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Shawn P Adamo
Shawn P Adamo, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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Experience:  CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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i have several bad notes receivable where the underlying security

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i have several bad notes receivable where the underlying security is lost to foreclosure. i need to know if all bad debts need to be taken on my 2010 tax return--the year the events happened or if they can be held and used later.

Taxtom :

Hello, If the debts are uncollectible then you should take them this year. If there is a slight chance of collecting any of them then you can wait. Keep in mind you will be limited to writing off only $3000 above any offsetting gains and the remaining loss will be carried forward for later years. Thanks Tom

I believe the limit may be higher than the 3,000 limit if they are short term (doubtful but well worth brining up). the term (how old are they) will force limits or not.

 

I will be happy to explain more.

 

How many different debts? How much is the total? how many are older from before 1/1/2010?

 

These answers will allow me to determine the type of writeoffs and give you a better response.

 

I would not accept until you provide the details. However,

 

If this does not answer your question please let me know.

 

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Customer: replied 5 years ago.

i have notes from '07 but the only one defunt in '09 was after the first deed of trust foreclosed on the property. original principal 11K + interest, late etc

 

others affected in 2010 were from '07 and 08 and there are 3 one principal = `16K, another 39.500 and another around 67K

 

i carried the notes and paid taxes on the interest on schedule C and wrote off prior bad debts in 2008 for a client who filed bankruptcy and i lost 70K. wrote the entire loss off in the same year. business is filed with our personal taxes and we only owed a little that yhear and converted my husband's ira to a roth.

 

this time i only really can use the 11k note to offset our tax liability. if i claim all i ned to issue 1099c to client now for 2010. if i do not have to i'll just send hte one related to the 11k principal note and hold the others.....

 

but...what about the 3k cap--i was told it was for real estate these are business debts

take the 11k as a longterm loss (or you can use asmuch as11,ooo to offset long trm gains. Th cap (3k) is the same no matter what... sorry.

 

You do NOT issue a 1099 although the loss is taxable to him.

 

 

If this does not answer your question please let me know.


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Customer: replied 5 years ago.

not clear... i am claiming the loss and he is not paying and he doesn't get a 1099C--bad debt?

 

unclear about long term gains/losses.... the business is pretty much wiped out due to loss of notes repaid. i have our joint income--social security, pension and some income from the properties i took back that are being carried by me as installment sales and i'll report that income (maybe 20K ) on schedule c as my business income. the loss i'd like to take will probably net around 16K and that will be a wash for our tax liabiliity for last year.

 

i then would like to carry (hold onto the other notes) and continue to try and collect and write off in the future.... or do you suggest i do something else. am i catching on with you.

My error. I read 1099R. I should have clarified.
Customer: replied 5 years ago.

am i okay? if i do not need the entire loss this year i can either claim and it will carry forward or i can continue to try to collect something and save for later years????

 

where will the loss show it carries forward for future years if i overclaim this year-- big deal for us is the possibility of amending our '08 return where we paid about 3k in taxes and using the current tax return to hopefully permit us to recapture that money... can't get any real dollars back but we are doing all possible with the loss.

 

i do need to issue the 1099C--right. do you know date i must do this.

 

thank you for help-- this stuff gets into my brain with some difficulty but i need to understnd and i will accept with appreciation

you can claim up to 3,000 as a long term loss. the balance carries (8,000) till next year. then offset the 8,000 with up to 8,000 of long term gains or write off another 3,000. the same going forward till it's all gone. Turbo tax (50.00) deluxe 2011 will walk you through this while it holds your hand.

 

1099c was Supposed to have been issues by 1/31/11.

 

Please, please make sure you ask any other questions. Night.

If this does not answer your question please let me know.


If this answers your question please click the green ACCEPT button and leave Positive Feedback

Shawn P Adamo, CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
Category: Finance
Satisfied Customers: 2884
Experience: CPA, Professor, CFP. CGMA, Business Consultant, Professor, PFS I have decades of experience answering these questions.
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