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existed between each of the petitioners and the alleged debtors
which obligated the debtors to pay petitioners a fixed or
determinable sum of money, (2) the debt was created or acquired
in or in connection with a trade or business of petitioners, and
(3) the debt became worthless in 1992. See sec. 166; United
States v. Generes, 405 U.S. 93 (1972); Calumet Indus., Inc. v.
Commissioner, 95 T.C. 257, 285 (1990); Beaver v. Commissioner, 55
T.C. 85, 91 (1970); Black v. Commissioner, 52 T.C. 147, 151
(1969). A gift or contribution to capital is not debt within the
meaning of section 166. See Calumet Indus., Inc. v.
Commissioner, supra at 284; Kean v. Commissioner, 91 T.C. 575,
594 (1988). Petitioners bear the burden of proof on this issue.
See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Our review of the record in this case confirms that
petitioners have failed to prove any of the three elements
necessary to establish their claim to a business bad debt
deduction. We address each of them below.
Did a Bona Fide Debt Exist?
In order for us to find that a bona fide debt was created
for purposes of section 166, petitioners must prove that there
was “a genuine intention to create a debt, with a reasonable
expectation of repayment” and that the intention was consistent
with the “economic reality of creating a debtor-creditor
relationship”. Litton Bus. Sys., Inc. v. Commissioner, 61 T.C.
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