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Neither Navis nor petitioners reported the sale of the
alleged business plan and intellectual property on its or their
1995 Federal income tax return. There is no indication that
Navis even filed a Federal income tax return for 1995.
Petitioners have not shown that the alleged business plan and
intellectual property, PowerAgent and WorkWorld, had any value.
Petitioners have not presented this Court with any evidence that
the alleged business plan and intellectual property even existed.
The promissory note, a demand note, lacks a date of maturity
and does not require regular interest and principal payments to
be made. There is no evidence that Search2000 made any interest
or principal payments on the promissory note. Moreover, there is
no evidence that either Navis or petitioners demanded payment
from Search2000. There is no evidence that either Navis or
petitioners required Search2000 to provide collateral for the
promissory note. Petitioners have failed to show that, when the
promissory note was created, there was a genuine intention to
create a bona fide debt.7
7Petitioners alleged on their 1997 Federal income tax return
that Mr. Sundby was a lender. Petitioners must prove that Mr.
Sundby was in a trade or business and that the alleged debt was
connected to that trade or business in order to take their
claimed deduction. Sec. 166(d); see Commissioner v. Groetzinger,
480 U.S. 23, 35 (1987) (“the taxpayer must be involved in the
activity with continuity and regularity and * * * the taxpayer’s
primary purpose for engaging in the activity must be for income
or profit.”). Moreover, on Schedule C of their 1997 Federal
income tax return, petitioners indicated that Mr. Sundby did not
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