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When You Are Left Holding the Bag (and the Bad Debt)

The recent closing of Dean & DeLuca in St. Helena has impacted many local businesses, including wineries who may have had outstanding invoices due from the luxury food and wine store at the time of the closing.

While there have been numerous reports and articles about the demise of its parent company, Pace Development (owner since 2014), no official bankruptcy proceedings are currently underway.  In interviews as recent as July, Sorapoj Techakraisri, the company’s chief executive has maintained his intention to pay vendors for amounts owed. 

So what is a Napa winery to do about those customer invoices that remain unpaid (and probably past due) on their books?  For income tax purposes, the winery must prove that a debt is worthless in order to take a bad debt deduction. 

The IRS offers the following “identifiable events or facts” which might substantiate a claim of worthlessness when a debtor has:

  • Serious financial reverses
  • Insolvency (Author’s note: A taxpayer is insolvent when total liabilities exceed total assets.)
  • Abandonment of business (Author’s note: not just abandoning a store location.)
  • Bankruptcy or receivership

Based on Pace Development Corporation’s reviewed financial statements published in August of 2019  by EY’s Bangkok office, the company’s assets exceed their liabilities. The company is not insolvent as of the date of the report.   

Wineries with unpaid invoices due from Dean & DeLuca should therefore wait until the end of 2019 to determine if the bad debt can be written off as uncollectible at that time. 

 

EXCITING NEWS!  BDCo has moved to NAPA. 

After spending more than 30 great years as a resident of St. Helena, BDCo began a search in 2019 for a new office location in Napa that would better suit its needs. The goal was to improve the life/work balance for members of the team without inconveniencing our customers. Our newly completed Napa home meets our requirements perfectly and we can't wait to welcome you for a visit once we are all able to move about freely. 

For now, our office remains closed to visitors and much of our staff will continue to work remotely at their discretion and in accordance with current safety regulations. 

Our new address is :

Brotemarkle, Davis & Co. LLP
1000 Main Street, Suite 250
Napa, CA 94559 

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