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J.Hazelbaker
J.Hazelbaker, Attorney
Category: Legal
Satisfied Customers: 4385
Experience:  Attorney and small business owner with 10 years experience in the general practice of law.
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Do you no how you would apply this in your accounting?

Resolved Question:

Do you no how you would apply this in your accounting?
Submitted: 4 years ago.
Category: Legal
Expert:  J.Hazelbaker replied 4 years ago.

J.Hazelbaker :

Hello.

J.Hazelbaker :

It would depend on what year the loss occurred and whether you took the loss.

J.Hazelbaker :

While it is a recovery, it's still ~90% loss.

J.Hazelbaker :

While I am not a CPA, I imagine there is a method to recapture this recovery, if the loss had been taken in previous year(s).

J.Hazelbaker :

A CPA probably knows of a half dozen ways to account for this.

J.Hazelbaker :

However, legally, it is not considered "income".

Customer:

It took place in 2001 and the Business filed bankruptcey. We just received this year about $11,000 of a judgement of $130,000. I believe we only took a loss for the attorney fees only of about $45,000.

J.Hazelbaker :

The attorney fees would be a business expense, not a loss.

J.Hazelbaker :

You should have taken a loss on the bad debt.

J.Hazelbaker :

But, if you didn't you could do so now.

Customer:

I'll Check with our CPA! Thanks! for the Quick Response!

J.Hazelbaker :

Either way, the $11k is not income. But, I'm sure there is a generally accepted and well known (by a CPA) method for

J.Hazelbaker :

booking it.

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