Contractor paid in full but job never finished. In 2020 suit filed with $5,500 judgment in my favor but the contractor is now in prison for nonrelated issue. His attorney advises he has no funds nor assets. Can loss be claimed on 2020 taxes?
On your 2020 tax return, you can deduct the amount you paid to the contractor for the unfinished job (if paid in 2020). But you cannot deduct the uncollected $5,500 judgment.
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Thank you MinhT1. May I ask why IRS form 8949 may not be used to claim the loss of the funds? I have reviewed IRS publication p550 on the Topic number 453 on a Bad Debt Deduction for Nonbusiness Bad Debts, and the instructions for the use of IRS form 8949 and specifically page 54 on Nonbusiness Bad Debts, and this appears to be the avenue to address the referenced loss.
In a follow up to my investigation of this issue I did a search on this platform on the question:
Court Judgment Bad Debts, and I note the Best Answer posted by JulieR on a artist works sold by dealer and her reply that appears to reinforce my observation on if this loss of mine may be deducted and if so how to enter in Turbo Tax. Again, thank you for your review and input.