2006-09-08 22:48:36 · 3 answers · asked by MARK W 1 in Business & Finance ➔ Taxes ➔ United States
I am an attorney. If you forgive a personal loan, you may be able to write it off as a short term capital loss on your Schedule D. You will receive a deduction for that amount whether or not you itemize. However, the debtor will have to declare this amount as income and pay taxes on it. Alternatively, if you forgive a loan and view it as a gift, then there is no deduction to you and no income to the other person. It will be a bit different in a business situation (bad debt will be a business expense rather than a capital loss) but the gist is the same: someone has to pay taxes.
Best,
D. Lev, Esq.
Boston, MA
2006-09-09 06:29:10 · answer #1 · answered by D Lev, Esq 2 · 0⤊ 0⤋
D Lev, Esq is correct. Also note: interest charged on the loan is taxable.
2006-09-09 13:08:16 · answer #2 · answered by STEVEN F 7 · 0⤊ 0⤋
Possible, but unlikely. If you could prove you have done everything reasonable to collect, it may be deductible as a bad debt.
2006-09-09 05:48:44 · answer #3 · answered by sselfe 1 · 0⤊ 0⤋