QUESTION 3 Sophia operates Crimson Tide Training Equipment as a sole proprietorship. The company is an accrual basis taxpayer and has an outstanding $1,000,000 unsecured receivable from War Eagle LLC. The receivable is related to sales of sophisticated football training equipment in 2018. in early 2019, War Eagle filed for Chapter 11 bankruptcy protection. At that time, financial analysts estimated that unsecured creditors would likely only receive $0.50 on the dollar for their outstanding claims. In early 2020, Crimson Tide receives a final settlement of $600,000 from the bankruptcy court. What amount of bad debt (If any can Crimson Tide deduct in 2019, and what amount of income or expense must Crimson Tide recognize in 2020? $1,000,000 bad debt deduction in 2019: 5600,000 income in 2020 $500,000 bad expense deduction in 2019: $100,000 income in 2020 so bad debt deduction in 2019: 5400,000 bad debt expense deduction in 2020 $400,000 bad debt deduction in 2019. $0 income or expense in 2020