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income does not include any amount that would be includable in
gross income by reason of the discharge of indebtedness if the
discharge occurs in the context of a bankruptcy case or when the
taxpayer is insolvent. However, none of these exceptions has
been shown to apply in the present case.
Finally, we recognize that the debt incurred by petitioner
on his Mellon Bank credit card could be viewed as giving rise to
a series of loans, rather than gifts, from petitioner to the
woman, the nonpayment of which could give rise to a bad debt
deduction. See sec. 166. This view would require petitioner to
prove, inter alia, that: (1) A bona fide debt existed; (2) the
debt became worthless; and (3) worthlessness occurred during the
taxable year in issue. See secs. 1.166-1(a), (c), and 1.166-2(a)
through (c), Income Tax Regs.
Petitioner’s testimony at trial, if accepted at face value,
might suffice to prove that a bona fide debt existed. However,
whether the debt became worthless is problematic. In any event,
assuming that it did, the record would not support a finding that
the debt became worthless during the taxable year in issue.
Accordingly, we are unable to conclude that petitioner is
entitled to a bad debt deduction.
B. Conclusion
For the reasons set forth above, respondent’s determination
is sustained.
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