Martha,an accrual-method taxpayer,has an accounting practice.In 2015,she performs tax analyses for Arnold and sends him an invoice for $10,000.In 2016,Martha sells her practice and all accounts to David.Arnold's debt becomes worthless that year after David has purchased the practice.The result is
A)Martha deducts a nonbusiness bad debt in 2016.
B)Martha deducts a business bad debt in 2016.
C)David deducts a business bad debt in 2016.
D)David deducts a nonbusiness bad debt in 2016.

Question

Quizplus · Accepted Answer

David, who purchased the practice and accounts, can deduct the bad debt as a business bad debt in 2016 when Arnold's debt becomes worthless.

Martha,an Accrual-Method Taxpayer,has an Accounting Practice