Henry C. Boler and Sherry M. Boler - Page 9




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          Petitioner and Scott did not discuss whether Scott was required             
          to pay interest.  Scott left AIM early in 1996 without repaying             
          any of the $14,900.  When he left AIM, Scott told petitioner that           
          Scott considered the $14,900 to be compensation for work he had             
          done for AIM.  AIM did not deduct the $14,900 as compensation               
          paid to Scott.                                                              
               Petitioner did not sue Scott because litigation is                     
          expensive, and Scott had been a friend.  In October 1996,                   
          petitioner asked Rebecca Hennesey, one of petitioners’ certified            
          public accountants, for advice about whether AIM could deduct the           
          $14,900.  She advised petitioner to contact Scott to try to                 
          collect the $14,900.  One of Scott’s sisters gave petitioner an             
          address for Scott.  On December 18, 1996, petitioner sent a                 
          certified letter to Scott at that address asking him to repay the           
          loans.  The letter was returned unclaimed.  AIM deducted the                
          $14,900 as a bad debt in 1996.                                              
          F.   Labor Performed by High School Students                                
               Some high school students maintained the lawn and premises             
          at the Whittington property in the summers of the years in issue.           
          Petitioner paid them $442 in 1994, $40 in 1995, and $243 in 1996.           
          AIM reimbursed petitioner and deducted those amounts.                       











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