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Respondent determined a deficiency of $970 in petitioners’
Federal income tax for 2000.
The sole issue for decision is whether, under section
166(d), petitioners are entitled to a nonbusiness bad debt
deduction for loans or advances to their son.
Some of the facts were stipulated. Those facts and the
accompanying exhibits are so found and are incorporated herein by
reference. Petitioners’ legal residence at the time the petition
was filed was Lexington, Kentucky.
Petitioners’ son, Michael Alt (Michael), while a student at
the University of Kentucky at Lexington, Kentucky, was employed
part time at a pet store. He continued to work in the business
and, at some point, became manager of the store. The business
was locally owned. Sometime in 1995, the owner decided to sell
the business. Since Michael had worked in the business for
several years and was intimately acquainted with its customers
and its merchandise, he became interested in purchasing the
business. With substantial financial assistance from
petitioners, Michael purchased the business. The financial
assistance provided by petitioners was $97,000. Of that amount,
$55,000 was for purchase of the business, and $42,000 was for
working capital. Petitioners were both retired and, in order to
obtain the $55,000, borrowed $55,000 from a local bank and
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