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Ask Lane Your Own Question
Category: Tax
Satisfied Customers: 12691
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Client i loaned someone 15k to pay off credit cards. she would

Customer Question

i loaned someone 15k to pay off credit cards. she would clean house to pay it off. she has since been committed to aa mental health institution with no chance of paying me back. is there a tax deduction in this? thx
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.
Hi,Yes, this would be a personal bad debts deduction (personal, becasue the client is no in the business of MAKING loans)..Hang on and I'll get you the IRS guidance on this
Expert:  Lane replied 2 years ago.
Sorry , iI see that this is you now..But yes, (unless you are i the busiuness of making loans, or this is a receivable for sales), this is a "non-business bad debt.".Report a nonbusiness bad debt as a short-term capital loss on Form 8949 (PDF), Sales and Other Dispositions of Capital Assets, Part 1, line 1. Enter the name of the debtor and "bad debt statement attached" in column (a). Enter your basis in the bad debt in column (e) and enter zero in column (d). Use a separate line for each bad debt. It is subject to the capital loss limitations. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return.Reference URL:
Expert:  Lane replied 2 years ago.
Let me know if you have questions ...If this HAS helped, I'd appreciate a positive rating, using the smiley faces or stars on your screen ... that's the ONLY WAY I'm credited for the work here. Let me know ... Lane