Client was holding a note through his S corporation due from another S corp. Client's corporation assigned the note to himself when the corporation was sold to another party.
Since holding the note, personally, he has received no payments, and the owner of the S corp has indicated he is unable to pay, though still in business. As I know both parties and have prepared monthly write ups and tax returns for each, I'm comfortable that the debtor corp and debtor guarantor can't pay and is merely surviving. Believe we can write off the debt, $ 11,000.00, on my client's Sch A and Form 2106. Any future recovery, we would treat as Other Income on Line 21. Should mention that the client doesn't want to take legal action against the debtor. Are we in the right place?
Since holding the note, personally, he has received no payments, and the owner of the S corp has indicated he is unable to pay, though still in business. As I know both parties and have prepared monthly write ups and tax returns for each, I'm comfortable that the debtor corp and debtor guarantor can't pay and is merely surviving. Believe we can write off the debt, $ 11,000.00, on my client's Sch A and Form 2106. Any future recovery, we would treat as Other Income on Line 21. Should mention that the client doesn't want to take legal action against the debtor. Are we in the right place?
, and refers you to Pub 550.
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