Business Bad Debt

Business Bad Debt means:
a debt resulting from the conduct of a taxpayer's trade or business or a debt that became worthless in connection with the taxpayer's trade or business. A business bad debt can be deducted as an ordinary expense when it becomes worthless. A cash basis taxpayer can deduct a bad debt only if the amount was included in income or a cash loss was incurred. Accrual basis taxpayers must use the specific charge-off method to deduct bad debts when they actually become worthless. Only certain small banks and thrift institutions can use the reserve method. Former IRC (check if this IRC provision is current here) §166.