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In the notice of deficiency, respondent determined that
petitioner was not entitled to the claimed bad debt deduction
because he did not (1) establish a business purpose for the loss,
(2) show that the loss resulted from a bad debt and in particular
his bad debt, and (3) show that all reasonable steps were taken
to collect the debt.
Bad Debt Deduction (Attieh Bros.)
In 1987 Julicher Sports was engaged by Attieh Bros. Co.
(Attieh Bros.), a family-owned business in Amman, Jordan, to
install the rink and other flooring materials for a skating rink
called the Skating Palace in Amman. Attieh Bros. paid Julicher
Sports approximately $150,000 for the installation. Petitioner
developed a close relationship with the Attieh family, in
particular the brothers Thair and Nidal Attieh and their father
Raouf, and soon he was treated as if he were a member of the
family. Raouf was a commercial attach� for the Jordanian
Government with ties to the King of Jordan, and petitioner felt
he would be a valuable business contact in Jordan.
On October 15, 1989, petitioner individually (i.e., not
Julicher Sports) and Attieh Bros. entered into a loan agreement
(First Loan Agreement) whereby petitioner would lend Attieh Bros.
$50,000 for a period of 5 years, to be repaid on or before
October 15, 1994. The money was to be used to add a franchise
restaurant to the Skating Palace. The First Loan Agreement
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