Last year, jane identified $87,400 as a nonbusiness bad debt. in that tax year before considering the tax implications of the nonbusiness bad debt, jane had $174,800 of taxable income, of which $8,740 consisted of short-term capital gains. this year, jane collected $17,480 of the amount she had previously identified as a bad debt.

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Brett Valenzuela

Today, 18:42

Last year, jane identified $87,400 as a nonbusiness bad debt. in that tax year before considering the tax implications of the nonbusiness bad debt, jane had $174,800 of taxable income, of which $8,740 consisted of short-term capital gains. this year, jane collected $17,480 of the amount she had previously identified as a bad debt.

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Agustin Bruce · Answer 1

If the account was written off during a previous taxable year, income created for the current year (Jane's acceptance of the $17,0) is subject to the tax benefit rule. She must include this amount in her gross income