In year one,Dr.Drill,an accrual basis dentist,recorded $5,000 of taxable income for dental services performed but not paid in cash by Mr.Cashless.In year two,Mr.Cashless is bankrupt and Dr.Drill has decided that the debt is uncollectible.In year two,Dr.Drill may:

Question

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Dr. Drill recorded the income in year one, so it would be an ordinary business loss in year two when it is deemed uncollectible. It is not a capital loss because it is not an asset that was sold or disposed of, but rather income that was not received. Additionally, the loss can be deducted in full as it is completely uncollectible.

In Year One,Dr