*95 Decision will be entered under Rule 50.
Deductions -- Bad Debts -- Business or Nonbusiness -- Section 23 (k). -- Loans which became worthless were business bad debts rather than nonbusiness bad debts where made by individuals to one of a number of corporations which they had organized and which they owned and operated.
*510 The Commissioner determined deficiencies in income tax for 1944, as follows:
| Docket No. 15707, Vincent C. Campbell | $ 811.97 |
| Docket No. 15709, James E. Campbell | 1,122.21 |
| Docket No. 15710, John Albert Campbell | 2,605.66 |
The only issue for decision is whether the Commissioner erred in holding that specified amounts were nonbusiness bad debts allowable as short term capital losses under section 23 (k) (4) of the code instead of allowing them in their entirety as bad debt deductions.
FINDINGS OF FACT.
The returns of the petitioners for 1944 were filed with the collector of internal revenue for the eighteenth district of Ohio.
The following amounts were claimed on those returns as deductions for bad debts due from the*96 Campbell Bros. Coal Co. of Akron, which became worthless during 1944: *511
| Vincent C. Campbell | $ 4,370.84 |
| James E. Campbell | 4,370.84 |
| John Albert Campbell | 9,266.18 |
The Commissioner, in determining the deficiencies, held that the loss on the loans in each case represents a nonbusiness bad debt which is allowable as a short term capital loss under the provisions of section 23 (k) (4) of the Internal Revenue Code. He disallowed the amount claimed in each instance as a bad debt and made the necessary adjustment in order to reflect the same amount as a short term capital loss.
The three petitioners have been engaged since 1929 in organizing, owning, and operating corporations engaged in the retail coal business in Cleveland, Detroit, and Akron. They had 12 such corporations. It was their practice as a part of their business to advance to, or leave with, those corporations on open accounts money belonging to them in many different instances. One of those corporations was the Campbell Bros. Coal Co. of Akron. The loans to that company which are here in question are similar to loans made to others of their companies. The loans due from the Campbell Bros. Coal Co. of*97 Akron in the amounts claimed on the 1944 returns became worthless during 1944.
The bad debts resulting were business bad debts and were not nonbusiness bad debts.
OPINION.
The Commissioner in his brief attempts to argue matters inconsistent with his own determination as disclosed in the deficiency notices. He may not do that under the rules of the Court without affirmative pleadings on his part. It must be recognized, for the purpose of this proceeding, that the petitioners actually loaned the money to the Campbell Bros. Coal Co. of Akron, in the amounts claimed in their returns, and those amounts became worthless during 1944, because those facts are not only consistent with, but are essential to, the determination made by the Commissioner. The petitioners have properly deemed those matters not in dispute.
The only question at issue is whether those bad debts were business or nonbusiness bad debts within the meaning of section 23 (k) (4). That section provides that the term "non-business debt" means a debt other than one "evidenced by a security as defined in paragraph (3) and other than a debt the loss from the worthlessness of which is incurred in the taxpayer's trade or business." *98 The loans here in question were not evidenced by a security as defined in paragraph (3). They were debts, the loss from the worthlessness of which was incurred in the taxpayers' business. A finding has been made that they were business rather than nonbusiness bad debts because the evidence shows that they had a direct connection with the business carried on by these petitioners and the losses were directly a result of, and incurred in, *512 the business of organizing and operating corporations engaged in the retail coal business, which business of organizing and operating such corporations was carried on by the petitioners during the taxable year. These are not cases in which losses of corporations are being confused with losses of individuals or in which the business of a corporation is being confused with the business of individuals. Nor are they like net loss carry-over cases in which loss occurred in isolated transactions rather than in the operation of a business. Cf. Joseph Sic, 10 T. C. 1096. These petitioners were entitled to the deductions which they claimed on their returns for bad debts.
Decision will be entered under Rule 50*99 .