Warren Jack Kidder and Barbara Jeanne Kidder - Page 5

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          allows an individual to deduct losses sustained from bad debts              
          that become worthless during the taxable year.  Section 166(d)(1)           
          restricts the deduction for losses from nonbusiness debts of a              
          taxpayer other than a corporation by characterizing them as                 
          short-term capital losses.  Only a bona fide debt, arising from a           
          "debtor-creditor relationship based upon a valid and enforceable            
          obligation to pay a fixed or determinable sum of money" qualifies           
          for a deduction under section 166.  Sec. 1.166-1(c), Income Tax             
          Regs.  Whether a bona fide debtor-creditor relationship exists is           
          a question of fact to be determined upon a consideration of all             
          the facts and circumstances.  See Fisher v. Commissioner, 54 T.C.           
          905, 909 (1970).  Petitioners must show that a bona fide debt               
          existed between them and Mr. Bogue.  See Rockwell v.                        
          Commissioner, 512 F.2d 882, 885 (9th Cir. 1975), affg. T.C. Memo.           
               We also note that intrafamily transactions are subjected to            
          closer scrutiny.  See Caligiuri v. Commissioner, 549 F.2d 1155,             
          1157 (8th Cir. 1977), affg. T.C. Memo. 1975-319; see also Perry             
          v. Commissioner, 92 T.C. 470, 481 (1989), affd. 912 F.2d 1466               
          (5th Cir. 1990).  It is more likely that a transfer between                 
          family members is a gift.  See Perry v. Commissioner, supra;                
          Estate of Reynolds v. Commissioner, 55 T.C. 172, 201 (1970).                
          Petitioners may overcome this inference by showing that a real              
          expectation of repayment existed and that there was an intent to            

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