is with respect to ira distributions did he rolled over one hundred twenty thousand of those such that that amount should not have been taxable i hope i have time for both of these issues i'd really like to start with the bad debt issue and the the standard  review i recognize is for clear air but i do want to remind the the court that under the eighth circuit annunciation of what clearly erroneous is all about that even if there is evidence to support what the tax court did if upon a review of the whole record this court is left with a firm and definite conviction that a mistake was made then there's clear air and the problem that the tax court has i believe with this conclusion that it reaches that its conclusion as to mr dominant motivation for having made the loans to his company was it was very conclusory and it did not go through the analysis that the courts have set out in terms of the things you have to look at to find out what the dominant motivation is the issue of course i know the courts of the courts the judges you've all read the brief but when you have have a individual who is both an employee and an owner of a company who loaned money to the company and then the debt goes bad the deduct ibility for the as an ordinary deduction depends upon the dominant motivation of the taxpayer who who made the loan the do it to protect his interest in employment and salary in which case it's deductible or did he do it to protect his investment in which case it's only a capital loss and else is what that the evidence and what's the what's the evidence in the record as to what the motive once well the the test the taxpayer testified that he did it to provide working capital to the company working the company without this funds could not operate and working capital is defined as essentially liquid assets designed to meet short term obligations including by the way wages the mr howard was able to take a salary because he loaned this money from his that he had gotten out of his ira to the company was there other evidence besides the debtor's testimony yes and that gets into the object of factors that the courts say are primarily what the inquiry should be about it's not that the testimonies are irrelevant but the objective factors are the size of the investment at the time of the loan the size of the salary and whether the taxpayer had any other income the tax where had no other source of how it how would you relate t he size of the mower how would you use that to determine the motive would largely be more in line with investment or more in line with trying to secure your salary we have to compare the size of the loan to the salary and you have to compare the size of the loan to the investment and it at this time at the time that he made these loans two thousand and six in the first half of two thousand and seven his investment interest was i would say it was negligible and i know there's been there was a finding by the tax court that there was paid in capital of these two companies of eight million dollars and he owned about half so the tax court concludes on the commissioner argues that his investment is interest is like four million dollars that's just not the case in the hutchinson case cited in the brief but at the district court what was concluded as a finding of fact the tax court did not make a lot of findings of fact but in passing the tax court noted that the paid in capital of the two companies was approximately eight or nine million dollars now forget other cases what's what's the evidence as to the source of the paid in capital well that's that's the entry in the balance sheet and paid in capital  i'm only historic and that's exactly right i don't carry it well what's the evidence is the history that's it i mean there was paid in capital i know enough about balance sheets to know at doesn't tell you how much individual investor contributed to that entry that's exactly right that's my point all right so what so there's no evidence there's no evidence while i may be missing the point of the question evidence as to what i'm not following the question as to how taxpayer as an as an originating or as a shareholder what were his his direct contributions to equity and therefore paid in capitalism result i've looked at this announcement i've looked at this record i don't believe the there is a record on that but the there is evidence from which this court can find that the fair and what's what's the evidence that the if paid in capital is is basically historic retained earnings what's the what's the evidence that would attribute that those retained earnings to to mr howard as an investor well retained earnings were actually negative on these balance sheets so that i know so then what's the source of the paid in capital we don't we don't know from the record the these companies were started one was started in two thousand and three one was started in one nine hundred ninety six i got that off of the tax returns and there is no record as there's nothing in the record i i don't believe that establishes who paid in the capital at what time this capital was paid in and that's why it's my argument that that notation by the tax court is irrelevant to a finding as to what mr howard investment interest was what other evidence of his investment is it's a fair market value of i'm going to get taverns but i have to define it the investment interest for its purposes is the fair market value of the of his investment in the company at the time the loans were made the loans were made two thousand and six two thousand seven the the evidence weight i'm losing my voice i'm so i guess that's what evidence of his investment his personal investment it's not the fair market value of his stock on on the day the day the company's failing well that the record does not what what what is the historic investment he was supposedly protecting i don't believe you can i can give you a number based on this record in terms of how much money he paid for his stock for example then then had the burden of proof here your client did in the taxpayer does but the inquiry for the dominant purposes what's the value of his investment on the day he makes the loans and it and taxpayers don't only make loans to a business when the business is failing sometimes when they first buy in they have to execute a personal guarantee and so there's an investment interest to protect it doesn't always follow  there is there evidence of either fair market value on the date of the loans or historic investment there is and that and that is from his testimony that the company's inability to meet its up to operate without the loans is a factor that suggested his investment interest value was negligible the balance sheets which show paid in capital on the that's when we one component of equity the balance sheet show negative equity for these two companies taken as a whole that's evidence that he didn't have much if any of an investment interest but i thought he testified he thought he thought the companies at the time of the loans were going to bring home these government contracts and do well he was he was hoping that he wasn't valuing his investment is zero how can you how can you can you make that argument well unclear or review the you have to also compare the fact you have to not lose sight of the fact that he had a salary to protect and that was his only i understand we're talking about the investment component but he was making one hundred fifty thousand a year from these companies counts of those the records show whether the loans were the loan money w from him or what what initiated the the making of the law i don't i don't believe so other than the fact that he was chief executive officer and it may suggest an inference that he made the judgment that the companies needed these monies to operate so to that extent i would say the record suggests in answer to your question so there's no documentation of any kind of solicitation or not solicitation i mean the loans were documented there were notes work right documentation as to the purpose for the loan f the cannot documentation no no i mean there's just not only common for a company to include in minutes or in some documentary form its purpose for seeking capital seeking money i am i know companies have done that there was nothing like that in this record there was also evidence getting back to where the only benefit is what what's the as you get value out of the capital loss to the action but it's very limited you can only offset it and i know i know you know i know the restrictions right i don't know his situation oh i don't i don't believe that there is as far as i can tell from this record you're on i'm into my my rebuttal times i'd like you have to explain to me how does this out on the on the first issue that hundred twenty thousand going in on the being mailed on the sixty fifth day yes certainly it did who did you read that did it was he didn't have counsel before the tax court he was pro se he was is there any explanation of whether he was doing anything other then thinking he was resigning so to speak before the first withdraw it's hard for me to say i don't think i can answer your question yes i think they always talked in terms of the one thousand he paid back in as kind of reaping a return of the one twenty that went back out i mean that's how everyone looked at it from what i can tell on this record and did you research whether there should be a mailbox  final yeah your final payment yet we did not find we wanted to make that argument and we could not find any authority to suggest to support it and what authority we did do suggested maybe it wasn't directly on point but it suggested that that  would not be a viable argument so we have this issue though that it's a it's a it's a partial rollover of the return of the one sixty eight which i don't really think is a new issue i think it's a subset of a narrow subset  of the main issue that was presented at trial well it's rather remarkable that it wasn't argued it is to me because it just sort of stared it just jumped right out at me if in the face when i saw the record i'd like to if there are no more questions i thank you as far as the second issue is concerned the evidence clearly supports the text to the text court's determination that the dominant intent of the taxpayer was to protect his investment and there is evidence in the record supporting the fact that he put four million dollars into the company first of all on page two of the opinion th today's the you know let me just stop you if you're if you're just taking forty nine percent of the paid in capital and saying therefore he put four million in that's that's false you can't do that was well we we went to a different school of accounting i guess but but in any event you you cite your brief says that that the ten circuits decision in little in is is is distinguishable on the facts in it and i read it yesterday it looks to me like the dominant factor is better for the commissioner in that case than in this case that is that the taxpayer and lit one never took any salary out of the company and yet the tenth circuit in chief elaborate analysis of applying the supreme court test however  with however much it favored it comes out the other way so you're going to have to tell me why let one if we if we were to follow it doesn't demand a contrary result here first of all the t scaring tease and advances to the company were more than three times the value of his investment so when you compare the loans and the value of the investments they were you know very different here  have what in our us is four million investment to the two companies in relation to a four hundred thirty five thousand dollar loan class you know he asked of guaranteed thousand four hundred thirty five thousand and guarantee our own of a half a million dollars to is to protect the salary of one hundred forty nine thousand that doesn't compute promised land when was the case what basically all we have is taxpayer self serving testimony and the court looks at to get jacked of evidence i would say that this case is more in the allergist's to the supreme court original investment and a taxpayer again who claims that there is that the loan is made to protect his salary and the court just are set by the supreme court says s one hundred six of four or five u s taxpayer was purporting to stay was that his twelve thousand dollar annual salary was his sole motivation and that his thirty eight thousand dollar original investment the actual value of which prior to it the fortune you know nine hundred sixty two we do not know plus is loans to the corporation plus this personal interest in the integrity of the corporation of a source of living for his son in law and it's an investment for his son and his son in law were of no consequence whatever in his thinking the court then concludes that the taxpayers explanation falls of its own weight and that reasonable minds could not on this record of scribed to it on this record describe to a dominant motivation of the preservation of his tail reus president of the corporation our view that these investments approach four million dollars the returns show that he was the shareholder with this percentage of ownership and the but even if this court were to say well whatever he invested you know initially the question is what is to initially value what is the value of the in fact that at the time he made the loan  the evidence supports the conclusion that his investments at the time he made the round had substantial value he made the loans between february and july two thousand and seven  well let me just say that as far as the day i finish by saying that the value in october of two thousand and seven which was several months after this you know taxpayer less money sort of where i'd be where i'd begin and that is it seems to me that it would have been the commissioner has all of the tax records going into the trial and if there had been a  violation of the one year rule that that is relied upon rather heavily in your brief that would have been put forward as a defense to the to  the hundred twenty thousand not as a partial it would simply no one would have had to worry about the mailbox rule and so forth with one hundred twenty thousand right all right so i put aside frankly your notion that well the record doesn't permit us to know whether that there would have been something disqualifying this partial offset and then i come to the partial offset itself and it  frankly leaps out so so directly to me from the statute and the regs that i got it seems to me the tax court had should have particularly for a pro se tax payer the sixty day requirement wasn't complied with but wait a minute wait a minute the the thing is if the tax court is interested in justice and not just making sure every dollar's collected there is an obvious in title meant under the partial why is it they should address whether there's an obvious entitlement under the partial rollover principle based on the hundred sixty eight thousand dollar withdraw and they didn't do that well and i and i and i don't care whether it's plain error of you or not unless you can unless you can tell me why this wasn't a clearly warranted partial i well you're basically saying the tax for instead of just hearing the arguments for him should have reviewed the statute to see if there was any other basis on which the never seen this problem before and we have a pro se pro se litigant who has a plausible mailbox justification for treating this as a timely hundred twenty thousand i think you have to convince me this isn't so i'm just as to cry out for united states department of labor versus rapper roberts one thirty five thirty three forty five where this court did and fact not apply the rules t was the case where an employer was liable for vibration penalties for violation of the employee paragraph protection act he got away with it in the district court because it's how the district court time an appeal would prevail and that you know justice would require considering the argument that simply the fact that a new argument on appeal would restart in reverse so as this court to consider the new argument this exception word overcome the rule the general rule it's only unusual circumstances such as three of the votes you know would require rollover wouldn't apply that's fine but you've agreed that the commissioner would have been all over the one year rule to defeat the entire case but this would not of this would not have been a new a new investigation new for a new one you know now i'm going to i'm saying that they already checked that out we can be confident of that because if the one year rule had applied it would have been used to defeat the entire claim i don't i don't know that and i know we have not got i know we're not we're talking hypothetically but if you got another reason why the partial rollover rule if it had been timely race would have been defeated well that is simply speculation p wait wait you've studied the case i'm just asking if you've got another argument i don't understand that you can oh god oh good i'll go well we'll send them back for a new trial what are you going to do another reason why the partial roll over rule had been timely raised would have been defeated by or could well have been defeated by the commissioner at trial well i  or three minutes forty eight seconds for rebuttal thank you for a call thank you there are two points i want to make both on the bad dead issue one is i'm kind of surprised to hear the commissioners attorney say that the generis case is a lot like our case it's nothing like our case in generis the taxpayer who made the loans to the company he had another full time job he worked a couple days a week for this company and he had a lot of income substantial income apart from the fairly small income he received from the company that he made the loan to so that's point one point two has to do with the timing of the taxpayers loans in this case every single loan that the taxpayer made that he seeks a bed  was made before that sandia contract was executed except for the very last one which was forty six thousand dollars ten days after approximately ten days after the execution of the contract he  didn't make the loans that he's seeking bad debt deduction for after he had the sandia contract in hand it was all other than that forty six thousand dollar one before the sandia contract and the lip when case tells us that this application of these objective factors including the value of the investment it's not a mechanical mathematical test we're just trying to get a sense for these of these factors are sort of a proxy for what was the dominant mode of protecting salary protecting investment his salary was one hundred forty something thousand a year and the and the commissioner says why would he put all this money in to protect one hundred forty thousand dollars salary that's per year he loaned in the in two thousand and six one hundred seven thousand dollars that he that wasn't repaid but he made that back in salary and then some in two thousand and seven he loaned to another i believe it's three hundred or four hundred thousand he got one hundred forty thousand back in salary and if this company could have held on for one or two more years he would have recouped in salary what he had put in through these loans his dominant motive was protection of salary not used to stopping when there's still time on the clock but it but i will not serve any more question thank you very good thank you counsel the case has been well briefed and argued we will take it under advisement this opperman we wish you a speedy recovery thank you