Larry M. Levy and Diane Levy - Page 6

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               Respondent determined that the advances and guaranty                   
          payments were capital contributions to JTFJ, entitling                      
          petitioners to a short term capital loss deduction in 1989, and a           
          short-term capital loss carryover deduction of $3,000 per year in           
          1991, 1992, and 1994.  Petitioners contend that they are entitled           
          to a section 166 business bad debt deduction of $445,104 in 1991.           
          In the alternative, petitioners contend that they are entitled to           
          deduct these payments as section 165 losses, or as section 162(a)           
          ordinary and necessary business expenses.                                   
          I.   The Joint Venture                                                      
               Petitioners contend that they are entitled to an ordinary              
          deduction because the advances to JTFJ and guaranty payments were           
          made pursuant to a joint venture.  Petitioners further contend              
          that the entity became worthless in 1991.                                   
               A joint venture has been defined as a special combination of           
          two or more persons, where in some specific venture a profit is             
          jointly sought without any actual partnership or corporate                  
          designation.  See Beck Chem. Equip. Corp. v. Commissioner, 27               
          T.C. 840, 848 (1957).  Whether an entity will be recognized as a            
          joint venture for tax purposes is determined by reference to the            
          same principles that govern recognition of a partnership.  See              
          Luna v. Commissioner, 42 T.C. 1067, 1077 (1964) (stating that the           

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