In determining whether a debt is a business or nonbusiness bad debt, the debtor's use of the borrowed funds is not important.

Question

Quizplus · Accepted Answer

The debtor's use of the borrowed funds is not relevant to the classification of a debt as a business or nonbusiness bad debt. Factors that are considered include the taxpayer's primary source of income, the relationship between the taxpayer and the debtor, and the frequency and regularity of the taxpayer's lending activities.

In Determining Whether a Debt Is a Business or Nonbusiness