Which of the following taxpayers can claim a business bad debt deduction for the current year?
I.Johnson is a dentist using the cash basis of accounting. He has accounts receivable from patients totaling $7,800 that are more than 90 days past due.
II.George owns and operates a sporting goods store and uses the accrual method of accounting. He has several customers who have owed him money for more than 10 months.

Question

Which of the following taxpayers can claim a business bad debt deduction for the current year?
I.Johnson is a dentist using the cash basis of accounting. He has accounts receivable from patients totaling $7,800 that are more than 90 days past due.
II.George owns and operates a sporting goods store and uses the accrual method of accounting. He has several customers who have owed him money for more than 10 months.
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Quizplus · Accepted Answer

Only taxpayers using the accrual method of accounting, like George in statement II, can claim a business bad debt deduction for accounts receivable that become worthless. Cash basis taxpayers, like Johnson in statement I, do not recognize income until it is received, so they cannot claim a bad debt deduction for unpaid accounts receivable.

Which of the Following Taxpayers Can Claim a Business Bad