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evidence of worthlessness in 1997, petitioners must show that the
$2 million loan had value at the beginning of 1997 and became
worthless during that year. Milenbach v. Commissioner, 106 T.C.
184, 204 (1996), affd. in part, revd. in part on other grounds
and remanded 318 F.3d 924 (9th Cir. 2003). The determination
depends upon the particular facts and circumstances of each case,
although, generally, “the year of worthlessness is fixed by
identifiable events that form the basis of reasonable grounds for
abandoning any hope of recovery.” Id. at 204-205; see also
Estate of Mann v. United States, 731 F.2d 267, 276 (5th Cir.
1984); Dallmeyer v. Commissioner, 14 T.C. 1282, 1291-1292 (1950).
A taxpayer must provide evidence of lack of potential as well as
liquid value by yearend, and the taxpayer’s unsupported opinion
that the debt became worthless in a particular year, by itself,
will not normally be accepted as proof of worthlessness. See
Dustin v. Commissioner, 53 T.C. 491, 501-502 (1969), affd. 467
F.2d 47 (9th Cir. 1972).
B. Analysis
1. Introduction
In support of their entitlement to a 1997 bad debt deduction
for the worthlessness of the $2 million loan, petitioners argue
that, as of December 31, 1997: (1) Solv-Ex was in bankruptcy in
both the United States and Canada; (2) it had committed to sell
all of its Canadian operating assets (plant and equipment) and
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