Solved: After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.
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New Member

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

After how many years can I claim a non business debt.  My lawyer passed away on December 2005, I loaned him money in September 2005 to be re-payed in December 2005 (With Interest) but he never re-payed the loan. I filed Papers with Supreme Court on  March 2007. Family never had any probate because the Lawyer was involved in a" Ponzie"  scheme and the family is broke. I've exhausted every avenue but unable to recover any monies either from the attorney general of New York or the Family.


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Level 15

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

  1. A claim for refund or credit based on a bad debt deduction under IRC Section 166 or Section 832(c) or a worthless security loss under IRC Section 165(g) may be filed within seven years from the due date of the return for the year with respect to which the claim is made (determined without regard to any extension of time to file). See IRC Section 6511(d)(1).

  2. If the deductibility of the bad debt or worthless security loss affects a Net Operating Loss (NOL) carryback, the period is the later of:

    1. Seven years from the due date of the return for the year in which the NOL arose (determined without regard to any extension of time to file), or

    2. See IRM 25.6.1.10.2.8.1Net Operating Loss (NOL) Carryback or Capital Loss Carryback, the period for which the NOL arose.

  3. Limitation. The overpayment must be attributable to the deductibility of the bad debt or worthless security loss.

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6 Replies
Level 15

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

I suppose you could take a bad debt deduction, but it may now be past the Statute of Limitations to do so.
Level 15

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

  1. A claim for refund or credit based on a bad debt deduction under IRC Section 166 or Section 832(c) or a worthless security loss under IRC Section 165(g) may be filed within seven years from the due date of the return for the year with respect to which the claim is made (determined without regard to any extension of time to file). See IRC Section 6511(d)(1).

  2. If the deductibility of the bad debt or worthless security loss affects a Net Operating Loss (NOL) carryback, the period is the later of:

    1. Seven years from the due date of the return for the year in which the NOL arose (determined without regard to any extension of time to file), or

    2. See IRM 25.6.1.10.2.8.1Net Operating Loss (NOL) Carryback or Capital Loss Carryback, the period for which the NOL arose.

  3. Limitation. The overpayment must be attributable to the deductibility of the bad debt or worthless security loss.

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New Member

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

Thank you so much.
Level 5

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

You report the bad debt when it became worthless.  According to the IRS, it become worthless when when "the surrounding facts and circumstances indicate there's no reasonable expectation of payment" after you've taken "reasonable steps" to collect it.  https://www.irs.gov/taxtopics/tc450/tc453

New Member

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

Thank you for your response. I have been trying to get the family to pay the debt but no luck. it has been 10 years since the loan. The borrower passed away in 2005 (He was part of a PONZIE SCHEME) The borrower in this case a (LAWYER) passed away 1 month prior  to when the loan was payable. I filed the proper papers with the Supreme Court Of Queens in March of 2007. No probate. Can I still claim this Debt?
Level 5

After how many years can I claim a non business debt. I've exhausted every avenue but unable to recover any monies From March 2007.

Please see:  <a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p550#en_US_2016_publink100010585">https://www.irs.gov/publications/... includes this language:
"Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949 with box C checked.

For each bad debt, attach a statement to your return that contains:

A description of the debt, including the amount, and the date it became due;
The name of the debtor, and any business or family relationship between you and the debtor;
The efforts you made to collect the debt; and
Why you decided the debt was worthless. For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt."

The way I see it is you will tell the IRS what you did to collect the debt.  The year you gave up taking "reasonable steps" is probably the year the debt became worthless.  You have seven years in which to file an amended return to receive a refund -- this is an exception to the usual 3-year rule for amendments.  So arguably, if you took any "reasonable steps" to collect on the debt in 2010 or later before deciding it was worthless, then you can still amend your tax return for the year the debt became worthless.
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