- 559 -
To be entitled to a bad debt deduction under section 166,
the taxpayer, among other things, must establish that a genuine
debt in fact existed, and that the debt became worthless within
that taxable year. See Andrew v. Commissioner, 54 T.C. 239, 245
(1970); sec. 1.166-1(c), Income Tax Regs.
In deciding whether a debt has become worthless, we consider
whether a creditor in the exercise of sound business judgment
would conclude that the debt is uncollectible. See Andrew v.
Commissioner, supra at 248. Thus, whether a debt has become
worthless in a particular year is a question of fact. However,
the resolution of such issue is based on objective factors and
not merely on the taxpayer's subjective judgment as to
worthlessness. See generally sec. 1.166-2(a), Income Tax Regs.
IRA again argues that certain statements made by
respondent's counsel at trial were "concessions", and that the
only issue to be decided was whether the debts were worthless in
1987 when they were written off. Respondent, on the other hand,
contends that IRA failed to establish that (1) Ballard's and
Lisle's debts became worthless during 1987; (2) the Abernathy
debt (a) had any value prior to 1987, and (b) became worthless
during 1987; and (3) the Forest limited partnership debt (a)
existed in fact, and (b) became worthless during 1987.
We agree with respondent. First, we reject IRA's concession
argument. It has no merit.
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