(also posted in my journal - but here too to cast a wider net)...
There is no reasonable expectation that we'll be paid back a loan from 2001. We loaned a friend $5k after he lost his Si Valley network admin job at Nortel in the tech collapse. He and his wife and *severely* disabled child moved closer to Sacramento and financially, things only fell apart further.
On one hand, I'd like to take the deduction for tax year 2014 as we're in the 33% tax bracket.
On the other hand, the last thing I'd want to do is burden him with a tax liability for forgiven debt.
M50 believes this friend declared bankruptcy about ten years ago.
http://www.irs.gov/taxtopics/tc453.html says form 8949 I have to write his name and attach a detailed accounting of the loan.
But, on wikipedia, it says, "To be considered as deductible, the debt must be: bona fide debt, and worthless within the taxable year." I think we may have missed the boat if he declared bankruptcy a decade ago.
Advice? Thoughts?
My conclusion is that we're too late. I just thought I'd put it to the forum before I totally write it off, well, I mean, not write it off. You know what I mean.
