                                                                           FILED
                           NOT FOR PUBLICATION
                                                                           NOV 25 2015
                    UNITED STATES COURT OF APPEALS                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


JUNE SHAW,                                       No. 13-73687

              Petitioner-Appellant,              Tax Ct. No. 8172-12

  v.
                                                 MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,

              Respondent-Appellee.


                           Appeal from a Decision of the
                                    Tax Court

                          Submitted November 18, 2015**
                             San Francisco, California

Before: McKEOWN, RAWLINSON, and PARKER,*** Circuit Judges.

       June Shaw appeals the Tax Court’s determination that she had a deficiency

in her 2009 tax return. We review de novo the Tax Court’s legal conclusions and

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
        ***
            The Honorable Barrington D. Parker, Jr., Senior Circuit Judge for the
U.S. Court of Appeals for the Second Circuit, sitting by designation.
review for clear error its factual findings. Johanson v. Comm’r, 541 F.3d 973, 976

(9th Cir. 2008).

      In 2009, June Shaw advanced $808,475 to SRG Corporation, her family’s

company. SRG began facing financial difficulties and Kenneth Shaw, June’s

brother and president of SRG, informed June that SRG could not repay her. Shaw

listed the $808,475 as bad debt on her tax returns. The IRS denied her loss

deduction and issued a deficiency notice. The Tax Court upheld the determination

of deficiency because Shaw did not meet her burden of proving that the amount

qualified as bad debt under I.R.C. § 166.1

      The Tax Court correctly upheld the determination of deficiency in Shaw’s

tax return. To claim a bad debt, a taxpayer must establish the existence of a bona

fide business debt that became worthless during the year for which the debt was

claimed. See I.R.C. § 166(a); Treas. Reg. § 1.166-1(c). A bona fide debt is one

that arises from a debtor-creditor relationship based on an enforceable obligation to

pay a sum of money. Treas. Reg. § 1.166-1(c).

      Shaw failed to show that her advance to SRG constituted a bona fide debt

that arose from a debtor-creditor relationship. Notably, her behavior was not

      1
        The Tax Court also agreed with the IRS’s imposition of an addition to tax
under I.R.C. § 6651(a)(1) and an accuracy-related penalty under I.R.C. § 6662.
These determinations are not at issue in this appeal.

                                             2
consistent with that of a traditional lender; she continued to advance money to

SRG despite its unstable finances and the company’s failure to repay any interest

or principal. Shaw also failed to prove worthlessness as she produced no evidence

beyond her and her brother Kenneth’s testimony that SRG had become insolvent.

The Tax Court may refuse to accept uncorroborated testimony as dispositive and

did so here. See Ruark v. Comm’r, 449 F.2d 311, 312 (9th Cir. 1971) (holding that

a “court is not bound to accept testimony at face value even when it is

uncontroverted if it is improbable, unreasonable, or questionable” (internal citation

omitted)).

      Shaw’s argument on appeal that the advance was a capital contribution

under I.R.C. § 165 was not raised before the Tax Court; instead she argued only

that the advance was a bad debt under I.R.C. § 166. The capital contribution

argument was therefore waived. See Merkel v. Comm’r, 192 F.3d 844, 852 n.10

(9th Cir. 1999).

      AFFIRMED.




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