(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 § 1.167(a)-8, § 1.168(i)-1, or § 1.168(i)-8, as applicable. For provisions respecting the obsolescence of depreciable property for which depreciation is determined under section 167 (but not under section 168, section 1400I, section 1400L(c), section 168 prior to its amendment by the Tax Reform Act of 1986, Public Law 99-514 (100 Stat. 2121 (1986)), or under an additional first year depreciation deduction provision of the Internal Revenue Code (for example, section 168(k) through (n), 1400L(b), or 1400N(d))), see § 1.167(a)-9. For the allowance of casualty losses, see § 1.165-7.
(d) Effective/applicability date—(1) In general. This section applies to taxable years beginning on or after January 1, 2014. Except as provided in paragraphs (d)(2) and (d)(3) of this section, § 1.165-2 as contained in 26 CFR part 1 edition revised as of April 1, 2011, applies to taxable years beginning before January 1, 2014.
(2) Early application of § 1.165-2(c). A taxpayer may choose to apply paragraph (c) of this section to taxable years beginning on or after January 1, 2012.
(3) Optional application of TD 9564. A taxpayer may choose to apply § 1.165-2T as contained in TD 9564 (76 FR 81060) December 27, 2011, to taxable years beginning on or after January 1, 2012, and before January 1, 2014.
[T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, as amended by T.D. 9564, 76 FR 81084, Dec. 27, 2011; T.D. 9636, 78 FR 57706, Sept. 19, 2013; T.D. 9689, 79 FR 48667, Aug. 18, 2014]
Notes of Decisions
Coors Porcelain Co. v. Comm'r, 52 T.C. 682 (Tax Ct. 1969).
· cites it 8× “165-2 , proposed July 3, 1956, withdrawn and reproposed October 8, 1959, finally adopted January 15, 1960, by T.”
Chevy Chase Land Co. v. Comm'r, 72 T.C. 481 (Tax Ct. 1979).
· cites it 6× “And in certain cases, an "abandonment loss" deduction is allowed upon the sudden termination of usefulness of property.”
Markwardt v. Comm'r, 64 T.C. 989 (Tax Ct. 1975).
· cites it 2× “In the case of depreciable property used in the taxpayer's trade or business or for the production of income, a loss incurred on the abnormal retirement of the asset is allowable in accordance with similar rules.”
Massey-Ferguson, Inc. v. Comm'r, 59 T.C. 220 (Tax Ct. 1972).
· cites it 4× “Considering all the surrounding facts and circumstances, we hold that in 1961 the petitioner completed the abandonment of the Davis trade name, the general line distributorship system, and the going-concern value of the MI operation.”
Pilgrim's Pride Corp. v. Comm'r, 141 T.C. 533 (Tax Ct. 2013).
· cites it 20× “On June 24, 2004, G voluntarily surrendered the securities to S and T for no consideration. On its Federal income tax return for the tax year ending June 30, 2004, G reported a $98.”
Thompson v. Comm'r, 66 T.C. 1024 (Tax Ct. 1976).
· cites it 2× “Section 165 permits a loss deduction for the sudden termination of usefulness of nondepreciable property used in business or in a transaction entered into for profit.”
Kingsbury v. Comm'r, 65 T.C. 1068 (Tax Ct. 1976).
· cites it 2× “We further believe that testimony was tainted by a belief on her part that the cardroom license might yet be revoked by county officials based upon a finding by this Court that she had leased the cardroom to petitioner.”
Louisville & N. R. Co. v. Comm'r, 66 T.C. 962 (Tax Ct. 1976).
· cites it 2× “28 *138 Respondent argues that the grading is a nondepreciable asset and that any loss sustained is governed by section 165 and consequently under the pertinent regulations, the property must be "permanently discarded from use" in order to qualify for the loss deduction. Sec.”
CRST, Inc. v. Comm'r, 92 T.C. 1249 (Tax Ct. 1989).
· cites it 4× “, 4 provides for a loss deduction for obsolescence of nondepreciable property by allowing a deduction where, inter alia, such property is permanently discarded from use by taxpayer.”
Lockwood v. Comm'r, 94 T.C. 252 (Tax Ct. 1990).
· cites it 4× “2 *18 The parties agree that the master recordings were used in a trade or business or in a transaction *17 entered into for profit.”
Daily v. Comm'r, 81 T.C. 161 (Tax Ct. 1983).
· cites it 4× “In March 1977, the sellers elected to declare a forfeiture of the partnership's interest in all three apartment buildings.”
— 26 C.F.R. § 1.165-2(c) — 1 case
Annotations are extracted automatically from the opinions in the
Syfert caselaw corpus and ranked by authority, recency, and
treatment. Dots show Syfertize treatment of the citing case itself.