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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
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