dissenting: There would appear to be no dispute that petitioner sustained an out-of-pocket loss of $15,000 when she made payment under her obligation as a guarantor. To be deductible, this out-of-pocket loss must not be compensated for by insurance or otherwise and must be (1) incurred in trade or business, or (2) incurred in a transaction entered into for profit, or (3) the result of a casualty or theft. Sec. 23 (e), I. E. C.
In effect, the majority opinion translates petitioner’s loss into a nonbusiness bad debt by holding that petitioner was compensated for her loss by the claim that she then had over against the principal debtor, the estate of her deceased husband. Until petitioner made the payment in question, she possessed no right to reimbursement. Cf. Eckert v. Burnet, 283 U. S. 140. When payment was made, her husband had been dead for seven years', his estate had been found insolvent, and the executors of his estate had been discharged. It seems to me highly specious to hold that she then received a theoretical claim against his estate which “compensated” her for her loss. A similar problem was before us in Abraham Greenspon, 8 T. C. 431, where the guarantors were permitted to deduct the loss sustained on paying their obligations as guarantors, since the principal debtor was an insolvent defunct corporation from which recourse was impossible. The Green-spon decision does not appear to me to be satisfactorily distinguished by the majority opinion here.
If petitioner’s payment is characterized as a loss for the reasons set forth above rather than as a bad debt, as the majority holds, the deductibility of the payment must depend upon whether the loss was incurred in a “transaction entered into for profit.” This question has not been squarely met in the majority opinion.