Installment note settlement....

[Art]

Taxpayer settled an installment note receivable in Dec 2008 for about $ 15,000 less than the balance. The note was for a loan on an investment home he sold in 2000. The purchaser has been a slow payer and often delinquent on monthly payments. Attempts to collect past due amounts failed. The home was due to be foreclosed for back real estate taxes. Taxpayer is elderly and did not want to deal with a repossession, ect. In Dec the purchaser offered $ 6000 to settle the note, resulting in $ 15,000 balance left uncollected. I believe the $ 6000 has to be picked up as a payment on the note ( part interest and part principal-capital gain). Would it be correct to treat the $15,000 as a non-business bad debt loss (short-term capital loss)?

[JG EA]

Taxpayer settled an installment note receivable in Dec 2008 for about $ 15,000 less than the balance. The note was for a loan on an investment home he sold in 2000. The purchaser has been a slow payer and often delinquent on monthly payments. Attempts to collect past due amounts failed. The home was due to be foreclosed for back real estate taxes. Taxpayer is elderly and did not want to deal with a repossession, ect. In Dec the purchaser offered $ 6000 to settle the note, resulting in $ 15,000 balance left uncollected. I believe the $ 6000 has to be picked up as a payment on the note ( part interest and part principal-capital gain). Would it be correct to treat the $15,000 as a non-business bad debt loss (short-term capital loss)?

You refigure. See Pub 537 page 3 where there are worksheets for your situation.