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bad debt |
Also found in: Dictionary/thesaurus, Medical, Financial, Wikipedia, Hutchinson | 0.06 sec. |
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bad debt n. an uncollectible debt. The problem is to determine when a debt is realistically dead, which means there must be some evidence of uncollectibility or a lengthy passage of time. Discharge in bankruptcy, the running of the statute of limitations to bring a lawsuit, disappearance of the debtor, a pattern of avoiding debts or the destruction of the collateral security can all make a debt "bad." For income tax deduction purposes such a debt in business is deductible against ordinary income (found in Schedule C) and such a personal debt is deductible against short-term capital gains. A debt due for services rendered is not a bad debt for tax purposes, since there is just no income on which to be taxed. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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The inference is that, had the taxpayer specifically identified an allowance account (or portion thereof) as offsetting the bad debt in question--as in Brandtjen & Kluge, Inc. It is far more expensive to write off a bad debt than it is to pay for trade credit insurance, which generally costs less than 1 percent of sales, according to research from Marsh. said its fourth-quarter charges may exceed $1 billion and its loss from continuing operations will widen from the third quarter because of bad debt. |
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