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There is no standard test or formula for determining
worthlessness, and the determination depends upon the particular
facts and circumstances of the case. Lucas v. American Code Co.,
280 U.S. 445, 449 (1930); Crown v. Commissioner, supra. A
taxpayer must usually show identifiable events to prove
worthlessness in the year claimed. United States v. S.S. White
Dental Manufacturing Co., 274 U.S. 398 (1927); Crown v.
Commissioner, supra; Dallmeyer v. Commissioner, 14 T.C. 1282,
1291-1292 (1950). Debts are wholly worthless when the taxpayer
had no reasonable expectation of repayment. Crown v.
Commissioner, supra.
After carefully considering all the facts, we conclude
petitioners have failed to prove that the $491,054 debt
petitioner claimed became wholly worthless in 1995. We therefore
sustain respondent’s determination.
Whether Job Termination Can Render a Debt Worthless
Petitioner argues that firing Evans was the “identifiable
event” that rendered the loan worthless in 1995. We disagree.
Once Evans was fired from the Clinic, he found similar employment
at another medical clinic. There is nothing in the record to
show that repayment was conditioned upon Evans’ continued
employment with the Clinic. In addition, petitioner has not
pointed us to, nor have we found, any case in which terminating a
debtor’s employment alone renders a debt worthless.
In fact, there is a case that indicates just the opposite.
An insurance company was denied bad debt deductions for unpaid
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