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Respondent determined a deficiency in petitioners’ Federal
income tax of $1,716 for the taxable year 1999.
After concessions by petitioners, the sole issue remaining
for decision is whether petitioners are entitled to a bad debt
deduction.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Madera, California, on the date the petition was filed in this
case.
From November 1998 through May 1999, petitioner husband
(petitioner) worked as an independent contractor for Anderson
Mortgage Group, Inc. (Anderson), as a loan officer. In this
capacity, petitioner earned commissions for real estate mortgage
loans which he procured, funded, and closed. Petitioner’s
contract with Anderson provided that either party had the right
to terminate the contract for any reason by providing the other
party with 24 hours’ written notice. The contract further
provided that upon termination “any loans procured but not funded
or closed will become the property of Anderson Mortgage and no
compensation will be due” petitioner. In May 1999, Anderson
terminated the contract after giving petitioner the required 24
hours’ notice. In July 1999, an attorney retained by petitioner
wrote Anderson, stating that petitioner was “due approximately
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