Press Room: Article
Lessons Learned from a Case of Bad Debt
When taking a bad debt deduction, it matters whether you are engaged in a trade or business.
Some of the more common tax issues that taxpayers face in today’s economy are those involved in debt restructurings. Whether debt is modified or cancelled on one side of the transaction, there typically is a bad debt deduction available to the lender.
For corporate taxpayers, the tax issues are relatively straightforward. By contrast, non-corporate taxpayers must first address a threshold question: Is the debt business or non-business related?