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worthless within the taxable year. The deduction is allowable
only in respect of a bad debt owed to the taxpayer, sec. 1.166-
1(a), Income Tax Regs., and then only to the extent that the
taxpayer has a basis in the debt. Perry v. Commissioner, 92 T.C.
470, 477-478 (1989), affd. without published opinion 912 F.2d
1466 (5th Cir. 1990).
Section 167(a)15 allows a depreciation deduction for a
reasonable allowance for the exhaustion, wear, and tear of
property used in a trade or business or of property held for the
production of income. The right to deduct depreciation is based
on (1) investment in the property, and (2) the use of the
property to produce income for the taxpayer. Currier v.
Commissioner, 51 T.C. 488, 492 (1968); Gladding Dry Goods Co. v.
Commissioner, 2 B.T.A. 336, 339 (1925).
Respondent contends that petitioner is not entitled to
deductions for any of the Schedule C expenses that petitioner
claimed on his tax returns for 1982, 1983, 1985, and 1986, and
for the net loss petitioner claimed on his Schedule C for
15Sec. 167(a) provides, in pertinent part, as follows:
SEC. 167. DEPRECIATION.
(a) General Rule.--There shall be allowed as a
depreciation deduction a reasonable allowance for the
exhaustion, wear and tear (including a reasonable allowance
for obsolescence)--
(1) of property used in the trade or business, or
(2) of property held for the production of income.
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