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Respondent issued petitioner a deficiency notice denying the
$10 million partial bad debt deduction for 1995. Petitioner
timely filed a petition.
OPINION
The issue in this case arose in the context of a fast-paced
and changing business environment. While the management group
made the best business decisions under the circumstances at the
time, exigent circumstances beyond the management group’s control
caused the management group not to be able to achieve their
goals. We are now called upon, more than 10 years later, to
decide the tax consequences of these business decisions.
The parties stipulated that the parties were not related
under the Code and that there was no tax motivation underlying
the transaction between Bottlers and Properties. The parties
also stipulated that Bottlers had a reasonable expectation that
the Properties loan would be repaid. Respondent does not
challenge the substance of the transaction.
The issue before us, put simply, is whether petitioner is
entitled to deduct a portion of the debt, $10 million, because it
was partially worthless.3 More broadly speaking, we are asked to
3Petitioner has the burden of proof because the examination
commenced before July 22, 1998, the effective date of sec. 7491.
See Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727.
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