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collection efforts may serve as evidence of worthlessness.
However, such action is not required. See Smyth v. Barneson, 181
F.2d 143 (9th Cir. 1950); Bowman v. Commissioner, T.C. Memo.
1995-259. Where the surrounding circumstances indicate that a
debt is worthless and uncollectible and that legal action to
enforce payment would in all probability not result in the
satisfaction of execution on a judgment, a showing of these facts
will be sufficient evidence of worthlessness. See sec. 1.166-
2(b), Income Tax Regs.
We find that the surrounding circumstances so indicated in
this case, during petitioner's tax year ended July 31, 1992.
Among the other factors discussed above, we note that as of
July 21, 1992, Mark Mann was insolvent in both balance sheet and
bankruptcy terms. His total liabilities (including the advances)
were approximately $142,259; his assets were approximately
$7,200, and consisted of his travel trailer/residence and his
used truck. Also, as a result of his unemployment, Mark had
become unable to meet his obligations as they came due. For
these reasons, it is clear that if petitioner had sought to
collect the advances, Mark Mann would have been forced to declare
bankruptcy, and petitioner would most likely have received
nothing. Where a creditor is familiar with the debtor's
circumstances and knows that the debtor is hopelessly insolvent,
he need not attempt to collect the debt where his attempts to do
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