- 8 - The thrust of petitioner’s testimony is that he made loans to virtual strangers over the course of 1999, through December 1999, pursuant to “promissory notes” that did not specify any amounts due, in order to earn favorable interest. Petitioner testified as follows: in ‘97 and ‘98 and ‘99 I was actively involved in it and when I found the market was going down I started liquidating and fortunately I had the opportunity to meet this group and I thought that rather than putting my money in the bank making two percent or three percent I had an opportunity that they would give me six percent and I could therefore secure the fund for myself. Then later on if something panned out where they went IPO or something else I might be able to have some opportunity there. So I asked them to provide me a promissory note which they did for ‘99 on the basis that I would provide them the funds as they needed it and as I had the available when I had already cashed some of my stocks. * * * Petitioner then claims that, in early 2000, he concluded that the alleged “loans” were worthless. Whether a bona fide debtor-creditor relationship exists is a question of fact to be determined upon consideration of all of the facts and circumstances. Fisher v. Commissioner, 54 T.C. 905, 909 (1970). Among the factors that are commonly considered in deciding whether there was a reasonable expectation, belief, and intention of repayment are: (1) Whether a note or other evidence of indebtedness exists, Clark v. Commissioner, 18 T.C. 780, 783 (1952), affd. 205 F.2d 353 (2d Cir. 1953); (2) whether interest is charged, id.; (3) whether there is a fixed schedulePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011