On June 2, 2017, Fred's TV Sales sold Mark a large HD TV, on account, for $12,000. Fred's TV Sales uses the accrual method. In 2018, when the balance on the account was $8,000, Mark filed for bankruptcy. Fred was notified that he could not expect to receive any of the amount owed to him. In 2019, final settlement was made and Fred received $1,000. How much bad debt loss can Fred deduct in 2019?

Question

Quizplus · Accepted Answer

Fred can only deduct the bad debt loss that was not recovered. Since he received $1,000 in 2019, the deductible bad debt loss is the remaining $7,000 from the $8,000 balance. However, since the question asks for the deduction in 2019 and the $7,000 was already accounted for in 2018 when it was determined to be uncollectible, the deduction for 2019 is $0.

On June 2, 2017, Fred's TV Sales Sold Mark a Large