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Course- Introduction to taxation 1. For a reserve for doubtful debts to be tax deductible, the...

Course- Introduction to taxation

1. For a reserve for doubtful debts to be tax deductible, the amount of the reserve must be reasonable, and the related debt must have resulted in income being reported for tax purposes.

True or False

Business   Accounting   
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Answer #1

True

Explanation:

For a reserve for doubtful debts to be tax deductible, a taxpayer should give:

· Reasonableness of addition to reserve: Including relevant factors and Correction of errors in prior estimates.    

· Statement required. A taxpayer using the reserve method shall file with his return a statement showing - The volume of his charge sales or other business transactions for the taxable year and the percentage of the reserve to such amount; and the total amount of notes and accounts receivable .

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