Write-Off Justification Sample Clauses

Write-Off Justification. Under the specific charge-off method of deducting bad debts, the sole tests are worthlessness during the taxable year, and the fact that such debts are actually business bad debts either at the time they arose or at the time worthlessness occurs. Whether a debt actually has become worthless in whole or in part is a question of fact. The deduction must be taken in the taxable year in which a debt becomes wholly worthless, not in a later year. If a business debt does not become wholly worthless but is uncollectible in part, the law allows a partial deduction. It does not have to be taken in the year in which the debt becomes partially worthless but can be taken in a later year. In either event, the taxpayer carries the burden of proof; he must establish to the satisfaction of the Revenue Service (or the court if the case goes to litigation) that each claimed bad debt is worthless, that it became worthless during the taxable year, and that it is a business bad debt. Among the many decisions involving the worthlessness of debts, these conditions have been held to establish a bad debt deduction: