I loan my son in law (now ex son I law) money to payoff some high interest loans he had a couple of years ago now that my daughter and him have split he has stop paying me back.
My question is can I take the remaining amount owed and take it off as a loss on my 2015 taxes? ======> I think so; you have a Non BIZ bad debt as you’re owed money and you can’t collect it from him as short term capital loss NOT ordinary losses on your SCh D of 1040; to claim the bad debt,
there has to be a debtor-creditor relationship, and there has to be a valid and enforceable obligation for repayment; the debt must be totally worthless. Unlike business bad debts, you can’t take a deduction for partially worthless nonbusiness bad debts. A debt becomes worthless when you know there’s no chance you’ll be repaid and you’ve taken reasonable steps to collect the debt. You don’t have to sue him to prove that the debt’s uncollectible, either.
And what do I need to support this in paper work for the IRS.
I got his name, SSI number and other information as I did his taxes last year.=======>>as said, you can take the deduction by claiming a short-term capital loss on Sch D of your Form 1040 tax return. On the sch D of 1040, you’ll give the name of the debtor and the amount of the bad debt. You also need to attach a separate statement to your 1040 that: describes the debt, including the amount, and the date it became due ; specifies the debtor’s name and any business or family relationship between you and the debtor; How you tried to collect the debt ; Why you determined that the debt was worthless. If you Miss a Deduction, then you need to file amended return, 1040X, I mean for the year the debt became worthless.; You need to file the 1040X within 7 years, NOT 3 years, from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later.
Note;your Nonbiz bad debts are treated as STCL. Such losses are first deducted from your STCG, if any. If your net short-term losses exceed your short-term gains, your net STCL are then deducted from your totalLTCG for the year. If your net short-term losses exceed the LTCG, the excess short-term loss is deductible against up to $3K of your other income. Any amount remaining can be carried forward and deducted in future years.