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In connection with the sale of Harmony Foods to Glico,
petitioner, Harmony Foods, and MEI entered into an agreement
accelerating the amounts due as minimum commission and noncompete
payments. Before the sale of Harmony Foods to Glico, petitioner
received $200,000 as commissions pursuant to paragraph 4.B of the
employment agreement and $500,000 in noncompete payments.
During June, July, and August 1990, petitioner attempted to
collect additional commissions. When he contacted MEI he was
told to speak with Glico, and when he contacted Glico, he was
told to speak with MEI. In mid-December 1990, petitioner was
informed during a meeting with Yasuaki Aoki, the Chief Executive
Officer of Glico, that Glico would not make any further payments
to him pursuant to paragraph 4.B of the employment agreement.
Petitioner's employment with Glico was terminated shortly after
this meeting.
Petitioners claimed a $500,000 bad debt deduction on a
Schedule C attached to their 1990 Federal income tax return based
on petitioner's failure to receive any more than $200,000
pursuant to paragraph 4.B of the employment agreement.3
Respondent disallowed the deduction. We agree with respondent.
3 Petitioner did not claim the entire $700,000 difference
between the minimum payment received and the maximum payment
allowable because at that time he believed he might be able to
collect additional commission payments.
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