Kushel v. Commissioner

15 T.C. 958, 1950 U.S. Tax Ct. LEXIS 8

• Court: United States Tax Court
• Decided: December 28, 1950
• Docket: Docket No. 23886
• Status: Published

Opinion

OPINION.

Opper, Judge:

Petitioner’s failure to carry his burden of proof has resulted in our finding the ultimate fact in accordance with respondent’s determination. There is no evidence from which we can conclude that, with respect‘to the business as to which the bad debt was suffered, petitioner was more than a “passive investor,” Foss v. Commissioner (CCA-1), 75 Fed. (2d) 362; or that he was in the tax year either in the real estate business or in the business of making loans, Regulations 111, section 29.23 (k)-6; or for the matter of that, that he was ever in any business other than that of paper and bags. Certainly the record, unlike that in Vincent C. Campbell, 11 T. C. 511, shows affirmatively that he was not a stockholder, and it is not clear that he was even a nominal officer or director of the debtor corporation. It follows that since the debt was not represented by a “security,”¹ and the loss was not incurred in the trade or business of the taxpayer, the requirements of section 23 (k) (4) to constitute the deduction in controversy a business bad debt have not been met. The Omaha National Bank v. Commissioner (CCA-8), 183 Fed. (2d) 899.

Similarly, we find no proof that as far as this taxpayer was concerned, the transaction was entered into for profit so that the deduction could be taken as a loss² under section 23. (e) (2) even if we assume that the two remedies are not mutually exclusive. See Spring City Foundry Co., 292 U. S. 182.

Decision will be entered for the respondent.

1 SEC. 23. • * •

(k) Bad Debts.—

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(4) Non-business debts. — In the ease oí a taxpayer, other than a corporation, if a non-business debt becomes worthless within the taxable year, the loss resulting therefrom shall be considered a loss from the sale or exchange, during the taxable year, of a capital asset held for not more than 6 months. The term “non-business debt" means a debt other than a debt evidenced by a security as defined in paragraph (3) and other than a debt the loss from the worthlessness of which is incurred in the taxpayer’s trade or business.

2 SEC. 23. * * *

<e) Losses bx Individuals. — In the case of an individual, losses sustained during the taxable year and not compensated for by insurance or otherwise—

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(2) if incurred in any transaction entered into for profit, though not connected with the trade or business; • • •