In determining how you deduct a loss, you first have to establish whether it is a business bad debt or a nonbusiness (personal) bad debt. Read the above and then look at IRS Publication 550 or 535. Use Google to locate the publications by entering your keywords: “Publication 550,” etc.
As Rich says, check with your CPA, but first look at the information contained in the references so that you can be informed before asking your questions.
I loaned a individual money and took a second mortgage on his property for security. He has failed to repay the loan and there is no equity in the property. I was told that I can write off the bad loan from my income taxes if he declares bankruptcy. Isn’t there any other way to write it off since it is obvious he has no intention to repay the loan? Any thoughts would be appreciated.
Posted by M.Osterman on October 28, 2008 at 07:37:40:
That’s not worthless.
I would sue him and get a judgment. Then you’ll learn how to levy a bank account, garnish wages…or my favorite…3rd party examination on someone else. Not to mention you can file an abstract in the county he lives in.
I live in California…you’ll have to check out your own state laws…