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Any way to get a tax loss here?

7 years ago I lent someone $100,000. He put up gems worth $150,000 as collateral; with the understanding that they would be sold to pay off the loan. We sold $20,000 worth and figured it wouldn't take too long to finish up. Then 9/11 happened, the market for gems collapsed and hasn't recovered.

Needless to say, he defaulted on the loan; owing me $80,000 and leaving me gems worth maybe $50,000. The person selling them hasn't been able to move much since then, but swears the market will recover and I should hold off on panicking.

Is there any way to take my $30,000 loss, and if I ever sell the gems for more than $50,000 pay capital gains? Or am I just stuck doing nothing until I dump them?

Yeah, I understand that it sounds like a scam, but it really wasn't. The valuation was done by my jeweler, I got 2% of the company and 12% interest. At the time it was a viable company and a reasonable investment.

Reply to
Taxlover
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No. The debt is not worthless. It has been satisfied. You have a basis in the gems of $80k.

Reply to
D. Stussy

So I don't have a loan loss at all; I have some gems I will probably sell at a loss?

Reply to
Taxlover

You don't have a loss yet. You have two options. One is to sell the gems now, and when they are all gone you can take whatever loss you have. The other is to wait until later, and at that time take whatever gain or loss there is.

Stu

Reply to
Stuart Bronstein

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