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Subject:  question on bad debt Date:  11/23/2013  9:44 AM
Author:  2gifts Number:  119558 of 133520

I have a question on if I can deduct a debt that is not repaid on my taxes. We made a loan to FIL several years ago on which I have a Promissory Note. While he was still living, he made several payments against it, and I reported the interest paid on our taxes as required. However, he passed away 2 years ago, and we do not expect to get the remaining balance from his estate due to the Medicaid lien. Does that mean that I can deduct the remaining balance as a bad debt? If so, how do I report that?

We are hoping that his estate will be closed out this year, and so I will know that the debt is bad. If it goes until 2014, I'd be reporting it there instead, but I don't think that makes a difference in terms of my question.

I found some information on the IRS website about bad debts, but it talked about business loans, and this didn't feel like it fit in that category.

Do you need any additional information to answer my question?
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