Joel Hillman - Page 3

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          and information received from petitioner during telephone calls              
          from prison.  The return was filed on October 9, 1994.  On his               
          1991 return, petitioner reported a $50,000 ordinary loss and a               
          $3,000 capital loss relating to PM For Export.                               
               Respondent denied petitioner's deductions for an ordinary               
          loss, a capital loss, state and local income taxes, unreimbursed             
          employee expenses, and expenses relating to rental property.                 
          Respondent further determined that petitioner was liable for an              
          addition to tax for failure to file and an accuracy-related                  
          1.   Ordinary and Capital Loss Deductions                                    
               Petitioner lent Mr. Scholes the $50,000 in mid-September of             
          1991.  Petitioner contends that the loan, which was due in 1992,             
          became worthless in 1991 and that he is entitled to a $50,000                
          ordinary loss deduction for a business bad debt.  Respondent                 
          contends that petitioner failed to establish that the loan became            
          worthless in 1991.  We agree with respondent.  Although a                    
          taxpayer need not wait until a debt becomes due to determine that            
          it is worthless, section 1.166-1(c), Income Tax Regs., petitioner            
          did not establish that the loan became worthless in 1991, the                
          year he deducted it.  See Higginbotham-Bailey-Logan, Co. v.                  
          Commissioner, 8 B.T.A. 566 (1927) (holding that the taxpayer must            
          establish that he ascertained the debt to be worthless in the                
          taxable year in which he claims it to be deductible).  Petitioner            
          also reported a $3,000 capital loss deduction that allegedly                 

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