26 U.S.C. § 166
Bad debts
# (a) General rule
(1) Wholly worthless debts There shall be allowed as a deduction any debt which becomes worthless within the taxable year. (2) Partially worthless debts When satisfied that a debt is recoverable only in part, the Secretary may allow such debt, in an amount not in excess of the part charged off within the taxable year, as a deduction.
# (b) Amount of deduction
For purposes of subsection (a), the basis for determining the amount of the deduction for any bad debt shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property.
# (c) Repealed. Pub. L. 99–514, title VIII, § 805(a), Oct. 22, 1986, 100 Stat. 2361
[(c) Repealed. Pub. L. 99–514, title VIII, § 805(a) , Oct. 22, 1986 , 100 Stat. 2361 ]
# (d) Nonbusiness debts
(1) General rule In the case of a taxpayer other than a corporation— (A) subsection (a) shall not apply to any nonbusiness debt; and (B) where any nonbusiness debt becomes worthless within the taxable year, the loss resulting therefrom shall be considered a loss from the sale or exchange, during the taxable year, of a capital asset held for not more than 1 year. (2) Nonbusiness debt defined For purposes of paragraph (1), the term “nonbusiness debt” means a debt other than— (A) a debt created or acquired (as the case may be) in connection with a trade or business of the taxpayer; or (B) a debt the loss from the worthlessness of which is incurred in the taxpayer’s trade or business.
# (e) Worthless securities
This section shall not apply to a debt which is evidenced by a security as defined in section 165(g)(2)(C).
# (f) Cross references
(1) For disallowance of deduction for worthlessness of debts owed by political parties and similar organizations, see section 271. (2) For special rule for banks with respect to worthless securities, see section 582.
Source: view the official text
Cited by 44
- 26 CFR § 1.1038-1 — Reacquisitions of real property in satisfaction of indebtedness.
- 26 CFR § 1.1038-2 — Reacquisition and resale of property used as a principal residence.
- 26 CFR § 1.1222-1 — Other terms relating to capital gains and losses.
- 26 CFR § 1.1374-4 — Recognized built-in gain or loss.
- 26 CFR § 1.1502-13 — Intercompany transactions.
- 26 CFR § 1.165-5 — Worthless securities.
- 26 CFR § 1.166-1 — Bad debts.
- 26 CFR § 1.166-10 — Reserve for guaranteed debt obligations.
- 26 CFR § 1.166-2 — Evidence of worthlessness.
- 26 CFR § 1.166-3 — Partial or total worthlessness.
- 26 CFR § 1.166-4 — Reserve for bad debts.
- 26 CFR § 1.166-5 — Nonbusiness debts.
Show 32 more
- 26 CFR § 1.166-6 — Sale of mortgaged or pledged property.
- 26 CFR § 1.166-7 — Worthless bonds issued by an individual.
- 26 CFR § 1.166-8 — Losses of guarantors, endorsers, and indemnitors incurred on agreements made before January 1, 1976.
- 26 CFR § 1.172-9 — Election with respect to portion of net operating loss attributable to foreign expropriation loss.
- 26 CFR § 1.262-1 — Personal, living, and family expenses.
- 26 CFR § 1.271-1 — Debts owed by political parties.
- 26 CFR § 1.367(d)-1T — Transfers of intangible property to foreign corporations (temporary).
- 26 CFR § 1.446-1 — General rule for methods of accounting.
- 26 CFR § 1.448-3 — Nonaccrual of certain amounts by service providers.
- 26 CFR § 1.451-1 — General rule for taxable year of inclusion.
- 26 CFR § 1.57-1 — Items of tax preference defined.
- 26 CFR § 1.582-1 — Bad debts, losses, and gains with respect to securities held by financial institutions.
- 26 CFR § 1.585-1 — Reserve for losses on loans of banks.
- 26 CFR § 1.585-2 — Addition to reserve.
- 26 CFR § 1.585-3 — Special rules.
- 26 CFR § 1.585-5 — Denial of bad debt reserves for large banks.
- 26 CFR § 1.585-7 — Elective cut-off method of changing from the reserve method of section 585.
- 26 CFR § 1.6655-2 — Annualized income installment method.
- 26 CFR § 1.809-6 — Modifications.
- 26 CFR § 1.860A-0 — Outline of REMIC provisions.
- 26 CFR § 1.860C-2 — Determination of REMIC taxable income or net loss.
- 26 CFR § 1.865-1 — Loss with respect to personal property other than stock.
- 26 CFR § 301.6511(d)-1 — Overpayment of income tax on account of bad debts, worthless securities, etc.
- 26 CFR § 301.7701-13 — Pre-1970 domestic building and loan association.
- 26 U.S.C. § 108 — Income from discharge of indebtedness
- 26 U.S.C. § 1351 — Treatment of recoveries of foreign expropriation losses
- 26 U.S.C. § 165 — Losses
- 26 U.S.C. § 271 — Debts owed by political parties, etc.
- 26 U.S.C. § 582 — Bad debts, losses, and gains with respect to securities held by financial institutions
- 26 U.S.C. § 585 — Reserves for losses on loans of banks
- 26 U.S.C. § 593 — Reserves for losses on loans
- 26 U.S.C. § 6511 — Limitations on credit or refund
Nearby sections (25 sections)
- 147 · Other requirements applicable to certain private activity bonds
- 148 · Arbitrage
- 149 · Bonds must be registered to be tax exempt; other requirements
- 150 · Definitions and special rules
- 151 · Allowance of deductions for personal exemptions
- 152 · Dependent defined
- 153 · Cross references
- 161 · Allowance of deductions
- 162 · Trade or business expenses
- 163 · Interest
- 164 · Taxes
- 165 · Losses
- 166 · Bad debts
- 167 · Depreciation
- 168 · Accelerated cost recovery system
- 169 · Amortization of pollution control facilities
- 170 · Charitable, etc., contributions and gifts
- 171 · Amortizable bond premium
- 172 · Net operating loss deduction
- 173 · Circulation expenditures
- 174 · Amortization of research and experimental expenditures
- 174A · Domestic research or experimental expenditures
- 175 · Soil and water conservation expenditures; endangered species…
- 176 · Payments with respect to employees of certain foreign corporations
- 177 · Repealed. Pub. L. 99–514, title II, § 241(a), Oct. 22, 1986, 100…