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MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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I started a C-corp on 5/1/08 and loaned the corporation money

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I started a C-corp on 5/1/08 and loaned the corporation money for start up costs. I also gave the corporation a small line of credit for start up expenses, including pay roll, office supplies, vendors, legal fees, etc.. The corporation closed in December of 2008. They repaid part of the fees, but over $7K remained unpaid. Can any of that be written off on my 2008 taxes? If so, where would I enter that in TurboTax Online?



To determine if you have a bad debt or a capital loss, you must first determine if the amount was actually a loan or whether it should have been classified as a capital contribution.


If it was a loan it will probably be classified as a business bad debt. See link to IRS Publication 535 below. If a non-business bad debt, see Publication 550 (link below).


If the amount should have been a capital contribution, you will have a capital loss on disposal of stock.


Business Bad Debt, see page 37:


Non-business Bad Debt see page 53:


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