Ashley is an attorney who specializes in family law. She uses the cash method of

Question

Ashley is an attorney who specializes in family law. She uses the cash method of accounting and is a calendar-year taxpayer. Last year, she represented a client in a lawsuit and billed the client $5,000 for her services. Although she made repeated attempts, Ashley was unable to collect the outstanding receivable. Finally, in November of the current year, she finds out that the individual has moved without leaving any forwarding address. Ashley’s attempts to locate the individual are futile.

What is the amount, if any, of the deduction that she may claim in connection with this bad debt?

Explanation / Answer

As per given Case Law, Ashley is following cash method of accounting and under Cash method accounting system , Bad debt amoutn can not be deducted . On the other side, if Accrual mentod Accounting system are following, it's possible to write off the debt .

As stated in Above statmetn due to cash method accounting systme, revenue also was not recorded as in bookes .

Hence, She may not claim any deduction for this bad debt .

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