Income Tax – Non-Business Bad Debt Deduction – Deduction for Partially Secured Bad Debt Deferable Until Liquidation of Collateral Regardless of Tax Avoidance Motive

In 1944 the taxpayer liquidated security held for a non-business debt and deducted the balance of the debt as worthless. The creditor had been insolvent for some time. The commissioner disallowed the deduction on the grounds that the taxpayer had held the security after the debt was worthless in order to obtain a larger tax benefit from the deduction. The district court upheld the Commissioner. On appeal, held, reversed. A partially secured debt is not worthless as long as security is available for its satisfaction. The taxpayer’s intent is not a factor in determining worthlessness. Loewi v. Ryan, (2d Cir. 1956) 229 F. (2d) 627.