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In Ark. Best Corp. v. Commissioner, supra at 223, however,
the Supreme Court clarified these earlier cases by holding that a
taxpayer’s motivation in purchasing an asset is irrelevant to the
question of whether the asset comes within the general definition
of a capital asset in section 1221. Petitioner does not argue,
and the facts do not indicate, that its equity interest meets any
section 1221 exclusion from the general definition of a capital
asset. Hence, under the authority of the Ark. Best Corp. case,
petitioner’s advances in controversy (which we have held to
constitute a stock/equity interest rather than debt for tax
purposes) cannot result in an ordinary deduction upon either the
disposition of that stock/equity interest or its becoming
worthless. See Azar Nut Co. v. Commissioner, 94 T.C. 455 (1990)
(rejecting, on the basis of the Ark. Best Corp. case, the
business-connection-business-motivation rationale used in certain
pre-Ark. Best Corp. cases), affd. 931 F.2d 314 (5th Cir. 1991);
Sellers v. Commissioner, T.C. Memo. 2000-235; see also Maginnis
v. United States, 356 F.3d 1179, 1185 (9th Cir. 2004) (noting,
among other things, that the Supreme Court’s decision in the Ark.
Best Corp. case rejected the “motive” test).
On the basis of the foregoing, we hold that petitioner is
not entitled to ordinary deductions in connection with the
$2,052,900 and $1,859,135 amounts claimed for its taxable year
ended November 30, 1997.
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