- 7 - Respondent concedes that petitioner’s loans were bona fide debts that arose in the course of his trade or business of being an employee of KPS. The parties stipulated that petitioner made the loans to maintain his employment with KPS. The loans became worthless during 1996 because of the bankruptcy of KPS. Finally, petitioner was not in the trade or business of lending money; rather, he was in the trade or business of operating a trucking company. In the notice of deficiency, respondent allowed $85,009 as a bad debt deduction. However, petitioner is now claiming $86,040 for the bad debt deduction.6 The remaining question is whether the bad debt should be allowed as a deduction from gross income to arrive at petitioners’ adjusted gross income, or is to be treated as an itemized deduction in computing their taxable income.7 6The discrepancy between $85,009 and $86,040 will be addressed later in the opinion. 7 The significance of the parties’ dispute lies in the fact that itemized deductions are limited by certain thresholds and restrictions, whereas deductions used to arrive at adjusted gross income are not. In particular, an itemized deduction in the setting of this case would be subject to the 2-percent floor under sec. 67.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
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