Discussion:Non-Business Bad Debt
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| Revision as of 12:05, 18 March 2008 Death&Taxes (Talk | contribs) (Was the business) ← Previous diff |
Revision as of 13:57, 18 March 2008 Skhyatt (Talk | contribs) (My understanding) Next diff → |
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| {{ForumReplyPost|UserID=Death&Taxes|Date=18 March 2008|Text=Was the business incorporated? The bankruptcy of a corporation, and its failure to be listed as a debt there, might have little to do with the personal debt if he has not filed for personal bankruptcy. Yet, I would think a little more has to be done than simply tearing up the note and writing it off.}} | {{ForumReplyPost|UserID=Death&Taxes|Date=18 March 2008|Text=Was the business incorporated? The bankruptcy of a corporation, and its failure to be listed as a debt there, might have little to do with the personal debt if he has not filed for personal bankruptcy. Yet, I would think a little more has to be done than simply tearing up the note and writing it off.}} | ||
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| + | {{ForumReplyPost|UserID=Skhyatt|Date=18 March 2008|Text=My understanding is that even if you took the Son to court and obtained a judgment, that wouldn't exclude you from writing off the bad debt, if you can show it would still be uncollectible. Having said that, you guys have made good points. I need to ask the client a couple more questions. Thanks for the replies.}} | ||
Revision as of 13:57, 18 March 2008
Discussion Forum Index --> Advanced Tax Questions --> Non-Business Bad Debt
Discussion Forum Index --> Tax Questions --> Non-Business Bad Debt
| 18 March 2008 | |
| I have a client who loaned her Son approx 60K for his business back in 2002. His business went bankrupt and she is asking me if she can write this off. As I read Section 166, I cannot see a reason why she can't. Am I possibly missing/forgetting something here? | |
Michaelstar (talk|edits) said: | 18 March 2008 |
| Was this debt listed in the business bankruptcy? In order to be able to deduct this as a non-business bad debt (unless client is in the business of making loans this is non-business) there needed to be a legitimte loan. If it was listed in the bankruptcy that provides credence that this was a true loan and not a gift. Also, did your client ever receive and/or report interest income from payments made on the loan? | |
| 18 March 2008 | |
| No it wasn't listed in the bankruptcy. She did mention that to me. There was a promissory note that they had drawn up by an attorney calling for annual interest payments to be made @ 7%. No payments were ever made. The note became fully due and payable on 12/31/06. | |
| 18 March 2008 | |
| Gee. If it is not listed in the bankruptcy. She not stopped from collections. | |
Death&Taxes (talk|edits) said: | 18 March 2008 |
| Was the business incorporated? The bankruptcy of a corporation, and its failure to be listed as a debt there, might have little to do with the personal debt if he has not filed for personal bankruptcy. Yet, I would think a little more has to be done than simply tearing up the note and writing it off. | |
| 18 March 2008 | |
| My understanding is that even if you took the Son to court and obtained a judgment, that wouldn't exclude you from writing off the bad debt, if you can show it would still be uncollectible. Having said that, you guys have made good points. I need to ask the client a couple more questions. Thanks for the replies. | |
