Taxation, 2016 Bar — Question III

QUESTION

Rakham operates the lending company that made a loan to Alfonso in the amount of P120,000.00 subject of a promissory note which is due within one (1) year from the note's issuance. Three years after the loan became due and upon information that Alfonso is nowhere to be found, Rakham asks you for advice on how to treat the obligation as "bad debt." Discuss the requisites for deductibility of a "bad debt?" (5%)

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