- 34 -
the deduction, an individual taxpayer must prove (1) that bona
fide debt was created obligating the debtor to pay the taxpayer a
fixed or determinable sum of money, (2) that the bad debt was
created or acquired in proximate relation to the taxpayer’s trade
or business, and (3) that the debt became worthless in the year
claimed. See United States v. Generes, 405 U.S. 93, 96 (1972);
Calumet Indus., Inc. v. Commissioner, 95 T.C. 257, 284 (1990).
Petitioner admitted that the payment to the Kadrliks
actually was in the nature of a personal loan. Petitioners,
however, submitted no proof that the debt became worthless during
1991 or a later year. Consequently, we hold that petitioners
have failed to prove that they are entitled to deduct the payment
to the Kadrliks as a business bad debt or as a short-term capital
loss for 1991. Accordingly, we sustain respondent’s
determination on this issue.
Repairs Expense
Respondent disallowed petitioner’s deduction for repairs to
an oriental rug petitioner purchased in 1993 for periodic use in
his office because petitioner did not establish that the
expenditure was an ordinary and necessary business expense.
11(...continued)
the worthlessness of which is incurred in the taxpayer’s trade or
business.” Sec. 166(d)(2); see also sec. 1.166-5(b), Income Tax
Regs.
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011