At first I thought it should go on Sch D but then again I tought Sch A misc but I dont see a place for it on the Misc Itemized Deduction Statement.
Any help would be appreciated.
Any help would be appreciated.
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The first thing
you need to do, assuming this is a client loan and you're preparing the return, is to get a
copy of the loan agreement signed by both parties. Well, at least I would, because.....
IRS would seize upon a verbal personal loan in a moment and deny any deduction.
So assuming all the ducks are in a row, it's a non business bad debt.ChEAr$,
Harlan Lunsford, EA n LA -
Non-business bad debt is short term capital loss. How to report is covered in Pub 17 chapter 14.
Basically, on Schedule D part I enter the name of the debtor and "statement attached". Then the statement needs to contain a description of the debt including the amount and date it became due. The name of the debtor and any business or family relationships. The efforts taken to collect the debt. Why the debt was worthless. "For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt."
I've never actually done one myself, as it always ends up being something like a parent "loaning" their kid money for a car and then when the kid doesn't pay up the parent just wants to forget about it and write it off. There needs to be legitimate collection attempts.Comment
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