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Alex_Xolod [135]
3 years ago
10

Last year, taxpayer had a $10,000 nonbusiness bad debt. Taxpayer also had an $8,000 short-term capital gain and taxable income o

f $35,000. If taxpayer collects the entire $10,000 during the current year, $8,000 needs to be included in gross income.
Business
1 answer:
skelet666 [1.2K]3 years ago
3 0

Answer:

True

Explanation:

According to the IRS, nonbusiness bad debts are debts that don't fall into any of these three categories:

  1. Loans to clients, suppliers, distributors, and employees
  2. Credit sales to customers, or
  3. Business loan guarantees

In order for a nonbusiness bad debt to be deductible, it has to be worthless. Nonbusiness bad debts cannot be deducted partially unlike business bad debts. They are deducted as short-term capital losses.

In this case if the taxpayer was able to collect his nonbusiness bad debt then there is nothing to be deducted. The taxpayer must include both the $8,000 (short-term capital gain) and the $35,000 (taxable income) in his gross income.

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