Martha,an Accrual-Method Taxpayer,has an Accounting Practice

question 60

Multiple Choice

Martha,an accrual-method taxpayer,has an accounting practice.In 2016,she performs tax analyses for Arnold and sends him an invoice for $10,000.In 2017,Martha sells her practice and all accounts to David.Arnold's debt becomes worthless that year after David has purchased the practice.The result is

• A)Martha deducts a nonbusiness bad debt in 2017.
• B)Martha deducts a business bad debt in 2017.
• C)David deducts a business bad debt in 2017.
• D)David deducts a nonbusiness bad debt in 2017.

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Definitions:

Excise Tax

A tax on the sale or use of specific products or transactions.

Tax Burden

The total amount of taxes paid by an individual, corporation, or sector, often expressed as a percentage of income or GDP.

Price Paid

The amount of money exchanged for a good or service.

Consumers

Individuals or groups that purchase goods and services for personal use.