-12-
The only evidence linking the debt to 1998 is Ms. Hauser’s
discharge in bankruptcy for that year. We find no connection
between Ms. Hauser’s bankruptcy and the claimed bad debt. Ms.
Hauser was not the debtor, and she was not connected to the
business. Moreover, petitioner has not shown how Ms. Hauser
could otherwise be liable for Brooks Foods’ debts. Accordingly,
we find her bankruptcy discharge is of no consequence to the
worthlessness of the debt. In fact, the 1995 letter to
petitioner from Ms. Hauser’s attorneys indicated to petitioner
that he would not likely collect from Ms. Hauser. Petitioner did
not introduce any evidence of actions petitioner took with
respect to the debt from 1995 to 1998. Unfortunately, it appears
that Mr. Hauser duped petitioner the same as Ms. Hauser’s
attorneys stated that Mr. Hauser had duped others.
We are convinced that any debt of Brooks Foods to Egan Oil
had no value before 1998. Petitioner may not, therefore, deduct
the debt owed by Brooks Foods in 1998 because petitioner has not
substantiated the amount of the deduction nor shown that it
became worthless in 1998.
IV. Accuracy-Related Penalty
We turn now to respondent’s determination in the deficiency
notice that petitioner is liable for the accuracy-related penalty
under section 6662. Respondent has the burden of production
under section 7491(c) and must come forward with sufficient
evidence that it is appropriate to impose the penalty. See
Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011