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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28987
Experience:  Taxes, Immigration, Labor Relations
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I am selling a note that I am carrying. The note will be ...

Customer Question

I am selling a note that I am carrying. The note will be discounted. Can I take this as a tax loss?
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

Dear XXXXX,

Is that note with connection with financing the property you sold?

Or you loaned the money to someone?

 

Customer: replied 8 years ago.
It is in connection with a property my former husband and I sold and then I received the note as property settlement.
Expert:  Lev replied 8 years ago.

You will report selling the promissory note as selling the asset.

The question is what is your tax basis in the promissory note?

The IRS provides that the basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis.

So you need to identify the original basis of the note. If the basis is the face value of the note - the answer is yes - you may report a capital loss.