§ 166. Bad debts
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/usc/title-26/section-166A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(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[(c) Repealed.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]
(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.
(Aug. 16, 1954, ch. 736, 68A Stat. 50; Pub. L. 85–866, title I, § 8, Sept. 2, 1958, 72 Stat. 1608; Pub. L. 89–722, § 1(a), Nov. 2, 1966, 80 Stat. 1151; Pub. L. 91–172, title IV, § 431(c)(1), Dec. 30, 1969, 83 Stat. 619; Pub. L. 94–455, title VI, § 605(a), title XIV, § 1402(b)(1)(A), (2), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1575, 1731, 1732, 1834; Pub. L. 98–369, div. A, title X, § 1001(b)(1), (e), July 18, 1984, 98 Stat. 1011, 1012; Pub. L. 99–514, title VIII, § 805(a), (b), title IX, § 901(d)(4)(A), Oct. 22, 1986, 100 Stat. 2361, 2379; Pub. L. 100–647, title I, § 1008(d)(1), (2), Nov. 10, 1988, 102 Stat. 3439.)
Connections52 cite this · traces to 5
Cited by 52 sections · top 41
U.S. Code
- § 402Taxability of beneficiary of employees’ trust
- § 108Income from discharge of indebtedness
- § 403Taxation of employee annuities
- § 172Net operating loss deduction
- § 1361S corporation defined
- § 856Definition of real estate investment trust
- § 461General rule for taxable year of deduction
- § 852Taxation of regulated investment companies and their shareholders
- § 857Taxation of real estate investment trusts and their beneficiaries
- § 702Income and credits of partner
- § 593Reserves for losses on loans
- § 584Common trust funds
- § 642Special rules for credits and deductions
- § 1231Property used in the trade or business and involuntary conversions
- § 585Reserves for losses on loans of banks
- § 1248Gain from certain sales or exchanges of stock in certain foreign corporations
- § 1223Holding period of property
- § 423Employee stock purchase plans
- § 805General deductions
- § 818Other definitions and special rules
- § 291Special rules relating to corporate preference items
- § 1233Gains and losses from short sales
- § 1235Sale or exchange of patents
- § 582Bad debts, losses, and gains with respect to securities held by financial institutions
- § 1222Other terms relating to capital gains and losses
- § 631Gain or loss in the case of timber, coal, or domestic iron ore
- § 1234Options to buy or sell
- § 586Repealed. Pub. L. 99–514, title IX, § 901(c), Oct. 22, 1986, 100 Stat. 2378]
- § 1278Definitions and special rules
- § 1277Deferral of interest deduction allocable to accrued market discount
statutes-at-large
- Public Law 86–69
- Public Law 87–834
- Public Law 91–169to promote the safety of employees and travelers upon railroads by limiting the hours of service of employees thereon,” approved March 4, 1907
- Public Law 89–721
- Public Law 85–866
- Public Law 87–870
- Public Law 93–621
- Public Law 403
- Public Law 100–647To make technical corrections relating to the Tax Reform Act of 1986, and for other purposes
- Public Law 98–369To provide for tax reform, and for deficit reduction
- Public Law 94–455To reform the tax laws of the United States
50 references not yet in our index
- Aug. 16, 1954, ch. 736
- 68A Stat. 50
- Pub. L. 85–866, title I, § 8
- 72 Stat. 1608
- Pub. L. 89–722, § 1(a)
- 80 Stat. 1151
- Pub. L. 91–172, title IV, § 431(c)(1)
- 83 Stat. 619
- Pub. L. 94–455, title VI, § 605(a)
- 90 Stat. 1575
- Pub. L. 98–369, div. A, title X, § 1001(b)(1)
- 98 Stat. 1011
- Pub. L. 99–514, title VIII, § 805(a)
- 100 Stat. 2361
- Pub. L. 100–647, title I, § 1008(d)(1)
- 102 Stat. 3439
- Pub. L. 100–647, § 1008(d)(1)
- Pub. L. 100–647, § 1008(d)(2)
- Pub. L. 99–514, § 805(b)
- Pub. L. 99–514, § 805(a)
- Pub. L. 99–514, § 901(d)(4)(A)
- Pub. L. 98–369
- Pub. L. 94–455, § 1906(b)(13)(A)
- Pub. L. 94–455, § 1401(b)(1)(A)
- Pub. L. 94–455
- Pub. L. 94–455, § 605(a)
- Pub. L. 91–172
- Pub. L. 89–722
- Pub. L. 85–866
- Pub. L. 100–647
- Pub. L. 99–514
- section 1019(a) of Pub. L. 100–647
- Pub. L. 99–514, title VIII, § 805(d)
- 100 Stat. 2362
- Pub. L. 99–514, title IX, § 901(e)
- 100 Stat. 2380
- Pub. L. 98–369, div. A, title X, § 1001(e)
- 98 Stat. 1012
- Pub. L. 94–455, title VI, § 605(c)
- Pub. L. 94–455, title XIV, § 1402(b)(1)
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§ 166
Bad debts
U.S.C.×33
Stat.×19
ActAug. 16, 1954, ch. 736
Stat.68A Stat. 50
Pub. L.Pub. L. 85–866, title I, § 8
Stat.72 Stat. 1608
Pub. L.Pub. L. 89–722, § 1(a)
Cites 55 · showing 10Cited by 52 across 2 sources