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My boss personally lended an individual 100000 and the

My boss personally lended...

My boss personally lended an individual 100000 and the balance is now 82000, the person he landed this money to has stopped making payments, how can he claim this on his taxes and what tax from should go to the person who borrowed the $

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Answered in 8 minutes by:
1/5/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,847
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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If someone owes you money that you can't collect, you may have a bad debt. As long as this loan was not to an employee and your boss is not in the business of making loans this is a Nonbusiness bad debt.

Nonbusiness bad debts must be totally worthless to be deductible. You can't deduct a partially worthless nonbusiness bad debt.

A debt becomes worthless when the surrounding facts and circumstances indicate there's no reasonable expectation that the debt will be repaid. To show that a debt is worthless, you must establish that you've taken reasonable steps to collect the debt. It's not necessary to go to court if you can show that a judgment from the court would be uncollectible. You may take the deduction only in the year the debt becomes worthless. You don't have to wait until a debt is due to determine that it's worthless.

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's subject to the capital loss limitations. A nonbusiness bad debt deduction requires a separate detailed statement attached to your return. The statement must contain: a description of the debt, including the amount and the date it became due; the name of the debtor, and any business or family relationship between you and the debtor; the efforts you made to collect the debt; and why you decided the debt was worthless.

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Customer reply replied 4 months ago
Do I send the debtor any form such as a 1099c?

No, those are sent by banks and lenders that are in the business of making loans.

The statement sent with the return tells the IRS all they need to know.

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Did that clarify?

A positive 5 star rating is appreciated so I am credited for assisting.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,847
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
Robin D. and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
Although this was a personal loan, my boss has a pattern of owning personal notes, this being said, does it change anything? Would I send the debtor anything? would my boss still file on form 8949?

No, the answer does not change.

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Experience: 15years with H & R Block. Divisional leader, Instructor

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