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If you loaned money to a relative and they can't ever pay it back due to unforseen circumstances. How would I go about deducting it.
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<< If you loaned money to a relative and they can't ever pay it back due to unforseen circumstances. How would I go about deducting it. >>

See "Nonbusiness Bad Debts" in IRS Publication 550.

Phil Marti
Tax Preparer
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It is important to keep in mind that in order to be deductible the loan would have had to be an enforceable obligaion (executed note). This is especially true because you are dealing with a family member.

Secondly, the debt must be truly worthless, and you should have demonstrated an effort to collect.

If you had a properly executed promissory note from your relative, and your relative has declared bankruptcy, or you have made attempts at collections that have no possiblity of success, then you can collect.
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Deduct not collect. Sorry
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