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or as a bad debt under section 166, Arrigoni v. Commissioner, 73
T.C. 792, 800 (1980). Furthermore, while petitioner-husband’s
section 6672 liability had its genesis in the corporate
liability, that “liability became fixed and personal to him upon
his failure to pay over the amount withheld to the Government.”
Id. at 800. As we noted, “This Court will not permit the
taxpayer to transform a nondeductible personal obligation into a
deductible corporate debt when to do so would circumvent the
effectiveness of sec. 6672.” Id. at 801 n.9. Finally, even if
petitioners could overcome these roadblocks, petitioners have not
established that Dynatrex, Inc. did not claim such a deduction in
1988 or earlier as a part of wages when paid. In sum, there is
no basis for allowing petitioners such a deduction on their 1997
return.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent except as to
the section 72(t) penalty.
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Last modified: May 25, 2011