Bad Debt-Personal or business

[Bird Legs]

Client, about 4 years ago, loaned son about $300,000. to start a limousine service.
None of this loan was repaid and in 2006 the son declared bankruptcy. The note my
client had on this loan was included in the bankruptcy, therefore, client will receive
nothing.
Is this a personal bad debt deducted on Sched. A or a business bad debt?
Client did receive a little interest on the above amount. very little.

[JON]

Is he in

the business of lending money? You still have to get through the quack theory. Did he expect to get paid, was it treated by both parties as a loan, did he pursue collection etc if he did all he probably has a personal bad debt-the IRS would love to look at and see how it quacks.

I am assuming Father never worked at the business.

[OldJack]

Sounds like it would be a non-business bad debt deductible on 1040 Sch-D.

[Bird Legs]

Jon, you are

correct. The father did not work in the business.
He did receive a little interest.
The note went into the bankruptcy court. Very little chance of getting anything.
Thanks to both of you for your response.