ABC Motor Company provides the financing. ABC sells D's note to EF Financing. The sale of the note is a sale with recourse. D, after making several payments defaults on the note. D makes several payments and then defaults.
Circumstances indicate that the debt is uncollectible.
However, if the note is sold to EF without recourse, ABC is not liable to EF for the amount in default and therefore, is not entitled to a bad debt deduction. The following ruling is given based on the facts presented in your request. This response is a private taxpayer ruling and the determination herein is based solely on the facts provided in your request. The determination in this taxpayer ruling is the present position of the department and is valid for a period of four years from the date of issuance except as set out herein. This determination is subject to change should the facts prove to be different on audit.