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26 U.S.C. § 166 — Bad debts
Federal law — U.S. Code and appendices · legal_authorities
**(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**(c) Repealed.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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Stable record: federal_law:legal_authorities:record_usc_b2f783f41e50afb86c3c5f9b
Source file: Laws/federal/codes/united-states-code/title-26/section-166-bad-debts--4ac99c65c3.md
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Source location: Title 26, Chapter 1, § 166; chapter-001-normal-taxes-and-surtaxes.md
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**(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.
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule** There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.
**(b) Amount of deduction** For purposes of subsection (a), the basis for determining the amount of the deduction for any loss shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property.
**(c) Limitation on losses of individuals** In the case of an individual, the deduction under subsection (a) shall be limited to—
(1) losses incurred in a trade or business;
(2) losses incurred in any transaction entered into for profit, though not connected with a trade or business; and
(3) except as provided in subsection (h), losses of property not connected with a trade or business or a transaction entered into for profit, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft.
**(d) Wagering losses**
(1) **In general** — For purposes of losses from wagering transactions, the amount allowed as a deduction for any taxable year—
(A) shall be equal to 90 percent of the amount of such losses during such taxable year, and
(B) shall be allowed only to the extent of the gains from such transactions during such taxable year.
(2) **Special rule** — For purposes of paragraph (1), the term “losses from wagering transactions” includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.
**(e) Theft losses** For purposes of subsection (a), any loss arising from theft shall be treated as sustained during the taxable year in which the taxpayer discovers such loss.
**(f) Capital losses** Losses from sales or exchanges of capital assets shall be allowed only to the extent allowed in sections
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 165
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Federal law — U.S. Code and appendices · legal_authorities
**(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
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 585
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Federal law — U.S. Code and appendices · legal_authorities
### Statutory Notes
Section, added Pub. L. 89–722, § 1(b)(1), Nov. 2, 1966, 80 Stat. 1152; amended Pub. L. 93–625, § 4(c)(1), Jan. 3, 1975, 88 Stat. 2111; Pub. L. 94–455, title VI, § 605(b), Oct. 4, 1976, 90 Stat. 1575; Pub. L. 99–514, title VIII, § 805(c)(1)(A), Oct. 22, 1986, 100 Stat. 2362, included increase in vacation pay suspense account in gross income.
#### Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1987, see section 10201(c)(1) of Pub. L. 100–203, set out as an Effective Date of 1987 Amendment note under [section 404 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section404&num=0&edition=prelim).
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 81
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Federal law — U.S. Code and appendices · legal_authorities
### 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).
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 586
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Married individuals filing joint returns and surviving spouses** There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $36,90015% of taxable income. Over $36,900 but not over $89,150$5,535, plus 28% of the excess over $36,900. Over $89,150 but not over $140,000$20,165, plus 31% of the excess over $89,150. Over $140,000 but not over $250,000$35,928.50, plus 36% of the excess over $140,000. Over $250,000$75,528.50, plus 39.6% of the excess over $250,000.
**(b) Heads of households** There is hereby imposed on the taxable income of every head of a household (as defined in section 2(b)) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $29,60015% of taxable income. Over $29,600 but not over $76,400$4,440, plus 28% of the excess over $29,600. Over $76,400 but not over $127,500$17,544, plus 31% of the excess over $76,400. Over $127,500 but not over $250,000$33,385, plus 36% of the excess over $127,500. Over $250,000$77,485, plus 39.6% of the excess over $250,000.
**(c) Unmarried individuals (other than surviving spouses and heads of households)** There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2(a) or the head of a household as defined in section 2(b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table: If taxable income is:The tax is: Not over $22,10015% of taxable income. Over $22,100 but not over $53,50
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Exclusion from gross income**
(1) **In general** — Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if—
(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm indebtedness,
(D) in the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness, or
(E) the indebtedness discharged is qualified principal residence indebtedness which is discharged—
(i) before January 1, 2026, or
(ii) subject to an arrangement that is entered into and evidenced in writing before January 1, 2026.
(2) **Coordination of exclusions**
(A) *Title 11 exclusion takes precedence* — Subparagraphs (B), (C), (D), and (E) of paragraph (1) shall not apply to a discharge which occurs in a title 11 case.
(B) *Insolvency exclusion takes precedence over qualified farm exclusion and qualified real property business exclusion* — Subparagraphs (C) and (D) of paragraph (1) shall not apply to a discharge to the extent the taxpayer is insolvent.
(C) *Principal residence exclusion takes precedence over insolvency exclusion unless elected otherwise* — Paragraph (1)(B) shall not apply to a discharge to which paragraph (1)(E) applies unless the taxpayer elects to apply paragraph (1)(B) in lieu of paragraph (1)(E).
(3) **Insolvency exclusion limited to amount of insolvency** — In the case of a discharge to which paragraph (1)(B) applies, the amount excluded under paragraph (1)(B) shall not exceed the amount by which the taxpayer is insolvent.
**(b) Reduction of tax attributes**
(
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 108
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Federal law — U.S. Code and appendices · legal_authorities
For purposes of this subtitle—
(1) **Short-term capital gain** — The term “short-term capital gain” means gain from the sale or exchange of a capital asset held for not more than 1 year, if and to the extent such gain is taken into account in computing gross income.
(2) **Short-term capital loss** — The term “short-term capital loss” means loss from the sale or exchange of a capital asset held for not more than 1 year, if and to the extent that such loss is taken into account in computing taxable income.
(3) **Long-term capital gain** — The term “long-term capital gain” means gain from the sale or exchange of a capital asset held for more than 1 year, if and to the extent such gain is taken into account in computing gross income.
(4) **Long-term capital loss** — The term “long-term capital loss” means loss from the sale or exchange of a capital asset held for more than 1 year, if and to the extent that such loss is taken into account in computing taxable income.
(5) **Net short-term capital gain** — The term “net short-term capital gain” means the excess of short-term capital gains for the taxable year over the short-term capital losses for such year.
(6) **Net short-term capital loss** — The term “net short-term capital loss” means the excess of short-term capital losses for the taxable year over the short-term capital gains for such year.
(7) **Net long-term capital gain** — The term “net long-term capital gain” means the excess of long-term capital gains for the taxable year over the long-term capital losses for such year.
(8) **Net long-term capital loss** — The term “net long-term capital loss” means the excess of long-term capital losses for the taxable year over the long-term capital gains for such year.
(9) **Capital gain net income** — The term “capita
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1222
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Federal law — U.S. Code and appendices · legal_authorities
For purposes of this subtitle—
(1) In determining the period for which the taxpayer has held property received in an exchange, there shall be included the period for which he held the property exchanged if, under this chapter, the property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as the property exchanged, and, in the case of such exchanges the property exchanged at the time of such exchange was a capital asset as defined in section 1221 or property described in section 1231. For purposes of this paragraph—
(A) an involuntary conversion described in section 1033 shall be considered an exchange of the property converted for the property acquired, and
(B) a distribution to which section 355 (or so much of section 356 as relates to section 355) applies shall be treated as an exchange.
(2) In determining the period for which the taxpayer has held property however acquired there shall be included the period for which such property was held by any other person, if under this chapter such property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of such other person.
(3) In determining the period for which the taxpayer has held stock or securities the acquisition of which (or the contract or option to acquire which) resulted in the nondeductibility (under section 1091 relating to wash sales) of the loss from the sale or other disposition of substantially identical stock or securities, there shall be included the period for which he held the stock or securities the loss from the sale or other disposition of which was not deductible.
(4) In determining the period for which the taxpayer ha
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1223
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Federal law — U.S. Code and appendices · legal_authorities
**(a) General rule**
(1) **Gains exceed losses** — If—
(A) the section 1231 gains for any taxable year, exceed
(B) the section 1231 losses for such taxable year,
such gains and losses shall be treated as long-term capital gains or long-term capital losses, as the case may be.
(2) **Gains do not exceed losses** — If—
(A) the section 1231 gains for any taxable year, do not exceed
(B) the section 1231 losses for such taxable year,
such gains and losses shall not be treated as gains and losses from sales or exchanges of capital assets.
(3) **Section 1231 gains and losses** — For purposes of this subsection—
(A) *Section 1231 gain* — The term “section 1231 gain” means—
(i) any recognized gain on the sale or exchange of property used in the trade or business, and
(ii) any recognized gain from the compulsory or involuntary conversion (as a result of destruction in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation or the threat or imminence thereof) into other property or money of—
(I) property used in the trade or business, or
(II) any capital asset which is held for more than 1 year and is held in connection with a trade or business or a transaction entered into for profit.
(B) *Section 1231 loss* — The term “section 1231 loss” means any recognized loss from a sale or exchange or conversion described in subparagraph (A).
(4) **Special rules** — For purposes of this subsection—
(A) In determining under this subsection whether gains exceed losses—
(i) the section 1231 gains shall be included only if and to the extent taken into account in computing gross income, and
(ii) the section 1231 losses shall be included only if and to the extent taken into account in computing ta
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1231
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Federal law — U.S. Code and appendices · legal_authorities
**(a) Capital assets** For purposes of this subtitle, gain or loss from the short sale of property shall be considered as gain or loss from the sale or exchange of a capital asset to the extent that the property, including a commodity future, used to close the short sale constitutes a capital asset in the hands of the taxpayer.
**(b) Short-term gains and holding periods** If gain or loss from a short sale is considered as gain or loss from the sale or exchange of a capital asset under subsection (a) and if on the date of such short sale substantially identical property has been held by the taxpayer for not more than 1 year (determined without regard to the effect, under paragraph (2) of this subsection, of such short sale on the holding period), or if substantially identical property is acquired by the taxpayer after such short sale and on or before the date of the closing thereof—
(1) any gain on the closing of such short sale shall be considered as a gain on the sale or exchange of a capital asset held for not more than 1 year (notwithstanding the period of time any property used to close such short sale has been held); and
(2) the holding period of such substantially identical property shall be considered to begin (notwithstanding section 1223, relating to the holding period of property) on the date of the closing of the short sale, or on the date of a sale, gift, or other disposition of such property, whichever date occurs first. This paragraph shall apply to such substantially identical property in the order of the dates of the acquisition of such property, but only to so much of such property as does not exceed the quantity sold short.
For purposes of this subsection, the acquisition of an option to sell property at a fixed price shall be considered as a short
Source: Supplied U.S. Code snapshot — release unconfirmed · 26 U.S.C. § 1233
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