- 122 -
Commissioner, supra at 910-911; see also Zimmerman v. United
States, 318 F.2d at 613.
The $76,705 in advances appears to be something other than
loans. Essentially petitioner expected Koehler to repay these
advances “when he could”. Koehler did not furnish security, and
petitioner did not seek repayment of the advances. On the basis
of the record, we conclude that Crispin arranged the advances
from petitioner to help his friend and business associate,
Koehler, who was in financial need. See McCain v. Commissioner,
T.C. Memo. 1987-285, affd. per order (9th Cir., Apr. 11, 1989);
see also Boatner v. Commissioner, supra.
On the basis of the foregoing, we hold that petitioner is
not entitled to deduct a $76,705 bad debt for its taxable year
ended November 30, 1996.
V. Is Petitioner Liable for Penalties Under Section 6662?27
Respondent determined that petitioner was liable for
penalties under section 6662 for its taxable years ended November
30, 1996 and 1997, with respect to underpayments attributable to
the lease strip deal deductions. In particular, respondent
determined that petitioner was liable for a 20-percent penalty on
the portions of the underpayments attributable to rental expense
deductions as being due to petitioner’s negligence, disregard of
27Although respondent disallowed petitioner’s $404,000 net
operating loss (NOL) carryover deduction for 1996, respondent did
not determine that petitioner was liable for an accuracy-related
penalty on the portion of its underpayment attributable to the
$404,000 NOL.
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