Question
Hi everyone,
I’m working on my 2025 tax return and could use some guidance on how to properly report a loan that I believe is now uncollectible.
Back in 2019, I lent $30,000 to an LLC (formal promissory note, interest-bearing, tied to a real estate project). The terms specified repayment upon sale/refinance of the property. The property was eventually sold, but I never received any repayment.
I recently learned that:
* The LLC is now out of business
* There appears to be no personal liability for the owner
* A debt collection agency has suspended efforts due to lack of recovery prospects
At this point, I believe the debt is effectively worthless.
My questions:
1. Is this correctly treated as a **nonbusiness bad debt (short-term capital loss)**?
2. Is 2025 the right year to claim the loss based on when I determined it’s uncollectible?
3. On Form 8949, is it correct to report:
* Proceeds = $0
* Basis = $30,000
* Description as “Nonbusiness bad debt”?
4. Are there any additional statements or documentation I should include with the return?
I want to make sure I handle this correctly and defensibly.
Thanks in advance for any insights!
Enter your E-mail address. We'll send you an e-mail with instructions to reset your password.