Jason Budd, CPA, reports on the cash basis. In April 2014, Budd billed a client $3,5000 for the following professional services:
- Personal estate planning : $2,000
- Personal tax return preparation: $1,000
- Compilation of business financial statements: $500
No part of the $3,500 was ever paid. In April 2015, the client declared bankruptcy, and the $3,500 obligation became totally uncollectible. What loss can Budd deduct on his 2015 tax return for this bad debt?
a. $0
b. $500
c. $1,500
d. $3,500
Answer: A
CPA Exam
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