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established between petitioner and Estes or substantiate the
amounts he transferred to Estes. The evidence introduced at
trial by petitioner shows that he transferred the amounts at
issue to Estes. Therefore, we do not consider this argument
further in deciding these cases.
Respondent's determinations are presumed correct, and
petitioners bear the burden of proving otherwise. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioners must also prove their entitlement to any claimed
deduction. Deductions are a matter of legislative grace, and
petitioners must show that their claimed deductions are allowed
by the Code. See New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934).
Section 166(a) provides that a deduction shall be allowed
for any bad debt that becomes worthless within the taxable year.
Business bad debts are deductible as ordinary losses to the
extent of a taxpayer's adjusted basis in the debt. See sec.
166(b). Nonbusiness bad debts are treated as losses resulting
from the sale or exchange of a short-term capital asset. See
sec. 166(d).
To claim a bad debt deduction for the amounts advanced to
Estes, petitioner must prove that (1) a bona fide debt existed
between himself and Estes, and (2) the debt became wholly
worthless in 1993. No deduction for partial worthlessness of a
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