- 4 -
term capital loss of $3,000 in each year.
In the notice of deficiency, respondent disallowed the
$3,000 capital loss for each of the taxable years 1996 and 1997.
Respondent also made the following adjustments to petitioners’
Schedule A deductions:2
1996 1997
Claimed Allowed Dis- Claimed Allowed Dis-
allowed allowed
Lodging $2,488 $-0- $2,488 $1,058 $-0- $1,058
Meals & 1,216 1,072 114 -- -- --
entertain-
ment
Protective 693 -0- 693 529 -0- 529
clothing
Union dues 292 -0- 292 71 -0- 71
Total $4,689 $1,072 $3,587 $1,658 $ -0- $1,658
Bad Debt Deduction
Section 166(a) generally allows a deduction for debts that
become wholly or partially worthless within the taxable year. A
business bad debt is fully deductible from ordinary income;
however, a nonbusiness bad debt of a taxpayer other than a
corporation is treated as a short-term capital loss. Sec.
166(d)(1). A nonbusiness bad debt is defined as 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
2 Amounts reflect concessions made by the parties.
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Last modified: May 25, 2011