uestion 31

Martha, an accrual method taxpayer, has an accounting practice. In 2019, she performs tax analyses for Arnold and sends him an invoice for $10,000. In 2020, Martha sells her practice and all accounts to David. Arnold's debt becomes worthless that year after David has purchased the practice. The result is

David deducts a nonbusiness bad debt in 2020.

Martha deducts a nonbusiness bad debt in 2020.

David deducts a business bad debt in 2020.

Martha deducts a business bad debt in 2020.