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26 U.S.C. § 586 — Repealed. Pub. L. 99–514, title IX, § 901(c), Oct. 22, 1986, 100 Stat. 2378]

Federal law — U.S. Code and appendices · legal_authorities

26 U.S.C. § 586 — Repealed. Pub. L. 99–514, title IX, § 901(c), Oct. 22, 1986, 100 Stat. 2378]

### Statutory Notes Section, added Pub. L. 91–172, title IV, § 431(a), Dec. 30, 1969, 83 Stat. 618; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, related to reserves for losses on loans of small business investment companies, etc. #### Effective Date of Repeal Repeal applicable to taxable years beginning after Dec. 31, 1986, see section 901(e) of Pub. L. 99–514, set out as an Effective Date of 1986 Amendment note under [section 166 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section166&num=0&edition=prelim).

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Source location: Title 26, Chapter 1, § 586; chapter-001-normal-taxes-and-surtaxes.md

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Federal law — U.S. Code and appendices · legal_authorities

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 **(c) Repealed.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]** **(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

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Federal law — U.S. Code and appendices · legal_authorities

26 U.S.C. § 585 — Reserves for losses on loans of banks

**(a) Reserve for bad debts** (1) **In general** — Except as provided in subsection (c), a bank shall be allowed a deduction for a reasonable addition to a reserve for bad debts. Such deduction shall be in lieu of any deduction under section 166(a). (2) **Bank** — For purposes of this section— (A) *In general* — The term “bank” means any bank (as defined in section 581). (B) *Banking business of United States branch of foreign corporation* — The term “bank” also includes any corporation to which subparagraph (A) would apply except for the fact that it is a foreign corporation. In the case of any such foreign corporation, this section shall apply only with respect to loans outstanding the interest on which is effectively connected with the conduct of a banking business within the United States. **(b) Addition to reserves for bad debts** (1) **General rule** — For purposes of subsection (a), the reasonable addition to the reserve for bad debts of any financial institution to which this section applies shall be an amount determined by the taxpayer which shall not exceed the addition to the reserve for losses on loans determined under the experience method as provided in paragraph (2). (2) **Experience method** — The amount determined under this paragraph for a taxable year shall be the amount necessary to increase the balance of the reserve for losses on loans (at the close of the taxable year) to the greater of— (A) the amount which bears the same ratio to loans outstanding at the close of the taxable year as (i) the total bad debts sustained during the taxable year and the 5 preceding taxable years (or, with the approval of the Secretary, a shorter period), adjusted for recoveries of bad debts during such period, bears to (ii) the sum of the loans outstandi

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Federal law — U.S. Code and appendices · legal_authorities

26 U.S.C. § 586 — Untitled legal text

Page 1783 TITLE 26—INTERNAL REVENUE CODE [§ 586 Subsec. (c)(5)(C). Pub. L. 100–647, § 1009(a)(2)(A), added subpar. (C). 1987—Subsec. (c)(3)(C). Pub. L. 100–203 substituted ‘‘section 6655(e)(2)(A)(i)’’ for ‘‘section 6655(d)(3)’’. 1986—Subsec. (a). Pub. L. 99–514, § 901(a)(1), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: ‘‘This section shall apply to the fol- lowing financial institutions: ‘‘(1) any bank (as defined in section 581) other than an organization to which section 593 applies, and ‘‘(2) any corporation to which paragraph (1) would apply except for the fact that it is a foreign corpora- tion, and in the case of any such foreign corporation this section shall apply only with respect to loans outstanding the interest on which is effectively con- nected with the conduct of a banking business within the United States.’’ Subsec. (b)(1). Pub. L. 99–514, § 901(d)(1), substituted ‘‘subsection (a)’’ for ‘‘section 166(c)’’. Subsec. (c). Pub. L. 99–514, § 901(a)(2), added subsec. (c). 1981—Subsec. (b)(2). Pub. L. 97–34 defined ‘‘allowable percentage’’ to mean 1.0 percent for taxable years be- ginning in 1982 and 0.6 percent for taxable years begin- ning after 1982, previously so applicable for taxable years beginning after 1981 and redefined ‘‘base year’’ by substituting the last taxable year beginning before 1976 for taxable years beginning after 1975 but before 1983, for the last taxable year beginning before 1976 for tax- able years after 1975 but before 1982; and the last tax- able year beginning before 1983 for taxable years begin- ning after 1982, for the last taxable year beginning be- fore 1982 for taxable years beginning after 1981. 1976—Subsec. (b)(3), (4). Pub. L. 94–455 struck out ‘‘or his delegate’’ af

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