Edwin A. Helwig - Page 14

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          That potential was corroborated by unrelated third parties.  We              
          find that K&H’s dominant motive for advancing or lending Snacks              
          funds was for the purpose of developing business opportunities               
          and that the debt was thus proximately related to its trade or               
          business.  Accordingly, we hold that the advances in question                
          were business bad debts within the meaning of section 166.                   
               The final step in this three part inquiry is to decide                  
          whether petitioner has shown that any portion of the business bad            
          debts became worthless during the years claimed by petitioner.               
          This inquiry is also one of facts and circumstances, and                     
          worthlessness occurs “in the year in which identifiable events               
          clearly mark the futility of any hope of further recovery”.                  
          James A. Messer Co. v. Commissioner, 57 T.C. 848, 861 (1972).                
               Portions of the business bad debt were written off as                   
          partially worthless for the 1991 and 1992 fiscal years.  The                 
          amounts of partial worthlessness were computed by means of a                 
          ratio generated by comparing the total losses of Snacks to the               
          outstanding balance of the advances (both of which were                      
          increasing annually).  Because the vending machines’ capability              
          depended on its computer hardware and software, the accountant               
          considered the known propensity of these items to become                     
          technologically outmoded in choosing the method to compute                   
          worthlessness and in reaching the conclusion that loss deductions            

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