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worthless in the year that the deduction is claimed. Rule
142(a); Am. Offshore, Inc. v. Commissioner, 97 T.C. 579, 593
(1991); sec. 1.166-1(c), Income Tax Regs. A bona fide debt is
defined as one which arises from a debtor-creditor relationship
and which is based upon a valid and enforceable obligation to pay
a fixed or determinable sum of money. Sec. 1.166-1(c), Income
Tax Regs.
The question of whether a debt has become worthless is one
of fact, to be determined by an examination of all surrounding
facts and circumstances. Am. Offshore, Inc. v. Commissioner,
supra at 594.
A taxpayer may establish the worthlessness of a debt by
offering proof of identifiable events which establish that the
debt will not be paid in the future. Therefore, a taxpayer’s
subjective opinion that a debt is uncollectible, standing alone,
is not sufficient evidence that the debt is worthless. Fox v.
Commissioner, 50 T.C. 813, 822 (1968), affd. per curiam per order
25 AFTR 2d 70-891, 70-1 USTC par. 9373 (9th Cir. 1970).
Among the objective factors considered by courts to
determine worthlessness are: The debtor’s earning capacity;
events of default, whether major or minor; insolvency of the
debtor; the debtor’s refusal to pay; actions of the creditor in
pursuing collection, i.e., whether the creditor failed to take
collection action before claiming the deduction; subsequent
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