uncollectible Debt

[superman]

client has loaned money to kids to start business from home equity loan. Business is now bankrupt and no chance of getting the money back. Can client claim this on his tax return as a business loss if he has the kid sign a promisary note and then he is just added as a debtor? Interesting question but could not find the answer.

Thanks in advance for any guideance.

Superman

[Gretel]

client has loaned money to kids to start business from home equity loan. Business is now bankrupt and no chance of getting the money back. Can client claim this on his tax return as a business loss if he has the kid sign a promisary note and then he is just added as a debtor? Interesting question but could not find the answer.

Thanks in advance for any guideance.

Superman

Some questions:

When was the money loaned? Was promissory note done at that time? How about interest payments?

Sons biz = Sch. C?

Why do you think this could be a biz loss when it looks like a personal loan?

What did T/P do to collect debt?

[superman]

good questions

The money was loaned over a period of time. They never tried to collect the debt it was pay back when you can. No interest payment at all ever collected. It does look like a personal loan but now wants some tax savings. I think no but wanted to confirm my thought.

[Gretel]

Strongly confirmed NO.

[DaveO]

Agree with Gretel, looks like a gift, smells like a gift etc. I always insist on lot's of information on personal loan bad debts.