bad debt

bad debt
An uncollectible debt. A debt which may be deducted from gross income in determining income subject to tax. Anno: 39 ALR2d 898. A debt which is worthless because, in the exercise of sound business judgment, there is no likelihood of recovery thereon at any time in the future. O'Bryan Bros., Inc. v Commissioner (CA6) 127 F2d 645, cert den 317 US 647, 87 L Ed 521, 63 S Ct 41. A business debt which in the opinion of the Treasury is recoverable only in part at best. IRC § 166(a)(2). A debt which results from an unpaid loan of money is a "bad debt" and therefore deductible in the computation of income taxes only where there was an expectation of repayment. Such advances made with the belief that they would not be repaid are in the nature of gifts, and are Dot deductible as bad debts. American Cigar Co. v Commissioner (CA2) 66 F2d 425.

Ballentine's law dictionary. . 1998.

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