It can be claimed on a business schedule as a business bad debt or on schedule D as a non-business bad debt.
A business bad debt is a loss from the worthlessness of a debt that was either created or acquired in a trade or business or closely related to your trade or business when it became partly to totally worthless.
All other bad debts are nonbusiness. Nonbusiness bad debts must be totally worthless to be deductible. You can't deduct a partially worthless nonbusiness bad debt.
To support the claimed bad debt deductions, you need to show that: (1) the Loans were properly treated as debt for federal income tax purposes, and (2) that they became worthless during the taxable year.
Be sure you have not already written off the loan by claiming losses from the business. You can't deduct it twice.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
