Show I i 1 T Your Income Tax i NO 26 Dad Bad debts may be deducted from groSS Income In determining net income income in- in come and may be treated in one of two ways either by deduction from gross income In respect to debts ascertained to be worthless In whole or in part Or a reasonable addition to a reserve for tor bad debts Permission Permission sion to adopt the reserve reser method is limited to tax taxpayers ayers having a large number of accounts where credit has been ascertained to cover a considerable portion of time It Is not granted for the tho handling of one specific debt Bad debts may be deducted only for the year In which they are ascertained to be worthless and charged of off the tho books bools or of the tax tax- payer The taxpayer should attach to his return a statement showing the propriety of any deduction claimed for tor bad debts Where the supporting circumstances show that thata a debt Is worthless and ible and that legal action in all probability would not result In the of exe execution ution on a judgment judgment judg- judg ment proof or of these facts Is sufficient sut- sut or of their worthlessness Unpaid loans made mad to relatives or friends with little tittle or no expectation Uon or of their return are not deductiblE but are regarded as gifts It If a 3 debt Is forgiven it cannot annot be claImed |