Mann Construction Co., Inc. - Page 8




                                        - 8 -                                         

          petitioner's advances, and Richard Mann and he had never                    
          discussed forgiving or canceling them.                                      
               When petitioner canceled Mark Mann's obligation to repay the           
          advances, Mark was 37 years old.  At that time, Mark's required             
          child support payments were $800 per month; he was also required            
          to make support payments to his former wife.                                
               After the cancellation of the advances, Mark Mann did not              
          obtain full-time work until June 1995.  In that month, Mark                 
          accepted a position as the construction manager for the                     
          Confederated Tribes of Warm Springs, at a salary of $52,000 per             
          year.  At the time of trial (in March 1998) Mark still held this            
          position, at the same salary, with no bonus or other contingent             
          compensation arrangements.                                                  
               Mark Mann had not attained solvency at the time of trial.              

                                      OPINION                                         
               Subject to the limitations set forth in section 166(d)                 
          and (e), which are not at issue here, section 166(a)(1) allows a            
          deduction for any debt that becomes worthless within the taxable            
          year.  This "bad debt" deduction applies only to obligations that           
          are bona fide debt, as defined by section 1.166-1(c), Income Tax            
          Regs., and the applicable case law.                                         
               Petitioner must prove its entitlement to the bad debt                  
          deduction.  See Rule 142(a); Welch v. Helvering, 290 U.S. 111               






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011