[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: 26CFR1.166-7]

[Page 920]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.166-7  Worthless bonds issued by an individual.

    (a) Allowance of deduction. A bond or other similar obligation 
issued by an individual, if it becomes worthless in whole or in part, is 
subject to the bad debt provisions of section 166. The loss from the 
worthlessness of any such bond or obligation is deductible in accordance 
with section 166(a), unless such bond or obligation is a nonbusiness 
debt as defined in section 166(d)(2). If the bond or obligation is a 
nonbusiness debt, it is subject to section 166(d) and Sec. 1.166-5.
    (b) Decline in market value. A taxpayer possessing debts evidenced 
by bonds or other similar obligations issued by an individual shall not 
be allowed any deduction under section 166 on account of mere market 
fluctuation in the value of such obligations.
    (c) Worthless bonds issued by corporation. For provisions allowing 
the deduction under section 165(a) of the loss sustained upon the 
worthlessness of any bond or similar obligation issued by a corporation 
or a government, see Sec. 1.165-5.
    (d) Application to inventories. This section does not apply to any 
loss upon the worthlessness of any bond or similar obligation reflected 
in inventories required to be taken by a dealer in securities under 
section 471. See Sec. 1.471-5.