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issue. Specifically, respondent’s position is that the amount
advanced to the corporation was a contribution to capital.
Because the burden of proof does not affect the result with
respect to the NOL issue, we find that section 7491 has no
bearing on the determination of that issue.
Section 166(a) generally allows a deduction for a debt which
becomes worthless during the taxable year. Bad debts may be
characterized as either business bad debts or nonbusiness bad
debts. Sec. 166(d). To be entitled to the deduction, the
taxpayer must prove the existence of a bona fide debtor-creditor
relationship which obligates the debtor to pay the taxpayer a
fixed or determinable sum of money. Burns v. Commissioner, T.C.
Memo. 1997-83. A contribution to capital cannot be considered
debt. Calumet Indus., Inc. v. Commissioner, 95 T.C. 257, 284
(1990); sec. 1.166-1(c), Income Tax Regs.
Petitioners apparently concede that the money provided by
Mrs. Hess to Hess Inc. was not a loan. Mr. Hess testified that
“[Mrs. Hess] did not –- in terms of that bad debt, she did not –
there was no bad debt.” Mr. Hess further testified that the
identification of the amount provided by Mrs. Hess as a bad debt
“was a misnomer”.
Our review of the record leads us to conclude that the
advance by Mrs. Hess to Hess Inc. in 1992 was in fact a
contribution to capital, rather than a loan. There was no
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