In July of this year, Sam performs financial consulting services for William. On August 1, Sam sends William a bill for $1,200. As of September 30, Sam had not heard from William. After repeated efforts to collect the fee, Sam discovers in November that William has left the state and cannot be found. If Sam is an accrual basis taxpayer, for the current year he can deduct

Question

Quizplus · Accepted Answer

Since Sam is an accrual basis taxpayer, he can deduct the fee in the year it became practically uncollectible, which is November in this case, and take an ordinary loss deduction for the full amount of $1,200. This is based on the assumption that Sam has made reasonable efforts to collect the fee before it became uncollectible.

In July of This Year, Sam Performs Financial Consulting Services