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General ledgers and income tax returns of Blackland for the
relevant years are not in evidence, which would reflect the
ledger and tax return treatment by Blackland of the funds
received from petitioner and the details of Blackland’s March
1996 $600,000 transaction with petitioner.
Petitioner, who has the burden of proof, has failed to
establish that a genuine debtor-creditor relationship existed
between Blackland and himself with regard to the funds in
question and that the purported loans constituted valid debt.
Further, and in the alternative, we conclude that the
evidence does not establish that the purported loans to Blackland
became worthless by the end of 1995, the year for which the bad
debt deduction is claimed.
As late as December 31, 1995, petitioner continued to
transfer funds to Blackland, and in 1996 Blackland continued to
transfer funds to petitioner.
In December of 1995, Blackland had just begun settlement
negotiations with the tenant farmers which negotiations were not
completed until April of 1996. Blackland itself did not claim a
bad debt deduction with regard to the loans it made to the tenant
farmers until its 1996 Federal income tax return was filed. Had
Blackland in 1996 recovered more funds from the farmers, those
funds would have been available to transfer additional funds back
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