Bad Debt Tax write-off (From Bankruptcy)

[mindy1701]

What is the name of your state?
Mindy Johnson
California

I have a loan owned to me and the person has files Bankruptcy.
I have notice of "report of no Distribution" for the loan.

The loan was made in 2001 and none of it has been repaid.

Questions
#1: Can I write-off the loss of this loan?

#2: If so how much?
The Original loan was 10K but with interest it is now around 17K.

#3: If I can write it off, what types of gains can I use it against?
Capital Gains - Normal income - etc.

#4: If I don’t have enough "gains" in a given year can I roll it to the next years "gains”?

#5: I have until Aug 9th to file any "Objections" to the court.
Do I need to find out the "Stated Value" of the loan and "Object" if it does not match my records (interest and such)?
I assume this is going to effect how much I can write-off.

Also I may need to generate some capital gains if these are the only thing I can offset against.

Thanks
Mindy

 

[tranquility]

Was the debt created or acquired in connection with your trade or business?

If not, when it becomes totally worthless (when the court makes the BK final), it is a short term capital loss. The "debt" is what is deductible and not the interest on the non-paid debt. Think about it. Did you report the interest as income?

You will then follow the capital loss rules regarding how to reduce your income. (Generally, up to $3,000 more than your capital gain.)

 

[bandittheman]

is legal fees deductable on a case like this ?