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purported third-party promissory notes dated December 28, 1998,
and January 7, 1999, referring to payment on December 31, 1999,
for “any and all” loans or moneys received during 1999, without
any specific amounts mentioned. Respondent had no opportunity to
contact the alleged obligors on the notes. The Court granted
respondent’s motion for sanctions and ordered that petitioner
would not be allowed to introduce into evidence documents that
had not been timely produced in accordance with the Standing
Pre-Trial Order or the order granting respondent’s motion to
compel production.
The case was recalled for trial on June 19, 2003, at which
time the parties filed a Stipulation of Facts resolving all
issues other than those set forth above. After several delays,
on December 15, 2003, petitioner filed an answering brief to
which he attached copies of canceled checks dated in 1999 that
purportedly support the bad debt expense claimed.
Discussion
Bad Debt Expense
In order to be eligible for a bad debt deduction for debts
that became worthless, petitioner must prove that a bona fide
debt existed and that the debt became worthless in the year in
which he claimed the deduction. Sec. 166(d); sec. 1.166-5(a)(2),
Income Tax Regs.
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