Madeline Cook - Page 5

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          trade or business was announced in United States v. Generes,                
          supra at 103, as follows:                                                   
               in determining whether a bad debt has a "proximate"                    
               relation to the taxpayer's trade or business, as the                   
               Regulations specify, and thus qualifies as a business                  
               bad debt, the proper measure is that of dominant                       
               motivation, and that only significant motivation is not                
          Dominant motivation is determined at the time the taxpayer makes            
          the loan, Harsha v. United States, 590 F.2d 884 (10th Cir. 1979),           
          and is a question of fact to be decided on the basis of the                 
          entire record.  See Putoma v. Commissioner, 66 T.C. 652 (1976),             
          affd. 601 F.2d 734 (5th Cir. 1979).                                         
               Nonbusiness bad debts, on the other hand, may be deducted,             
          but only if they become entirely worthless during the year                  
          claimed; they are, moreover, to be treated as short-term capital            
          losses.  See sec. 166(d).  Generally, a nonbusiness bad debt is a           
          debt other than a debt (1) created or acquired in the trade or              
          business of the taxpayer or (2) the loss from the worthlessness             
          of which is incurred in a trade or business of the taxpayer.  See           
          sec. 166(d)(2).  Whether a debt is characterized as business or             
          nonbusiness is a question of fact.  See sec. 1.166-5(b)(2),                 
          Income Tax Regs.  The burden is on petitioner to prove that she             
          was engaged in a trade or business, and that her worthless loans            
          constituted business rather than nonbusiness bad debts.  See Rule           

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