Bad Debt - Schedule D - Uncollected or Worthless Loan

Apr 09, 2011 1 Replies

I have a loan I made in Dec. 2005 in the amount of $8,500. There is a signed, notarized loan document.



$8,000 remains unpaid. I obtained legal services some time ago to pursue the debt. The court ruled the defendant in default, but she resides in FL, which apparently is a debt haven. (She has a child, which I think is preventing the garnishment of wages.)



I am considering writing this off for a fraction of its value as a deduction, hoping to stick her with it as income.



I need some advice on filling in blanks properly. Parentheses tentative.



Property Description: _____ (Personal Loan, Name) Date Acquired: _____ (Dec. 2005) Cost or Other Basis: ____ ($8,500) Date Sold: _____ ??? Today's Date? Gross Proceeds_______ ($500) Special Type _______ P - Personal etc., etc.



Is this the proper way to get the best advantage from this?



Thanks in advance.


I'm assuming this wasn't in the course of your trade or business, so it's a "nonbusiness bad debt." See Publication 550 for how to report it.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

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