Which of the following would be a business bad debt if it were uncollectible?
A)A taxpayer loans his father $1,000 to start a business.
B)A taxpayer loans his son $10,000 to purchase a rental house.
C)A dentist, using the accrual basis of accounting, records income when it is earned and extends credit to a patient for services provided.
D)A taxpayer loans his brother $3,000 to purchase a truck for use in his brother's business.
E)None of the above.

Question

Quizplus · Accepted Answer

A business bad debt is a debt that arises from the taxpayer's trade or business. Option C describes a situation where a dentist provides services and extends credit to a patient, which is a business transaction. The other options do not involve a taxpayer's trade or business and, therefore, are not considered business bad debts.

Which of the Following Would Be a Business Bad Debt