- 5 -
than a corporation becomes completely worthless during the
taxable year. Sec. 166(a)(1), (2), (d).
Respondent does not dispute that the MacCoon note
represented a bona fide debt owed to petitioners. Both parties
also agree that the obligation is a nonbusiness debt. The
parties dispute whether the note became worthless in 1988.
Petitioners claim that, although Mr. MacCoon was no longer
obligated to pay petitioner on the note after the 1984
settlement, the loss could not have been claimed until 1988, the
maturity date of the note. Respondent contends that the note
became worthless, if at all, in 1984, the year that Mr. MacCoon
was no longer obligated to pay petitioner. We agree with
respondent.
At trial and on brief, petitioners alleged that an Internal
Revenue Service Appeals officer had informed them that they were
unable to write off the bad debt until the maturity of the note,
regardless of the disposition of the lawsuits. Even if such a
statement had been made, respondent would not be estopped from
asserting that the debt became worthless in 1984. Such a
statement would constitute a statement of law, and therefore one
of the necessary elements for estoppel would not be present.
Estate of Emerson v. Commissioner, 67 T.C. 612, 617-618 (1977).
The fact that an obligation is not mature at the time a bad
debt deduction is claimed does not automatically prevent
allowance of a bad debt deduction under section 166. Sec. 1.166-
1(c), Income Tax Regs. Petitioners have failed to establish that
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011