Purchased business asset-never delivered

[JenMO]

So, if we prove theft by fraud, I can deduct on Sch C? if only considered bad debt, then Sch D, short term loss? We can prove no trler, bank has records of loan and money sent, and there will be no registration of trler because trler was not received. If TP had received trler we could exp179 it, so why would we try to get a deduction for a loss we don't deserve. I have told TP, if eventually they would receive the trler ( they say they won't ever get it) we would have to report.

[Zee]

So, if we prove theft by fraud, I can deduct on Sch C? if only considered bad debt, then Sch D, short term loss? We can prove no trler, bank has records of loan and money sent, and there will be no registration of trler because trler was not received. If TP had received trler we could exp179 it, so why would we try to get a deduction for a loss we don't deserve. I have told TP, if eventually they would receive the trler ( they say they won't ever get it) we would have to report.

IMHO, I would classify this as theft loss (cash) and take a 100% deduction on the Schedule C, but only if the taxpayer could document his attempts to contact the seller with no avail and after reporting the incident as a theft loss to the local police (and obtaining a copy of the report)in the seller's state.

I stand corrected. I also agree with Soloman's earlier post, this is not a Schedule C deduction:

Originally Posted by solomon View Post
Assuming the dealer is in violation of his state law, I think §165(c)(1) would be the appropriate treatment. This then would go in Sec. B of Form 4684 and thus end up as an ordinary loss on Form 4797.



Here's a link to Revenue Ruling 2009-9 that might help. But, it is more related to an investment loss.

http://web20.nixonpeabody.com/globaltaxblog/Blog%20Attachments/Revenue%20Ruling%202009-9.pdf

[Jesse]

It may not seem fair but, unless it's inventory I do not believe you can take a Schedule C deduction. I think you need to follow as Solomon suggested.

Assuming the dealer is in violation of his state law, I think §165(c)(1) would be the appropriate treatment. This then would go in Sec. B of Form 4684 and thus end up as an ordinary loss on Form 4797.

From Form 4797 it is then entered on page one of Form 1040; you do not enter the amount on Schedule C.


Look over Publication 547: http://www.irs.gov/publications/p547/ix01.html

However, I've been wrong before!

[kaimana]

1. it does not qualify as a deduction on any form unless and until it is documented that the money paid cannot be recovered.
2. it cannot be depreciated on Sch C because it was never received.
3. Like any other "loss", once it has been documented as a loss by means of criminal, civil or other action...only then can it be deducted and at that time theft/loss form linked to Sch C would be the appropriate way to deduct it.

[newbie]

1. it does not qualify as a deduction on any form unless and until it is documented that the money paid cannot be recovered.
2. it cannot be depreciated on Sch C because it was never received.
3. Like any other "loss", once it has been documented as a loss by means of criminal, civil or other action...only then can it be deducted and at that time theft/loss form linked to Sch C would be the appropriate way to deduct it.

If it has been documented as a loss by means of criminal, civil or other action where on schedule C would you deduct it?

[kaimana]

"only then can it be deducted and at that time theft/loss form linked to Sch C would be the appropriate way to deduct it"