Question
Giovanni runs a greenhouse as a sole proprietorship using the accrual method. At the end of the taxable year, Giovannis accounts receivable totals $45,000, and
Giovanni runs a greenhouse as a sole proprietorship using the accrual method. At the end of the taxable year, Giovannis accounts receivable totals $45,000, and he estimates that 3.5% of that amount is uncollectable. The current balance in his reserve for uncollectable accounts is $950. As of the end of the year, Giovanni is aware of only one customer who will certainly not pay its account because it has gone out of business; that customers receivable balance is $2,250. Determine the amount of bad debt Giovanni may deduct for the current taxable year.
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