Question

5. J lends $30,000 to B and it is a business debt. In 2017, B declares bankruptcy and J learns that other creditors in her situation will most likely receive 15 cents on the dollar for the loans outstanding. J does not receive any repayment until 2018, when she receives $2,000. How much may J deduct in 2017? 2018? Would the answers change if it was a non-business bad debt?

Answer 1

Solution:-

Here we need to findout the J may deducted amout in 2017 & 2018.

J may deducted amout in 2017 = 30,000 * [ 100% - 15% ]

= 30,000 * 85%

= $25,500

J may deducted amout in 2017 = $25,500

J may deducted amount in 2018 = $2,000

• Non Business terrible obligation must be deducted when it turn out to be absolutely useless according to IRS production 463, so $25,500 can be deducted in 2018.

Note :-

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