David Woods, EA, ChFC, CLU wrote:
- quote -

My story is older than that! Besides, there's a distinction
between a personal debt and a business' debt.

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"Rick Merrill" <rick0.merrill[at]gmail.com> wrote:
- quote -

Not for at least the last 10 years.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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David Woods, EA, ChFC, CLU wrote:
- quote -

Times change.

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
- quote -

You're right Arthur, it is. A short-term capital loss at
that.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Ernie Klein wrote:
- quote -

No benefit on the revenue end. However, the accrual basis
taxpayer can, subject to limitations, deduct expenses before
they are paid in cash. So an expense incurred in Year 1 can
be deducted in Year 1 even though the bill is not paid until
Year 2.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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Dick Adams <rdadams[at]smart.net> wrote:

- quote -

You're not allowed to distort your income to move income
from one year to another. But in general cash-based
taxpayers recognize income in the year received and loss in
the year incurred, even if the two events are related.

I remember the case of a crook who embezzled several million
dollars around Thanksgiving, and was caught the following
January or February. Most of the money was recovered, and
the guy was sent to jail.

Eventually he received a notice from the IRS that he owed
income on his illegal receipt of money. When he protested
that he didn't get to keep it, he was told that he could
have an offsetting deduction in the following year.

Stu

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Katie" <katiej_1958[at]yahoo.com> wrote:

- quote -

Thanks!

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Ernie Klein <eckleinspammenot[at]pacbell.net> wrote:
- quote -

Yes, I should not have implied a benefit for the accrual
basis taxpayer. However, let me add a bit to your
hypothetical. For the accrual base taxpayer who pays taxes
on the amount billed one year and then gets to deduct the
amount of the bill that was never paid the next year, there
is no guarantee that the taxpayer will be in the same
incremental tax bracket for both years, so there could be
either a gain or loss separate from the interest-free loan
to the government.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Rick Merrill wrote:

- quote -

I thought a non-business bad debt deduction was taken as a
capital loss, rather than as a miscellaneous deduction.

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"Harlan Lunsford" <hlunsford[at]bellsouth.net> wrote:
- quote -

And this is why I hated farm returns that hadn't paid
estimates, never file a clients return before February 1st
otherwise and never file mine till all the others are done.

Clients who are in a rush are told I'm waiting for
corrections to the software. Which turns out to be true a
lot of the time as well.

Jo

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Victor Roberts wrote:
- quote -

That's right. It's a wash either way.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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- quote -

That is the correct answer.

- quote -

Read my lips "You can't "lose" what you never received."

- quote -

Again the correct answer appears.

- quote -

You should have subtracted that amount from your gross
income when preparing the return for the year in which you
you received the bad check.

I heard of someone who inflated his income in one year by
counting an invoice to a fictitious client. He did this
because he was taking some deductions which at best were
nefarious. The next year he backed it out. He got
audited and was told he had to file an amended return for
the prior year which was now closed. Gee how unfortunate

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Catherine White wrote:
- quote -

Thanks for the backup!-) I had loaned a roommate some rent
money and two years later he went to Canada so I entered a
miscellaneous deduction 'bad debt' for the amount. (The
idea of "Cost Basis" is really irrelvant since the debt (or
debt remainder) is the subject.)

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Catherine White wrote:

- quote -

LOL! Good story, CAtherine. You remind me now of Felix
Unger (remember him from Odd Couple)? He always typed his
tax return and had it postmarked before December 31st.

So, sounds like you (like I did last year) filed your
return about January 9th.

This year I had our return all ready to go, took the form
8379 home for wife to sign, but she dallied around and
forgot for a couple of days, but when she did and I was
ready to efile from office, that very day came in the mail a
1099R I completely forgot about waiting for. It was only a
code G rollover, but if she had not procrastinated, our
return might have been filed a few days earlier without that
gross income reported. whew!

ChEAr$,
Harlan Lunsford, EA n LA
Sun 13 Feb 2005

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Victor Roberts <xxx[at]lighting-research.com> wrote:
- quote -

And for my education also.

If the accrual basis taxpayer billed his client in a
DIFFERENT year, then he had to report the amount as income
and pay taxes on that income in the year billed. Then, if
he never got paid, he gets to deduct what he didn't get paid
as a bad debt, thereby getting back his own tax money that
he had already paid. He gets his money back and the
government gets an interest free loan for the amount of time
it held the money that it didn't deserve in the first place.

Not much of a benefit over the cash payer :-) -- or am I
missing something?

--
-Ernie-

"There are only two kinds of computer users -- those who
have suffered a catastrophic hard drive failure, and those
who will."

Have you done your backup today?

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Lanny Williams <lanny[at]loxinfo.co.th> wrote in news:110ltodpto8sa3
- quote -

He _can_ have a bad debt, it's just tricky timing. Happened
to me a number of years ago. Got paid for some work late in
the year, deposited the check, counted it as income
(constructive receipt, after all). Come late January (don't
remember why it took so long), found out from the bank the
check was no good. Took a loss the second year for the
amount of the bounced check.

However, he has to _think_ he's been paid, and count it as
such. Doesn't seem to be the case here....

Catherine

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Gene E. Utterback, EA" <eagent[at]alliancetax.com> wrote:

- quote -

Just to make sure I understand for my own education .....

If the accrual basis taxpayer billed the client in the same
year that he realized he would never be paid, then the "bad
debt" would just negate the bill for a net of zero. He would
not have any benefit over the cash basis taxpayer. Is this
correct?

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Rick Merrill wrote:
- quote -

If he is a cash basis taxpayer, he cannot take a deduction
for income that he never reported. If he is an accrual basis
taxpayer and can show that the income was reported, then he
can take the bad debt deduction.

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"Rick Merrill" <RickMerrill[at]comcastTHROW.net> wrote:
- quote -

I cannot speak for the CANADIAN law version, but if this
were American tax law, sure he could deduct the loss. To
the extent of his basis. ZERO. A cash basis taxpayer has
no basis in his own efforts.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Rick Merrill wrote:
- quote -

For him to have such a writeoff, that business must be on
the ACCRUAL basis, not cash basis.

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