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in the corporation. See id.; Benak v. Commissioner, 77 T.C.
1213, 1218 (1981). Considering these factors in the present
case, it is more probable that petitioner’s guaranty was intended
to protect his investment in Mayflower than it was to protect his
salary from a corporation that he wholly controlled. The amount
of the loan guaranty was disproportionate to petitioner’s salary
from Mayflower and is more likely related to his investment in
Mayflower. Petitioner even asserts in his brief:
As a result of an adverse loss ratio in 1988, it
was required that Mayflower/Jordan pay back a large
amount of money to Constitution Reinsurance.
Mayflower/Jordan did not have the funds at the time, so
the petitioner secured a loan that was passed on to the
corporation. If the monies had not been paid to
Constitution, they would have withdrawn their
reinsurance support. This action would have put
Mayflower/Jordan out of business immediately.
* * * * * * *
The loan was essential if the company was to
continue to operate.
We conclude that the bad debt deduction must be treated as a
nonbusiness bad debt.
We have considered the other arguments of the parties. They
are either unnecessary to our decision or lacking in merit.
Decision will be entered
under Rule 155.
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