3.26 Ark. Code R. 51-425
Bonds, when ascertained to be worthless, may be treated as bad debts to the amount actually paid for them. Bonds of an insolvent corporation secured only by a mortgage from which, on foreclosure, nothing is realized for the bondholders, are regarded as ascertained to be worthless not later than the tax year of the foreclosure sale and no deduction for a bad debt is allowable in computing a bondholder's income for a subsequent tax year.
A taxpayer (other than a dealer in securities) possessing debts evidenced by bonds or other similar obligations, cannot deduct from gross income any amount merely on account of market fluctuations, when a taxpayer ascertains, however, that due to the financial condition of the debtor or conditions other than market fluctuations, he will recover upon maturity none or only a part of the debt evidenced by the bonds or other similar obligations and so demonstrates to the satisfaction of the Director, he may deduct, in computing net income, the uncollectible part of the debt evidenced by the bonds or other similar obligations.
3.26 Ark. Code R. 51-425