Final answer:
The claim that both business and nonbusiness debts must be wholly worthless to claim a deduction is false. Business debts allow for a deduction even if they are only partially worthless, whereas nonbusiness debts must be wholly worthless to claim a deduction.
Step-by-step explanation:
The statement 'Both business and nonbusiness debts must be wholly worthless to claim a deduction' is false. For business debts, the Internal Revenue Code allows a deduction if the debt becomes either partially or wholly worthless. In contrast, nonbusiness debts must be wholly worthless before a deduction can be claimed. It's important for tax purposes to recognize the difference between these two types of debts when determining if a deduction is allowable.