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Garner) $20,000, as memorialized in a promissory note signed by
Mr. Garner. The loan was unsecured and due 23 days later on
October 1, 1987. The purpose of this loan was to assist
financially Mr. Garner, who was “about to lose his home and he
needed the money.” Mr. Garner was petitioner’s friend and
“fellow boilermaker”. Petitioner testified that he decided to
help Mr. Garner because Mr. Garner had indicated that he needed
the money for a short period of time. Petitioner could not
recall where Mr. Garner was going to get the money to repay him.
Mr. Garner died in 1994. No payments of interest or principal
were made on the loan prior to or after Mr. Garner’s death.
Prior to his death, Mr. Garner assisted petitioner in
negotiating a workers’ compensation settlement with petitioner’s
former employer, Precipitator Maintenance. Petitioner did not
hire an attorney or other representative to assist him in this
matter.
Petitioners timely filed their Federal income tax returns
for taxable years 1996 and 1997. Petitioners reported a long-
term capital loss attributable to a bad debt of $20,000 on the
Schedule D attached to their 1996 Federal income tax return and a
$17,000 long-term capital loss carryover on the Schedule D,
Capital Gains and Losses, attached to their 1997 Federal income
tax return. Because petitioners did not have offsetting long-
term capital gains in either year, petitioners claimed a long-
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