Court Denies Bad-Debt Business Deduction.
The circuit court agreed with the IRS, finding that the taxpayer was merely an investor who provided working capital to the corporation. There was no evidence, the court said, that the taxpayer actively managed the corporation or provided any services to the distressed companies. Therefore, the court denied the company's bad debt deduction and held the loans were nonbusiness debts (Commissioner v. Melvyn L. Bell, 8th Cir.,1-5-00).
--Michael Lynch, CPA, Esq., professor of tax accounting at Bryant College, Smithfield, Rhode Island.
|Printer friendly Cite/link Email Feedback|
|Publication:||Journal of Accountancy|
|Date:||Apr 1, 2000|
|Previous Article:||Lump Sum Payment Not Tax Exempt.|
|Next Article:||Calculating insolvency.|