Bad Debt Deduction Not Allowed.

The petitioner operated a consulting business and upon rehiring a former employee gave the employee $33,000 to help him through some tough times.  The petitioner stated to the employee that it was a loan, but no note or contract was executed.  The employee did not pay back the amount and the petitioner claimed a business bad debt deduction on his return.  The petitioner also sued the employee and the case was resolved two years after the tax year in issue when the deduction was claimed.  The evidence was devoid of any indication of either a business or non-business bad debt.  Court noted that even if the evidence had established that the loan was a bona fide debt, the petitioner would not have been able to establish that the bad debt was a business bad debt.  In addition, even if the debt was found to be a business debt, the petitioner would have failed to establish that the debt became worthless in the year in issue.  Dickenson v. Comr., T.C. Memo. 2014-136.