Money owed to me 10 yrs. ago $10K and remain unpaid inspite of collection efforts and litigation. A lien on his property was attached to his debt. Recently he wanted to sell the property and offered to settle his debt but at a much lesser amount.I refused payment unless paid in full. Nothing happened. Can I claim the $10K as nonbusiness loss this year? If Yes, and later in another year the debtor paid me in full, I presume I will have to declare it as other income in the year he/she pays me. Thanks for your response.
"Money owed to me 10 yrs. ago $10K and remain unpaid inspite of collection efforts and litigation. A lien on his property was attached to his debt."He decided not to sell the property when you refused to settle? If he's as stubborn as you say, you might have been better to settle and take the tax deduction for the unrepaid amount. Then if at some later date, he has a change of conscience and repays the difference, you will report that recovered loan as income.
acm4tax: Many thanks for your reply. Yes, he cannot sell the property because of the lien. Now, can I claim the amount $10K as a complete nonbusiness loss in my 2001 return. The person -- used to be a friend but without my knowledge is a professional fraud. I don't expect the amount to be paid at all. Let the property rot. Thanks again for your reply.
I think it would be hard to support the position that the debt has gone bad as long as the lien is in place AND the value of the property exceeds the total of your lien plus all prior liens (i.e. the mortgage on the property). If the value of the property has fallen below that total, then I think you could support the loss.
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