Mary incurred a $20,000 nonbusiness bad debt last year. She also had an $18,000 long-term capital gain last year. Her taxable income for last year was $25,000. During the current year, she unexpectedly collected $12,000 on the debt. How should Mary account for the collection?

a. $0 income

b. $11,000 income

c. $12,000 income

d. $8,000 income

e. None of these choices are correct.

Question

Teagan Shah

Business

8 October, 02:22

Mary incurred a $20,000 nonbusiness bad debt last year. She also had an $18,000 long-term capital gain last year. Her taxable income for last year was $25,000. During the current year, she unexpectedly collected $12,000 on the debt. How should Mary account for the collection?

a. $0 income

b. $11,000 income

c. $12,000 income

d. $8,000 income

e. None of these choices are correct.

+1

Answers (1)

Know the Answer?

Chandler Gillespie · Answer 1

d. $8,000 income

Explanation:

To compute the collection value only debts incurred, debts collected and debt to be collected needs to be considered.

collectible accounts = debt incurred - debt collected

= $20,000 - $12,000

= $8,000