A business bad debt gives rise to an ordinary deduction while a nonbusiness bad debt is treated as a short-term capital loss.

Question

Quizplus · Accepted Answer

A business bad debt is deductible as an ordinary loss in the year it becomes totally worthless or partly worthless. On the other hand, a nonbusiness bad debt is treated as a short-term capital loss and can only be deducted as a capital loss up to a maximum of $3,000 per year.

A Business Bad Debt Gives Rise to an Ordinary Deduction