Discussion:Business v nonbusiness bad debt
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Discussion Forum Index --> Tax Questions --> Business v nonbusiness bad debt
| 17 December 2007 | |
| Client loans money to an LLC. He is minority member, passive. He has a separate consulting business. He bills the LLC for services he provides through his business.
LLC is failing and has no ability to repay the loan. Client is going to walk away. The language of the Code and Regs leads me to believe that this debt is nonbusiness. I can't find anything exactly on point, and it's obviously a bad result. Can anyone point me to definitive discussion? Of course I would like to treat this as business debt if possible. Am I missing anything? As always, thanks for any help. | |
| 17 December 2007 | |
| [Bad Debt Deduction]
[[1]] Does the LLC owe client $ on consulting? If client never claimed the consulting income, then no deduction. Good Luck | |
TheTinCook (talk|edits) said: | 17 December 2007 |
| I think you could make a strong case for it being a business debt since he has a ownership interest in the LLC and he provies services to the LLC. The bigger issue is one of worthlessness. | |
| 18 December 2007 | |
| I think the only chance of arguing business b/d is to argue that he made the loan specifically to enable the LLC to utilize his services. If there is no link between the services provided and the loan made, its personal. | |
| 18 December 2007 | |
| Loan was made to the LLC to fund the business at inception, when they anticipated a profitable venture. He can bill the LLC for services rendered, but I would be hard pressed to make a case that the loan related to the consulting business. He was the money behind the LLC's start-up phase. Sounds nonbusiness, doesn't it? Thank you all for your help. | |
Death&Taxes (talk|edits) said: | 18 December 2007 |
| I will probably be accused of working for the IRS, but I agree with you Jessica. | |
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