Which of the following is always considered a business bad debt? A) A bad debt incurred by a partnership. B) A bad debt incurred by an individual taxpayer. C) A bad debt incurred b... Which of the following is always considered a business bad debt? A) A bad debt incurred by a partnership. B) A bad debt incurred by an individual taxpayer. C) A bad debt incurred by a corporation. D) A bad debt incurred by a sole proprietor.
Understand the Problem
The question is inquiring about which type of bad debt is always classified as a business bad debt, specifically focusing on different entities such as partnerships, individuals, corporations, and sole proprietors.
Answer
A bad debt incurred by a corporation.
A bad debt incurred by a corporation.
Answer for screen readers
A bad debt incurred by a corporation.
More Information
Corporations automatically classify their bad debts as business bad debts. This is consistent with IRS guidelines, where debts from routine business operations, such as credit sales, are considered business bad debts.
Tips
A common mistake is assuming that all business-related entities (like partnerships and sole proprietorships) automatically classify debts as business bad debts, which is not always the case without specific transactions or conditions.
Sources
- Business - Bad Debt - TaxAct - taxact.com
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