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$75,000 claim in the bankruptcy proceeding. Ultimately, Mr. and
Mrs. Bogue received a discharge from bankruptcy and relief from
their debts, including petitioners’ claim.
In the preparation of their 1992 income tax return,
petitioners were advised by their accountant that the claim
against Mr. Bogue could be deducted as a bad debt against
petitioners’ long-term capital gains. During 1993, when
petitioners were compiling information for the preparation of
their 1992 income tax return, they performed a more thorough
analysis of the total amount that had been advanced to Mr. Bogue
over the years. Based on their analysis of numerous documents,
petitioners calculated that the total outstanding advances made
to or on behalf of Mr. Bogue was $145,267, and they claimed that
amount as a bad-debt loss on their 1992 return. Petitioners
produced substantial amounts of documentation reflecting that
they had made numerous advances to and on behalf of Mr. Bogue,
beginning in 1987.
OPINION
We must determine whether the advances made by petitioners
represent loans to Mrs. Kidder’s son, and if so, whether the
loans became worthless in 1992. In general, section 166(a)2
2 All section references are to the Internal Revenue Code
in effect for the years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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