Discussion:Business Bad Debt Question
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Discussion Forum Index --> Basic Tax Questions --> Business Bad Debt Question
Discussion Forum Index --> Tax Questions --> Business Bad Debt Question
Ljcollinscpa (talk|edits) said: | 8 February 2008 |
| I have a client that made a $40,000 loan to his S corp that is now basically worthless (business assets are sold and no other assets are remaining except the loan I will describe below). I learned from all of you that I should report it on his 1040 on form 4797 as a business bad debt. My question is, the Corporation has an outstanding note for $8,000 that will be repaid over the next two years. This will in turn reduce the Loan from SH balance to $32,000 as the client will use the loan proceeds he receives to pay down the balance of the Loan from SH. Can he deduct the $32,000 as a Business Bad Debt this year or does he need to wait until the $8,000 note has been paid? I've read (and re-read) Section 166 on Business Bad Debts and I'm still confused. Thanks! | |
RoyDaleOne (talk|edits) said: | 9 February 2008 |
| My commentis I am pretty sure you don't mean that it is a business bad debt, because, one such loan does not make your client in the business of making loans. Therefore, it is probably a non-business loan. Why not:
1. assign the outstannding note receivable to shareholder as part payment on the s/h loan, 2. Close the Corp and winding it affairs, 4. Take a non business bad debt on schedule D. | |
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