[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.165-2]

[Page 893]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.165-2  Obsolescence of nondepreciable property.

    (a) Allowance of deduction. A loss incurred in a business or in a 
transaction entered into for profit and arising from the sudden 
termination of the usefulness in such business or transaction of any 
nondepreciable property, in a case where such business or transaction is 
discontinued or where such property is permanently discarded from use 
therein, shall be allowed as a deduction under section 165(a) for the 
taxable year in which the loss is actually sustained. For this purpose, 
the taxable year in which the loss is sustained is not necessarily the 
taxable year in which the overt act of abandonment, or the loss of title 
to the property, occurs.
    (b) Exceptions. This section does not apply to losses sustained upon 
the sale or exchange of property, losses sustained upon the obsolescence 
or worthlessness of depreciable property, casualty losses, or losses 
reflected in inventories required to be taken under section 471. The 
limitations contained in sections 1211 and 1212 upon losses from the 
sale or exchange of capital assets do not apply to losses allowable 
under this section.
    (c) Cross references. For the allowance under section 165(a) of 
losses arising from the permanent withdrawal of depreciable property 
from use in the trade or business or in the production of income, see 
Sec. 1.167(a)-8. For provisions respecting the obsolescence of 
depreciable property, see Sec. 1.167(a)-9. For the allowance of 
casualty losses, see Sec. 1.165-7.