1. How does the IRS define business bad debt and nonbusiness bad debt so that a taxpayer or a return preparer can distinguish between the two? What criteria or specific examples does the IRS give to aid in making the distinction?
2. The IRS states that there are two methods that can be used for claiming a business bad debt deduction (other than for a business bad debt of an employee). Describe these two methods.

Please answer each question in complete sentences, and cite name and number of the IRS publication or form/instruction where you found each answer, and the page number on which the answer is found. Use your own words in the answer do not copy the IRS language.