When borrowers struggle to meet their debt obligations, they may negotiate with creditors to modify the terms of their debt instrument. This could involve changes to the interest rate, repayment period, collateral, or other aspects of the debt. However, these modifications could potentially result in a taxable exchange of the original note for a modified one, a fact that may not be immediately apparent to the involved parties.
Thomas Gray
As both an accountant and an attorney, Tom understands tax issues from every perspective. When clients undertake transactions or investments, he seamlessly navigates complex tax laws and considerations at stake, allowing clients to focus solely on their business goals.
How Can I Claim a Business Bad Debt Deduction?
By Thomas Gray, Thomas Phelan, David Fournier, Evelyn Meltzer, Kenneth Listwak, Tori Lynn Remington & Heather Smillie on
Posted in Payments
Businesses can claim a bad debt deduction under the Internal Revenue Code when a customer fails to pay for services or products. However, the ability to claim this deduction depends on several factors, and businesses should be prepared to substantiate their claim if challenged by the IRS.