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Section 166(a) generally allows a deduction for any debt
that becomes wholly or partially worthless within the taxable
year. Section 166(d)(1)(A) provides that section 166(a) shall
not apply to any nonbusiness debt of a noncorporate taxpayer.
Section 166(d)(1)(B) provides that, where a nonbusiness debt of a
noncorporate taxpayer becomes worthless within a taxable year,
the loss resulting from the worthlessness of such debt shall be
considered a loss from the sale or exchange during the taxable
year of a capital asset held for not more than one year. For
purposes of section 166, the basis for determining the amount of
the deduction for any bad debt is the adjusted basis of the debt
as prescribed by section 1011 for purposes of determining the
loss from the sale or other disposition of property. See sec.
166(b); sec. 1.166-1(d)(1), Income Tax Regs.
In deciding whether petitioners are entitled for 1991 to a
nonbusiness bad debt deduction under section 166(d)(1)(B) for the
$50,000 punitive damages that were awarded to, but not collected
by, petitioner during that year, we need not, and do not, decide
whether that award constituted a valid debt owed to petitioner by
Mr. Erkel within the meaning of section 166(d)(1)(B) or whether
that award became a worthless debt during 1991 within the meaning
of that section. That is because, assuming arguendo, as peti-
tioners and respondent maintain, that the $50,000 punitive
damages award were in fact a debt and further assuming arguendo,
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