Flashcards: Deductible & Non-Deductible Corporate Expenses

In the case of a corporation that is not a financial institution, which of the following statements is correct with regard to the deduction for bad debts?

On the approval form the IRS, a corporation may change its method from direct charge-off to reserve.

If the reserve method was consistently used in prior years, the corporation may take a deduction of a reasonable addition to the reserve for bad debts.

Either the reserve method or the direct charge-off method may be used, if the election is made in the corporation’s first taxable year.

A corporation is required to use the direct charge-off method rather than the reserve method.

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