Which of the Following Taxpayers Can Claim a Business Bad

question 5

Multiple Choice

Which of the following taxpayers can claim a business bad debt deduction for the current year? Sylvia lent her neighbor $4,000 to put a new roof on his home. Because they have been I. II. friends for over 15 years, Sylvia trusted her neighbor to pay her back and didn't make him sign a note with interest. The neighbor has left town and Sylvia will not get any of her money back. Her loss is properly related to this year using the cash basis of accounting. Saul is an attorney using the cash basis of accounting. One of his clients is short of money to pay the utilities in the office building Saul rents from him. Saul advances the client $5,000. Saul has just learned that the client has filed bankruptcy and that Saul will not be repaid for any part of the loan.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements are correct.
• D) Neither statement is correct.

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Definitions:

Safety Needs

A level in Maslow's hierarchy of needs that entails security, stability, and freedom from fear.

Self-Esteem

A person’s overall subjective emotional evaluation of their own worth; it is a judgment of oneself as well as an attitude toward the self.

Physiological Needs

Basic physical requirements for human survival, such as food, water, and shelter, which become fundamental drives when unmet.

Intimacy

A close and personal relationship or bond between individuals, often characterized by affection and trust.