treated as a part of the cost of the building Ex Mr Oak an accrual basis

Treated as a part of the cost of the building ex mr

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treated as a part of the cost of the building. Ex: Mr. Oak, an accrual basis taxpayer, sells refrigerators at the retail level. For the current year, his sales totaled $550,000, which included $50,000 from the sale of one year service contracts for the refrigerators. From past experience, Mr.Oak knows that for the year he will have expenses of $20,000 relating to those contracts. On his current year return, Mr. Oak can
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Note: If a bad debt deduction is incurred in a net operating loss (NOL) year and thus increase an NOL carryover that was either completely used or has not expired as of the beginning of the year of recovery, the deduction is treated as provided a tax benefit to the taxpayer. Ex: Mac incurred a $40,000 NOL in 2016, which included a bad debt deduction of $6,000. The entire NOL was utilized in a carryback to 2014. If Mac receiver $3000 of the $6000 bad debts in 2017, the entire amount is taxable as income. Mac received a tax benefit from the bad debt through utilization of the NOL in 2014. Even if Mac had not used the NOL carryover as of the time of recovery, the amount is still income, since the NOL carryover period has not expired. Note: No bad debts deduction is available for cash basis taxpayer (no income) Note: business bad debt are reported as deduction against ordinary income Example: Mr. K, a dentist and calendar-year taxpayer, has consistently reported income and expenses from his business on the cash basis. All cash and checks he receives are deposited and included in income. Mr. K's records for the year reflect the following information:Uncollectible receivables..................................................................$2,000Patients' uncollectible returned checks.............................................500Recovery of an uncollectible receivable from four years ago..............1,000Business-related loan to a supplier that became totally worthless......3,000Mr. K has chosen not to use the nonaccrual experience method of reporting bad debts. What is the amount of Mr. K's bad debt expense for the year?
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