Larry J. and Angela L. Siggelkow - Page 6




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          Virgin, 230 F.2d 880 (5th Cir. 1956).  Section 166(d)(1)(A)                 
          provides that in the case of a taxpayer other than a corporation,           
          section 166(a) shall not apply to any nonbusiness debt.  Section            
          166(d)(2) defines a nonbusiness debt as “a debt other than--(A) a           
          debt created or acquired * * * in connection with a trade or                
          business of the taxpayer; or (B) a debt the loss from the                   
          worthlessness of which is incurred in the taxpayer’s trade or               
          business.”                                                                  
          Whether a debt is a business debt or a nonbusiness debt is a                
          question of fact in each particular case. Sec. 1.166-5(b), Income           
          Tax Regs.  In this regard, a debt must be proximately related to            
          the taxpayer’s conduct of a trade or business in order to                   
          constitute a business debt.  United States v. Generes, 405 U.S.             
          93 (1972); sec. 1.166-5(a)(2), Income Tax Regs.  Whether a debt             
          bears a proximate relation to a taxpayer’s trade or business is             
          determined by the dominant motivation of the taxpayer in                    
          incurring the debt.  United States v. Generes, supra at 103.  A             
          significant motivation is not sufficient.  Id.  If an employee’s            
          dominant motivation in making a loan to his employer is a desire            
          to preserve his position and salary at that company, the loan may           
          be a business loan.  See Shinefeld v. Commissioner, 65 T.C. 1092            
          (1976).  However, petitioner here has not demonstrated that the             
          loan was “necessary to keep his job or was otherwise proximately            
          related to maintaining his trade or business as an employee.”               
          Whipple v. Commissioner, 373 U.S. 193, 204 (1963).  Petitioner              
          held a salaried position in a separate company, not threatened by           

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