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I have paid 118,000 in satisfaction of a judgment lien

I have paid 118,000...

I have paid 118,000 in satisfaction of a judgment lien resulting from a personal guarantee of a business bank loan. I have been advised to deduct it as an other deduction as well as the legal fees pertaining. Is that correct ?

Accountant's Assistant: Which tax year is the deduction for?

2017

Accountant's Assistant: Anything else you want the Accountant to know before I connect you?

The loan stems from a business that was defunct 25 years ago.

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Answered in 9 hours by:
4/14/2018
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,463
Experience: Former IRS Revenue Agent
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I'm Fiona, former IRS revenue agent. I am looking at your question and will get back to you soon. Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP,IMTA

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Dear Customer,

Depending on whether it was your business and your loan. If you guarantee as personally for someone else' business loan, it is a personal activity and personal expenses.

However, if you have had basis in this business and you have investment in the business, etc., after calculating all the money in and out of this business, this loan loss could be your investment loss. The basis calculation needs to start from day one. Make sure that the proceeds of this loan originally were used for the business and lost for the business. If you have used the loan proceeds to benefit you, yourself personally, there is no more business loss. You returned a personal loan.

Regards,

Fiona

Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,463
Experience: Former IRS Revenue Agent
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