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Mary is self-employed operating a cash basis business which delivers coffee to other companies. In 2019...

Mary is self-employed operating a cash basis business which delivers coffee to other companies. In 2019 one of Mary’s customers files for bankruptcy and does not pay Mary $900. What is the amount of Mary’s deduction for bad debts in 2019?

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Answer #1
  • We write off debt that we determine uncollectible. But before taking action of write off take appropriate action for collection of it. In normal case write off approved only if one of the following condition exist
  1. Collection agency unable to collect debt
  2. Judgment entered against the debtor and failed to result in payment.
  3. The debtor has skipped and we are unable to trace him.
  4. Debtor filed for bankruptcy.
  • Once any of the above criteria occurred the debt is written off.
  • In Current case Mary's customer files for bankruptcy and does not pay marry $ 900 so Mary in 2019 can claim $900 as deduction.
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