Hello, I am wondering how I can properly claim a bad debt (Supplier fraud) on form T2125 for a sole proprietorship on line 8590.

[SoleProp1]

Hello,

I am wondering how I can properly claim a bad debt on form T2125 for a sole proprietorship on line 8590.

After reading the two conditions from the CRA website (below), I am confused:  Do I report the amount receivable in income/revenue and then deduct it on line 8590 or can I just deduct it on line 8590?

Here is my scenario:  

- I purchased supplies from another company which has not delivered the promised items due to fraud.

- I have filed a Police report and doubt that I will receive my supplies or the money spent and want to write this off.

Question:

Do I include the amount I spent on supplies (A receivable) as income and deduct this same amount on line 8590 as bad debt?

Or do I simply deduct this amount only on line 8590?

Please tell me the best way to handle this scenario.  Should I use line 8590 or another means?

Thank you in advance.

J

Line 8590 - Bad debts

You can deduct an amount for a bad debt if you meet the following conditions:

• you had determined that an account receivable is a bad debt in the year
  
• you had already included the receivable in income

[TurboTaxLise · Accepted solution]

Yes, simply deduct bad debt on line 8590. Keep all your receipts in case the CRA asks for them later.