Deductible & Non-Deductible Corporate Expenses Practice Test

On the approval form the IRS, a corporation may change its method from direct charge-off to reserve.

Either the reserve method or the direct charge-off method may be used, if the election is made in the corporation’s first taxable year.

A corporation is required to use the direct charge-off method rather than the reserve method.

If the reserve method was consistently used in prior years, the corporation may take a deduction of a reasonable addition to the reserve for bad debts.