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Business & farm
The response depends on your method of accounting for your Sch C activity:
- If you are an accrual basis taxpayer, then you would record this on the "other expense" line and just title it bad debt.
- If you are a cash basis taxpayer, then there is no bad debt because you have never picked this up into income
- If this was truly a business bad debt, related to your trade or business (loan not repaid OR no chance of repayment), then this would be entered on Sch C other expense line. You have the burden of proof that this is a business bad debt and there are a number of hoops that you would need to hurdle to prove this.
- If this was a nonbusiness bad debt (same loan not repaid), then this is a capital loss and entered on Sch D and the applicable form 8949.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
Also keep in mind the date of replies, as tax law changes.
‎June 7, 2019
3:16 PM