@steve701 wrote:
Ok, thanks for the input everyone. I should have mentioned it was a personal, not business case.
I was thinking along the lines of it being something like a "bad debt"..
Unfortunate to think that scum got away with everything....
A non-business bad debt could be deductible, but you have to have a real loss, not just an unpaid judgement. In other words, if you already paid someone $15,000 out of your existing funds, and they failed to do whatever was promised in return, that can be treated as a bad debt (non-business meaning you are not in the business of being a lender).
Or to explain another way, if someone promised to pay you something that would have been taxable income to you and they don't pay, your tax "reduction" is that you don't have income so you don't pay tax, but you can't take a separate deduction. But if you pay someone else and they don't pay you back (in money or services) then you have a deductible bad debt. I think we didn't ask enough clarifying questions about the judgement.
You need to have a legitimate contract with them (so lending money informally to a family member who doesn't pay you back is almost never allowed); and you must have exhausted all reasonable efforts at collection. Then, the bad debt is treated as a capital loss, you can deduct up to the amount of your capital gains this year, plus $3000, and carry forward any remaining undeducted amount to the next tax year.
Do you want to clarify the circumstances of the judgement?
https://www.irs.gov/taxtopics/tc453
