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Writeoff Bad Debt - Bankrupcy ?

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J

john1234567

Junior Member
What is the name of your state? CA

Hi

A guy I loaned money to about 6 years ago has file bankruptcy and I have been notified of the "Discharge of Debtor".

The orginal loan was for 10K, but at the time of bankruptcy he owed me about 17K.
I was not given any information on how much debt was listed on the bankruptcy procedings.

Will I be receiving some sort of 1099 type tax paperwork ?

I assume I can write-off the loan on my taxes but how much ?

And does it have to be off set by Capital Gains or anything like that ?

Thanks
John.
 


T

TinkerBelleLuvr

Senior Member
Have you declared the income on your taxes to make the debt grown from $10K to $17K? This would have been interest income.
 
Last edited:
LdiJ

LdiJ

Senior Member
john1234567 said:
What is the name of your state? CA

Hi

A guy I loaned money to about 6 years ago has file bankruptcy and I have been notified of the "Discharge of Debtor".

The orginal loan was for 10K, but at the time of bankruptcy he owed me about 17K.
I was not given any information on how much debt was listed on the bankruptcy procedings.

Will I be receiving some sort of 1099 type tax paperwork ?

I assume I can write-off the loan on my taxes but how much ?

And does it have to be off set by Capital Gains or anything like that ?

Thanks
John.
Click to expand...
If you were listed as a creditor in the bankruptcy proceedings then you should have received some kind of paperwork from the bankruptcy court...but no, you won't receive a 1099. A 1099 is for income received by you.

A nonbusiness bad debt is reported as a short–term capital loss in Part 1 on Form 1040, Schedule D. It would be subject to the capital loss limitations. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return.

Read through the information here and the related links:

http://www.irs.gov/taxtopics/tc453.html
 
A

abezon

Senior Member
The debt is $10,000. Because you weren't declaring the interest as income, the deductible bad debt is the original $10,000. If you were declaring the interest, then you're an accrual-based taxpayer & have a fancy accountant already.
 
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