Bugbee v. Commissioner

Bugbee (plaintiff) loaned his friend Billings a total of $19,750 across eleven unsecured, interest-bearing notes between 1958 and 1960, hoping Billings would succeed in various business ventures they discussed, even though Billings was unemployed and had little money at the time; Billings never repaid any principal or interest, and both men testified at trial that the obligation to repay was personal and unconditional, not contingent on any venture's success. After Bugbee's repeated requests for repayment went unanswered, he claimed a bad-debt deduction on his 1966 tax return, which the Commissioner (defendant) disallowed on the theory that no genuine debtor-creditor relationship existed.