- 4 -
Respondent determined that petitioner had not established
the existence or bases of his loans, that they were related to a
trade or business, or that they became wholly worthless in 1993.
Respondent disallowed petitioner's bad debt deduction in 1993 and
instead allowed a $3,000 investment loss on Schedule D, Capital
Gains and Losses, in each of the years 1992, 1993, and 1994.
The loans for which petitioner claimed the bad debt
deduction in 1993 fall into five general categories: (1) A group
of 30 loans to real estate broker Dominick Aloi (Aloi debt); (2)
loans made in connection with the used-car business of Donald
Tooke (Tooke loans); (3) real estate loans made to individuals,
secured by mortgages or deeds of trust; (4) an unsecured loan
made to an individual; and (5) personal loans made to friends and
acquaintances.
The Aloi Debt
Dominick Aloi was a real estate broker or agent who in 1990
owned and operated the Nick Aloi Real Estate Co. in Frederick,
Maryland. Between May and August of 1990, Mr. Aloi executed a
series of 30 promissory notes totaling $512,700. The notes did
not represent new loan proceeds but were instead renewed promises
on unpaid loans made in earlier years. In the 2 years prior to
1990, Mr. Aloi had not been making full payments on the loans.
The notes were short-term notes, usually for 30 days, were often
renewed more than once, and gradually grew in number to 30. The
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011