Claiming large bad debt deductions leads to tax woes for an investor. The investor had his S corporation advance funds to small companies in return for financial control and a minority equity interest. Later, the S corporation claimed a $10-million bad debt write-off, which flowed through to the investor and offset all of his taxable income. The Service audited his return and nixed the loss. The advances are equity contributions and not loans. There were no written notes or fixed repayment date, interest wasn’t charged, and the S firm financed the companies even after the year in which the bad debt deduction was taken (Sensenig, 3rd Cir.).