How do income tax rules treat bad debts?
Facts:
There are two provisions in the Income Tax Act (ITA) for bad debts.
Discussion:
The first way to claim a bad debt is covered in Section 20 of the ITA if the following requirements are met:
the debt was owing to the taxpayer at the end of the taxation year,
the debt became bad during the taxation year, and
the debt was included or is deemed to have been included in the taxpayer’s income for that taxation year or a previous taxation year.
