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are asked to decide whether petitioner is entitled to deduct
$158,381 as a business bad debt in 1998 under section 166 and
whether the accuracy-related penalty under section 6662(a) should
apply. We hold that petitioner is not entitled to deduct
$158,381 as a business bad debt and that the accuracy-related
penalty applies.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the accompanying exhibits are
incorporated by this reference. Petitioner resided in Anoka,
Minnesota, at the time he filed the petition in this case.
Petitioner has owned and operated Egan Oil, a sole
proprietorship, for 43 years. Egan Oil is a distributor of Exxon
Mobil petroleum products. Egan Oil purchases petroleum products
from Exxon Mobil and then resells them to customers such as
service stations and convenience stores.
One of Egan Oil’s customers was Brooks Foods, Inc. (Brooks
Foods), a chain of food stores owned by a prominent local
businessman named Brooks Hauser. Mr. Hauser encountered business
difficulties in 1993 and 1994 and fell behind on his payments to
Egan Oil for petroleum products Brooks Foods had purchased.
Petitioner knew Mr. Hauser was attempting to rebuild his business
and was seeking to refinance. To protect himself from the
rapidly increasing balance, petitioner decided to allow only a
2(...continued)
petitioner’s net farm loss and respondent’s reduction of
petitioner’s home mortgage interest deduction.
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