Two years ago, Ipenex Inc., an accrual basis taxpayer, wrote off a $17,500 account receivable as uncollectible. This year, Ipenex received an entirely unexpected check for $17,500 from the debtor. Which of the following statements is false?

Question

Quizplus · Accepted Answer

The tax benefit rule requires taxpayers to include in their taxable income any recoveries on bad debts that were previously written off and deducted from taxable income, thus statement B is false because the receipt of the $17,500 does affect the current year's taxable income by increasing it.

Two Years Ago, Ipenex Inc