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taxable year. Sec. 166(a), (d)(1)(A). A bona fide debt is one
that arises from a debtor-creditor relationship based upon a
valid and enforceable obligation to pay a fixed or determinable
sum of money. Sec. 1.166-1(c), Income Tax Regs.
A business bad debt deduction is allowable if the taxpayer,
among other requirements, establishes: (1) He was engaged in a
trade or business, and (2) the acquisition or worthlessness of
the debt was proximately related to the conduct of such trade or
business. United States v. Generes, 405 U.S. 93 (1972); sec.
1.166-5(b), Income Tax Regs. For a debt to be considered a
business debt, it must have a proximate relation to the
taxpayer’s trade or business. In determining whether a proximate
relationship exists, the proper measure is the taxpayer’s
dominant motivation for incurring the debt. A significant
motivation is not sufficient. United States v. Generes, supra at
103.
Petitioner bears the burden of proving that the amounts in
question constituted business debts and that such debts became
worthless in 2000, the year in which the deduction is claimed.
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
At the outset, respondent disputes that expenses were
incurred in connection with petitioner’s trade or business.
Petitioner argues that he was in the trade or business of
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