Prosper.com is a p2p lending site on which I am a lender. I have had defaults and want to know whether I can deduct these losses on my taxes to offset the income from interest earned.
2007-10-12 12:53:34 · 2 answers · asked by Scott R 2 in Business & Finance ➔ Taxes ➔ United States
Is this legal? Do you have to be licensed in the banking industry to do this?
Just curious...
If you're not operating as a business, though, it may be difficult to prove that you're doing anything beyond spending your money in a charitable activity.
If this is a business for you, then you're suffering a business expense called "bad debts" and they are deductible. The fact that you're reporting the interest as income is evidence of an investment, so you might be okay.
If I were you, I would call the IRS and ask how they handle the transactions, whether business or personal. My guess is that they'll tell you to deduct the losses only up to the amount of interest that you've earned.
2007-10-12 21:01:46 · answer #1 · answered by Anonymous · 0⤊ 1⤋
Yes.
Schedule D.
It is treated as "non-business bad debt".
2007-10-13 03:59:21 · answer #2 · answered by Wayne Z 7 · 2⤊ 0⤋