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business bad debt should be reclassified as a nonbusiness bad
debt and included as a short-term capital loss. In requests for
admissions served on petitioners, respondent asked petitioners to
admit:
51. On their 1990 income tax return, petitioners
deducted $100,000, the amount of the seized certificate
of deposit, as an expense; this amount should have been
claimed as a “non-business bad debt” rather than as an
expense.
Respondent now contends that petitioners have not substantiated
that a total of $100,000 was seized by Bent Tree National Bank.
Petitioner, at trial, was under the impression that respondent
had previously conceded substantiation of the $100,000 amount,
and petitioner only belatedly and ineffectively attempted to
subpoena the records of Bent Tree National Bank.
Under the circumstances, we believe that substantiation of
the $100,000 amount is new matter as to which respondent has the
burden of proof. See Rule 142(a). Petitioner testified that he
had a certificate of deposit with the bank that was seized in
satisfaction of his guaranty. Respondent has given us no reason
to reject petitioner’s testimony as to this item.
With respect to the characterization of the amount
petitioner paid as a result of his guaranty, petitioner
testified:
there’s so much law on this, and I’ve read it, but the
primary and dominant reason that this loan was made was
to save my salary, which I think was a hundred and--a
hundred and sixty or seventy thousand one year, and the
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