Jed is an electrician.Jed and his wife are cash basis taxpayers and file a joint return.Jed wired a new house for Alison and billed her $15,000.Alison paid Jed $10,000 and refused to pay the remainder of the bill,claiming the fee to be exorbitant.Jed took Alison to Small Claims Court for the unpaid amount and was awarded a $2,000 judgement.Jed was never able to collect the judgement nor the remainder of the bill from Alison.What amount of loss may Jed deduct in the current year?

Question

Quizplus · Accepted Answer

As cash basis taxpayers, Jed and his wife can only deduct losses for amounts that were actually received and included in income. Since Jed never received the $2,000 judgment or the remaining $3,000, he cannot deduct these amounts as a loss.

Jed Is an Electrician