worthless debts arising from unpaid wages, salaries,
fees, rents, and similar items of taxable income shall
not be allowed as a deduction under section 166 unless
the income such items represent has been included in
the return of income for the year for which the
deduction as a bad debt is claimed or for a prior
taxable year.
Inasmuch as petitioner did not report the fee income, he is not
entitled to a bad debt deduction for the unpaid fee for 1992.
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