Default on personal loan...where to deduct?

[AZ-Tax]

Taxpayer made a personal loan and in writing stated the borrower defaulted not collecting a penny.

Where to report this loss and if on Sch A, is it subject to 2% rule?

[Gene V]

Taxpayer made a personal loan and in writing stated the borrower defaulted not collecting a penny.

Where to report this loss and if on Sch A, is it subject to 2% rule?

Nonbusiness bad debt is deducted as a short-term capital loss on Schedule D.
See TTB 8-5/6

[AZ-Tax]

Thank you Gene

Here I was combing thru tab 4 itemized deductions for some reason I thought it would be reported there.

Thanks again

[JenMO]

Do you need to have records that you tried to collect? Or if they just havent' paid for years, is that proof enough?

[jimmcg]

In order to prove the validity of the loan you need proper documentation such as signed loan agreement with stated payment and interest terms. In order to prove the worthlessness of the loan you need to have documentation of collection attempts such as collection letters, attorney collection attempts, small claim court attempts, etc. Without documentation you are "just winging it."

[sea-tax]

From personal audit experience from a client of my firms if you don't have what Jim is talking about you will loose and get nothing.

[Davc]

Also, if this was to a related party, you need to show that it was a real loan with expectation of repayment. If there were never a payments made and it's a related party issue you're probably SOL.