The taxpayer must convince the court that his promotional and lending activities are sufficiently continuous and extensive to constitute an occupation in and of itself. Rollins v. C.I.R., 32 T.C. 604, affirmed 276 F.2d 368 (4th Cir. 1960). Where the taxpayer is "constantly looking for opportunities for the use of his money and time * * *" and "those which he found were many and varied," it has been held that he sustained a business bad debt when he made loans to one of his businesses.
Sec. 166(d)(2). Rollins v. Commissioner, 276 F.2d 368, 371 (4th Cir. 1960), aff'g 32 T.C. 604 (1959); sec. 1.166-5(b)(2), Income Tax Regs. Litwin v. United States, 983 F.2d 997, 999 (10th Cir. 1993).
Sec. 166(a). Rollins v. Commissioner, 276 F.2d 368 (4th Cir. 1960), aff'g 32 T.C. 604 (1959); sec. 1.166-5(b), Income Tax Regs. Litwin v. United States, 983 F.2d 997, 999 (10th Cir. 1993).
The length of time petitioner has held these profitable entities is fatal to his claim that the circumstances were so “exceptional” as to constitute a trade or business separate and distinct from the business of the entities. Berwind v. Commissioner, 20 T.C. 808 (1953), affd. 211 F.2d 575 (3d Cir. 1954); Rollins v. Commissioner, 32 T.C. 604, 616 (1959), affd. 276 F.2d 368 (4th Cir. 1960). There is some evidence in the record which suggests that petitioner intended to develop Mustang for an early and profitable sale, but it is not clear from his testimony whether petitioner was thinking of selling the corporation or simply selling stock of the corporation for additional capital.
Finally, it must be borne in mind that petitioner contends that his debt claim against Banner was a ‘non-business bad debt’ under section 166(d) rather than a debt related to his business. In Rollins v. Commissioner, 276 F.2d 368, 372 (C.A. 4, 1960), affirming 32 T.C. 604 (1959), the court said: In contrast to business bad debts, which may be deducted under * * * (sec. 166(a) to the extent that they become partially worthless in a given year, a non-business debt, to be deductible at all, must become totally worthless during the taxable year.
See H. Rept. No. 2333, 77th Cong., 2d Sess., p. 76, explaining the congressional intent when, in the Revenue Act of 1942, provisions were first enacted distinguishing between business and nonbusiness debts. See Rollins v. Commissioner (C.A. 4), 276 F.2d 368, affirming 32 T.C. 604. Such committee report contains the following:‘A new provision is added providing for special treatment of nonbusiness debts, applicable in the case of a taxpayer other than a corporation.
That treatment is not wholly inconsistent with petitioner's argument that he was a dealer in enterprises, but it strongly suggests that petitioner viewed himself as an investor in MOG and not as one in the trade or business of developing MOG for sale to customers. Cf. H. Beale Rollins, 32 T.C. 604, 616, affd. 276 F.2d 368 (C.A. 4, 1960), and Thomas Reed Vreeland, 31 T.C. 78, 83 (1958). Petitioner has not borne his burden of proving that he sought anything other than an investor's return from the enterprises he organized and advised.
Furthermore, the courts have consistently held that a shareholder cannot obtain a business bad debt deduction by claiming to be engaged in the business of investment for profit. Higgins v. Commissioner, 312 U.S. 212 (1941); H. Beale Rollins, 32 T.C. 604 (1959), affd. 276 F.2d 368 (C.A. 4, 1960), and cases cited therein at page 615. We have set out in detail and at some length the facts related to petitioner's automobile dealership ventures.
This Court has held on numerous occasions that the right to deduct bad debts as business losses is applicable only to the exceptional situations where the taxpayer's activities in making loans have been regarded as so extensive and continuous as to elevate that activity to the status of a separate business. Mas M. Barish, 31 T.C. 1280, 1286 (1959); H. Beale Rollins, 32 T.C. 604, 613 (1959), affd. 276 F.2d 368 (C.A. 4, 1960); Estate of William P. Palmer, Jr., 17 T.C. 702 (1951). We do not believe, in view of the factual matrix of this case, that the making of an isolated loan of $120,000 is so extensive an activity as to justify a finding by this Court that the partnership was engaged in the business of lending money.
It is well settled that if the integrity of the corporate form remains intact the business of a corporation is not the business of its stockholders or officers, Burnet v. Clark, 287 U.S. 410 (1932), Dalton v. Bowers, 287 U.S. 404 (1932), and this is so notwithstanding the fact that the stockholders may have devoted most of their time to the business of the corporation. Langdon L. Skarda, 27 T.C. 137, 148 (1956), affd. 250 F.2d 429 (C.A. 10, 1957); Jan G. J. Boissevain, 17 T.C. 325, 332 (1951); H. Beale Rollins, 32 T.C. 604, 615 (1959), affd. 276 F.2d 368 (C.A. 4, 1960). As we stated in Charles G.Berwind, 20 T.C. 808, 815 (1953), affirmed per curiam 211 F.2d 575 (C.A. 3, 1954), an officer or employee ‘cannot appropriate unto himself the business of the various corporations for which he works.’