Taj operates a sole proprietorship,maintaining the business records under the cash-basis method of accounting.Taj performs services for a client and sends the client a bill for $12,000.Six months later,before payment is received by Taj,the client files bankruptcy,with no assets available for unsecured creditors such as Taj.Taj will deduct
A)$12,000 ordinary loss.
B)$3,000 long-term capital loss.
C)$3,000 short-term capital loss.
D)$0.

Question

Quizplus · Accepted Answer

D)As a cash-basis taxpayer,Taj has no basis in the receivable.

Taj Operates a Sole Proprietorship,maintaining the Business Records Under the Cash-Basis