bad debt

[jrm0rgan]

I loaned my business money.  I have promissary notes signed by myself and my business partner (we had an LLC)

We had to close in 2020 due to Covid.  There was no money to pay me back.  Can I deduct the loans on my taxes?  I also have a $90,000 capitol account of which is a loss.  Can I write this off?

[AliciaP1]

Your final partnership tax return would have addressed this on the Schedule K-1 Form 1065  you should have received.  That K-1 would then be reported in the tax year that it represented.  Since you stated your business closed in 2020, the final partnership return should have been filed for 2020, and your 2020 Schedule K-1 would have been reported on your 2020 taxes.  If the final return is not being filed until 2021, then your 2021 K-1 needs entered and has the info to address this situation.

[Mike9241]

there is a need to prepare and file a partnership return.  where did the money go?  perhaps you are better off consulting a tax pro because certain answers can lead to more questions and we can go back a forth on this forum. a pro can discuss things and if more info is needed ask about that in a timely fashion.

failure to file a partnership return where there are two partners can result in a penalty of almost $5,000

[jrm0rgan]

i did file business taxes and have a k1

[ThomasM125]

The loan is a non-business bad debt and can be entered in the Deductions and Credits section of TurboTax under Other Deductions and Credits, and then Nonbusiness Bad Debt.

The capital you lost in the investment is a loss on investment, so you enter it as an investment sale, by reporting the sales proceeds as -0- and the cost basis as the amount of money you invested that you didn't recover.

Follow these steps to enter your investment sales in TurboTax:

While in the Federal section of TurboTax:

  1. Income and Expenses

  2. Investment Income

  3. Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)

Choose the category of investment you want to enter and follow the instructions to enter your investment sale.