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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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