ABC Beverage Corp., f.k.a. Beverage America, Inc. - Page 13

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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.                                                    
               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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