Madeline Cook - Page 6

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          142(a); United States v. Generes, supra at 104; Whipple v.                  
          Commissioner, supra at 202.                                                 
               Petitioner reiterated several times at trial that the reason           
          she made the loans to Hamilton, despite her son's miserable                 
          performance as a caterer, was to protect the Puro income stream             
          from being attached by Kaplan.  Assuming that her dominant                  
          motivation was as she stated, and not some other motivation, such           
          as not wanting to see her son fail in his new business, that does           
          not by itself mean that the debt is a business bad debt.  Before            
          a debt can be a business bad debt, there must be a trade or                 
          business of the lender to which the debt relates.  See, e.g.,               
          Whipple v. Commissioner, supra at 201-202.                                  
               At trial, respondent asked petitioner why she continued                
          making loans to Hamilton even though the business was failing.              
          She acknowledged that it was to protect her investment in Cold              
          Springs.  (Emphasis added).  Respondent also elicited a statement           
          from petitioner that, subsequent to the sale of Cold Springs'               
          assets to Puro, Cold Springs was no longer "in the trade or                 
          business" of operating a water company.  Petitioner was not an              
          employee of Cold Springs or Hamilton, nor was she in the business           
          of making loans.                                                            
               On her 1994 and 1995 Federal income tax returns, petitioner            
          attached a Schedule C reporting business activity from her travel           

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