Question

The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes, but is not allowed for a cash method taxpayer.

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Answer 1

The addition to the reserve for bad debts is allowed as a deduction for tax purposes for an accrual method taxpayer but not for a cash method taxpayer.

Step-by-step explanation:

The subject of this question is Business.

The question is asking about the treatment of the addition to the reserve for bad debts for tax purposes between an accrual method taxpayer and a cash method taxpayer.

For an accrual method taxpayer, the amount of the addition to the reserve for bad debts is allowed as a deduction for tax purposes. However, for a cash method taxpayer, the amount is not allowed as a deduction.