X, a psychiatrist, is a cash-basis taxpayer.He charges Z $100 per session and bills him monthly.When Z declares bankruptcy, he owes X $400.What course of action is open to X?

Name: X, a psychiatrist, is a cash-basis taxpayer.He charges Z $100 per session and bills him monthly.When Z declares bankruptcy, he owes X $400.What course of action is open to X?
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Question

Quizplus · Accepted Answer

As a cash-basis taxpayer, X can only deduct expenses when they are actually paid. Since X never received the $400, he cannot deduct it as a bad debt.

X, a Psychiatrist, Is a Cash-Basis Taxpayer