Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2025 to receive credits. NOTE: Go to My Professional Profile in your CCH CPELink account settings to ensure your name, and PTIN number; matches your PTIN card
With the looming economic recession, understanding the rules for claiming tax deductions for bad debts is more important than ever. In an economic downturn, the possibility increases that taxpayers won’t be fully paid for trade receivables and other debt instruments.
In order to reduce the financial hit from bad debts, it is important to understand the tax provisions applicable to partially worthless, wholly worthless, secured and non-business bad debts. What is considered a bad debt to a business person may not necessarily represent a bad debt for tax purposes.
Publication Date: April 2023
Designed For
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Topics Covered
- Definition of Debt and Basic Distinctions from Equity
- Debt Workouts Resulting in Bad Debt Deduction
- Rules for Deducting Business Bad Debts v. Nonbusiness Bad Debts
- Wholly worthless debts v. Partially Worthless Debts
- Documentation of Worthlessness
- Difference in Rules for Cash and Accrual Method Taxpayers
Learning Objectives
- Describe a bona fide debt deductible as bad debt for tax purposes
- Identify tax consequences of related party bad debts
- Recognize how to differentiate between business bad debts and nonbusiness bad debts
- Describe factors that prove worthlessness of debt
- Recognize how to evaluate the best timing for claiming a bad debt
Level
Intermediate
Instructional Method
Self-Study
NASBA Field of Study
Taxes (2 hours)
Program Prerequisites
Basic understanding of debt deductions and debt write-offs.
Advance Preparation
None
Instructor
Jennifer Kowal
Jennifer Kowal, JD, has been a tax professor and the director of the graduate tax program at Loyola Law School in Los Angeles since 2003. Loyola’s graduate tax program offers an LL.M. in Taxation for attorneys and a Master in Tax Law for non-lawyers. Professor Kowal teaches courses in advanced income taxation, income tax timing issues, corporate taxation, and tax research, among others. Prior to teaching at Loyola, Professor Kowal taught in the International Tax Program at Harvard Law School.
She also practiced law with the firms of Irell & Manella in Los Angeles and Ropes & Gray in Boston, advising clients on the taxation of various business transactions, including cross-border, partnership and corporate structures. Professor Kowal holds a BS in Accounting with distinction from the University of Kansas, and a JD from UCLA School of Law, where she was a member of the Order of the Coif.