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of income for the year for which the deduction as a bad debt
is claimed or for a prior taxable year.
Sec. 1.166-1(e), Income Tax Regs.
The amount of the alleged bad debt in this case represents
commissions which petitioner asserts he was owed for services
rendered as an independent contractor, but which were never paid
to him. Assuming arguendo that a bona fide debt existed,
petitioners nevertheless are not entitled to a bad debt deduction
because the commissions are items of income, sec. 61(a), which
were never included in petitioners’ income, sec. 1.166-1(e),
Income Tax Regs. We therefore need not reach respondent’s
alternative argument that there was no bona fide debt with
respect to the unpaid commissions. Gertz v. Commissioner, supra.
At trial, petitioner stated that he did not report the
$15,000 in commissions as income “since I never received it, * *
* although I have offered to declare it if necessary * * * if
that would fix the problem.” We note that, if petitioners had
reported the $15,000 as income on the Schedule C in 1999 along
with the claimed $15,000 deduction, the two items would have
offset each other, and the result would have been the same as the
result under our opinion in this case.
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