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The issues for decision are: (1) Whether petitioners’
advance of $200,000 to Richard Magness is deductible as a
business bad debt under section 166 and (2) whether petitioners
are liable for an accuracy-related penalty under section 6662(a).
We hold that the advance is not deductible as a business bad debt
and that petitioners are liable for the accuracy-related penalty.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts is incorporated herein by this
reference.
Petitioners are married and resided in Dana Point,
California, at the time the petition was filed. Unless otherwise
indicated, “petitioner” refers to Edward L. Provost.
Petitioner is a business consultant who, during 1993, also
held a real estate license. Prior to 1987, petitioner worked as
an executive in a transportation company called Industrial
Freight System (IFS).2 His employment at IFS ended in or about
1987, at which point he became a consultant to IFS. Petitioner
was not in the business of lending money in 1993.
Although petitioner received income from other sources, the
majority of his income from 1988 through 1991 was received from
consulting services. These services were performed almost
2At one time, petitioner owned a 40-percent interest in the
corporation.
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