A deduction for a business bad debt is allowed to the extent that income related to the debt was previously included in taxable income.

Question

A deduction for a business bad debt is allowed to the extent that income related to the debt was previously included in taxable income.
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Quizplus · Accepted Answer

This is known as the "tax benefit rule," which states that a deduction for a business bad debt is only allowed to the extent that the income related to the debt was previously included in taxable income. This ensures that taxpayers cannot take advantage of a deduction for a bad debt that was never actually included in their taxable income.

A Deduction for a Business Bad Debt Is Allowed to the Extent