Leonard Lundgren and Evelyn Lundgren v. Commissioner of Internal Revenue

This is an appeal from a decision of the Tax Court affirming a determination of the Commissioner of Internal Revenue which denied a deduction claimed as a business bad debt under section 166 of the Internal Revenue Code of 1954. Leonard Lundgren (hereinafter referred to as petitioner) and Evelyn R. Lundgren are husband and wife. Evelyn is a party to the proceedings only because the Lundgrens filed a-joint income tax return for the year involved.

There is no controversy concerning the facts. We recite them substantially as set out in the respondent’s brief.

Petitioner has been engaged in the timber and lumber manufacturing business during his adult life. He has organized various timber and lumber businesses, has been and now is an officer thereof, and presently has substantial stock holdings in various timber manufacturing and sales enterprises. Prior to 1951, petitioner conducted his business as a sole proprietor at Bend, Oregon. In 1951 this business was reorganized into a partnership in which petitioner had the controlling interest. In 1952 petitioner organized and incorporated Lundgren Sales Corporation to act as a sales agent for his lumber manufacturing business. About the…