- 11 -
affg. T.C. Memo. 1978-274; Grant v. Commissioner, 84 T.C. 809,
820 (1985), affd. without published opinion 800 F.2d 260 (4th
Cir. 1986); Rink v. Commissioner, 51 T.C. 746, 753 (1969). Thus,
a taxpayer is not entitled to a deduction for the imputed value
of services which he has not been required to report as income.
See Maniscalco v. Commissioner, supra at 7-8; Grant v.
Commissioner, supra at 820; Rink v. Commissioner, supra at 753.
Petitioners make no allegation that they reported the $920,000 of
claimed losses on any of their Federal income tax returns, and
they represented that they were cash basis taxpayers for the
years in issue.9
Section 165 provides, in general, for the deductibility of
losses sustained by the taxpayer. Section 166 provides, in
general, for the deductibility of debt which becomes worthless
during the taxable year. Under both provisions, the amount of
the deduction is determined by reference to the adjusted basis
provided in section 1011 for determining the loss from the sale
or other disposition of the property. See secs. 165(b) and
166(b). The deduction of a bad debt or a loss from gross income
9In an exhibit attached to respondent’s motion for partial
summary judgment, respondent asked petitioners whether they
reported the sale of the on-farm energy plant to Laurington Corp.
on any of their Federal income tax returns. Petitioners replied
that “I don’t believe it was because we were on a cash basis and
no cash was received.” Petitioners have not disputed any of the
exhibits attached to respondent’s motion and have referenced the
exhibits in their arguments opposing respondent’s motion for
partial summary judgment.
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