- 23 -
beginning of petitioner's 1992 tax year, Mark Mann sought credit
counseling, and the counseling service recommended bankruptcy.
In addition, during petitioner's 1992 tax year, Mark Mann became
(and remained) unemployed and could not meet his obligations as
they came due. Moreover, also during petitioner's 1992 tax year,
petitioner discontinued and sold the assets of the business in
which Mark had worked. Finally, it is clear that Mark's
liabilities greatly exceeded his assets as of the end of that tax
year. We find that these identifiable events gave petitioner
clear and definite grounds for abandoning any hope of recovering
the advances, as of the close of its 1992 tax year.
Therefore, keeping respondent's arguments--and the
difficulty of determining the time of worthlessness--in mind, the
evidence has convinced us that petitioner's business judgment
with respect to the value of the advances was sound. We find
that petitioner's advances to Mark Mann (and the accrued interest
thereon) became worthless during petitioner's tax year ended July
31, 1992.4
Respondent notes that petitioner did not take legal action
to enforce repayment of the advances. Of course, the results of
4 Hindsight confirms petitioner's judgment. The fact that
Mark Mann had not attained solvency 6 years after petitioner
canceled the advances--which had constituted approximately 83
percent of Mark's liabilities--further indicates that the
advances were worthless when petitioner canceled them.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011