A nonbusiness bad debt is reported as a short-term capital loss. In the Search box type "nonbusiness bad debt" (without the quotes), then click the link that says "Jump to nonbusiness bad debt."
- The first screen asks if you sold any investments. Click Yes.
- The next screen asks if you got a 1099-B. Click No.
- The next screen asks you to choose the type of investment you sold. Select "Uncollectible Debt (Nonbusiness Bad Debt)" and click Continue.
- On the next screen, enter the information that it asks for about the loan.
TurboTax will enter the uncollectible amount in Part I of Form 8949 with box C checked, and the loss will flow to Schedule D line 3. An explanation statement will be included in your tax return, with the information that you entered about the loan.
See the following topic on the IRS web site for information about deducting a nonbusiness bad debt.
Topic No. 453 Bad Debt Deduction
