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previous page Previous Page: Publication 535 - Business Expenses - Business Bad Debts
next page Next Page: Publication 535 - Business Expenses - How To Claim a Business Bad Debt
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taxmap/pubs/p535-053.htm#en_us_publink1000154199

When a Debt Becomes Worthless(p39)


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When a Debt Becomes Worthless

You do not have to wait until a debt is due to determine whether it is worthless. A debt becomes worthless when there is no longer any chance the amount owed will be paid.
It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. You must only show that you have taken reasonable steps to collect the debt. Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt.
taxmap/pubs/p535-053.htm#en_us_publink1000154200

Property received for debt.(p39)


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If you receive property in partial settlement of a debt, reduce the debt by the FMV of the property received. You can deduct the remaining debt as a bad debt if and when it becomes worthless.
If you later sell the property, any gain on the sale is due to the appreciation of the property. It is not a recovery of a bad debt. For information on the sale of an asset, see Publication 544.
previous pagePrevious Page: Publication 535 - Business Expenses - Business Bad Debts
next pageNext Page: Publication 535 - Business Expenses - How To Claim a Business Bad Debt
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication