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A cash basis taxpayer prepaid $10,000 to have improvments made to his swimming pool, The contractor only made $2,000 of improvements and then ceased activity, leaving the remainder of the work uncompleted.

I was wondering if this taxpayer can claim a non business bad debt deduction for the amount above the adjusted basis of $2,000?, the only problem is that this doesn't seem like it is a bad debt because it is a prepayment and the debt is not entiely worthless. Can anyone help me??

Thank you,

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