James R. and Myrtice L. Peacock - Page 29




                                       - 29 -                                         
          1994 World Billfish Series, a segment of which was devoted to               
          petitioners and their team, we conclude that petitioners                    
          participated in the tournaments for pleasure and recreation                 
          rather than the pursuit of business.  This factor favors                    
          respondent.                                                                 
               x.  Conclusion                                                         
               On the basis of our careful review of the record and our               
          evaluation of the nine aforementioned factors, we conclude that             
          PMSI did not engage in the fishing activity with an actual and              
          honest objective of making a profit.  We sustain respondent’s               
          determination.                                                              
          2.  Bad Debt                                                                
               Respondent determined that petitioners were not entitled to            
          the claimed bad debt deduction.  Petitioners assert that the                
          dealership could deduct the $50,000 loan in 1995 as a bad debt              
          because the loan was never repaid.  Petitioners assert that the             
          condominium when Mr. Peacock received it was worth less than the            
          balance on the loan and that Mr. Peacock reported on his personal           
          income tax return the proceeds which he received when he later              
          sold the condominium.                                                       
               Section 166(a)(1) allows a deduction for any debt that                 
          becomes worthless within the taxable year.  A nonbusiness bad               
          debt is deductible only in the year it becomes totally worthless.           
          A deduction is not allowed for partial worthlessness.  Black v.             






Page:  Previous  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  Next

Last modified: May 25, 2011