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Old 07-06-2016, 03:16 PM
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Uncollectible promissory note

Hello!

I sold my interest in an LLC and received a promissory note for monthly payments. After 5 payments the note became non collectible. The balance is $90k. I use cash method of accounting. Can I write this balance off as a loss against my other income?

The only amount I have previously declared as income was the 5 payments that I did receive.

TIA - your expertise is appreciated.



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Old 07-06-2016, 06:15 PM
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I sold my interest in an LLC and received a promissory note for monthly payments. After 5 payments the note became non collectible. The balance is $90k. I use cash method of accounting. Can I write this balance off as a loss against my other income?=========>In general, You have a bad debt if you cannot collect money owed to you. A bad debt is either a business bad debt or a nonbusiness bad debt; Your primary motive for incurring the debt must have been business related. Generally, ypu may report your business bad debts as ordinary losses on Form 1040 using Sch A. If you didn't take a deduction on your original return for the year it became worthless, you can file a claim for a credit or refund.As the debt is partially worthless, you must file a claim by the later of: 3 years from the date you filed your original return, or 2 years from the date you paid the tax.Depending on your type of business, you claim a refund or credit by filing Form 1040X if you're an owner of a one-person limited liability company, or Form 1065 if you're in a partnership or a multi-owner limited liability company
?

The only amount I have previously declared as income was the 5 payments that I did receive.==>As mentioned previously; Generally, you can take this deduction only if you can show the debt is a bona fide debt owed to you have a basis in the debt;the debt arose from your trade or business, and the debt became entirely or partially worthless.



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