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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.
OPINION
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
penalty.
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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