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  1. A claim for refund or credit based on a bad debt deduction under IRC Section 166 or Section 832(c) or a worthless security loss under IRC Section 165(g) may be filed within seven years from the due date of the return for the year with respect to which the claim is made (determined without regard to any extension of time to file). See IRC Section 6511(d)(1).

  2. If the deductibility of the bad debt or worthless security loss affects a Net Operating Loss (NOL) carryback, the period is the later of:

    1. Seven years from the due date of the return for the year in which the NOL arose (determined without regard to any extension of time to file), or

    2. See IRM 25.6.1.10.2.8.1Net Operating Loss (NOL) Carryback or Capital Loss Carryback, the period for which the NOL arose.

  3. Limitation. The overpayment must be attributable to the deductibility of the bad debt or worthless security loss.

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