I am a shareholder in a multi-member LLC that shut its doors in 2013. Over the last few years we have calculated allowable losses and income using the shareholder basis which was a combination of my initial investment along with a $10K sub-debt loan to the company. However, the $10K loan made to the company which is documented by a Promissory Note, will now be a total loss since the company is no longer operating due to insolvency (bankruptcy was not filed).

With all of this in mind, can I, as a shareholder, write off that 10K loan as a non-business bad debt write off which I believe is an offset against against capital gains on my personal tax return. OR would that be dissallowed by the IRS since it was considered already in my calculations to determine shareholder basis over the last few years?

I hope this make sense. Whatever help is available is greatly appreciated.