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Chens; this meets the Code’s requirement of a debt relating to a
business activity. Because the debt is a business one, the Chens
could deduct it if they proved the other elements of a bad debt
deduction: (1) a valid debtor-creditor relationship; (2) the
amount of the debt; (3) its worthlessness; and (4) the year it
became worthless. See Davis v. Commissioner, 88 T.C. 122, 142
(1987), affd. 866 F.2d 852 (6th Cir. 1989).
We have no reason to doubt that Citirom and PCTI had a valid
debtor-creditor relationship. The Chens also proved the amount
of the receivable through PCTI’s business records. So far, so
good. However, they stumble over the last two hurdles:
worthlessness, and worthlessness in 1998. Mr. Chen did credibly
testify that PCTI had trouble collecting from Citirom in 1998,
but though Citirom was a slow payer, it did continue to make
payments throughout the year on a number of other outstanding
invoices. A taxpayer’s “mere belief” that a debt is worthless
won’t support a deduction. Fox v. Commissioner, 50 T.C. 813,
822-823 (1968), affd. per curiam 25 AFTR 2d 70-891, 70-1 USTC
par. 9373 (9th Cir. 1970); sec. 1.166-2, Income Tax Regs. We
look instead for facts that establish reasonable grounds for
abandoning any hope of recovery--proof of the customer’s
insolvency, a description of action taken to recover the debt, or
an explanation of why no action was taken. Fincher v.
Commissioner, 105 T.C. 126, 137-138 (1995); Crown v.
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