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loss from the sale or exchange of a capital asset held for not
more than one year. Sec. 1.166-5(a)(2), Income Tax Regs. To
qualify for a worthless debt deduction, the taxpayer must show
that a debtor-creditor relationship was intended between the
taxpayer and the debtor, that a genuine debt in fact existed, and
that the debt became worthless within the taxable year. Andrew
v. Commissioner, 54 T.C. 239, 244-245 (1970); sec. 1.166-1(c),
Income Tax Regs. Petitioners bear the burden of proof. Rule
142(a).3
Transactions among family members are subject to careful
scrutiny. Caligiuri v. Commissioner, 549 F.2d 1155, 1157 (8th
Cir. l977), affg. T.C. Memo. 1975-319; Estate of Van Anda v.
Commissioner, 12 T.C. 1158, 1162 (1949), affd. per curiam 192
F.2d 391 (2d Cir. 1951). The taxpayer must show that there
existed at the time of the transaction an intent to enforce
collection of the indebtedness. Andrew v. Commissioner, supra at
245. Additionally, the taxpayer must show that the loan was made
with a reasonable expectation of repayment. Mercil v.
Commissioner, 24 T.C. 1150 (1955). The execution of a note does
not necessarily establish the existence of a bona fide debt.
Estate of Van Anda v. Commissioner, supra at 1162.
3Sec. 7491(a), which in some circumstances places the burden
of production on respondent, is not applicable here as the Court
decides the case without regard to the burden of proof.
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