IT-442R "Bad Debts and Reserves for Doubtful Debts"

5. ...[A] bad debt may be claimed in a taxation year only if the debt became bad in that year regardless of how long the debt may have been outstanding. It also follows that a deduction for a debt that became bad in one taxation year cannot be deferred and claimed in a subsequent taxation year.

Where it is considered that a part of a debt is collectible and a part is not, a portion only of the debt may be viewed as a bad debt.

Deductibility of bad debt losses on ordinary principles

1. ...[W]here...a debt was of a kind that would have qualified for consideration as a bad debt had it been retained until the end of the taxation year, any loss at the time of its disposition, or later because of non-payment by the debtor, would normally be deductible by the taxpayer as a general business expense. Such loss would be deductible provided the disposition of the debt was made in the ordinary course of the business or as part of trading in accounts receivable. ...

8. ...[A] taxpayer who is in the business of purchasing trade receivables is entitled to claim as a general business expense any loss on the disposition or realization of the receivables. Similarly, a taxpayer who makes advances to an employee to be recouped out of future commissions to be earned by the employee may be entitled to deduct the non-recoverable portion of such advances as a general business expense.