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Bad Debt
Petitioner claimed a deduction for a bad debt in the amount
of $183.33 on her return as her share of an uncollected fee for
one of the band's performances. In August of 1992, the band
entered into a contract with the Spectrum Club to perform two
nights for $1,100. The band contracted with side men
(independent musicians) to perform with the group and guaranteed
the side men's wages. Spectrum paid the band for one night's
performance; it did not pay the band for the second night. The
band, however, paid the side men their wages for the second
night's performance. Based upon the facts presented, we find
that petitioner may not deduct the $183.33 claimed as a bad debt.
We do, however, hold that she is entitled to claim the $183.33 as
an ordinary and necessary business expense. Sec. 162(a).
Depreciation
Petitioner claimed a deduction in the amount of $2,100 as
depletion. At trial, the parties agreed that the claimed
deduction was intended to be for depreciation of equipment
purchased during 1992. Petitioner submitted a number of checks
in support of the claimed deduction. She contends that she
properly deducted the entire cost of the equipment pursuant to
section 179.
Section 179 allows a taxpayer to elect to treat the cost of
section 179 property as a current expense in the year such
property is placed in service within certain dollar limitations.
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Last modified: May 25, 2011