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Posted by Paul Thomas, CPA on April 14, 2008, 8:12 am
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> My dad lent his brother-in-law a substantial amount of money 10 years
> ago, and never paid it back due to his new wife's need to live well.
> After 7 years in court, we got back the approx. amount of the loan,
> plus a judgment for much more. That was all the money our lawyers
> could get their hands on (pure luck...we had the number of a CD they
> were hiding). Soon after that they went into bankruptcy and my dad is
> a major creditor, but never collected on this and never will. So we
> are wondering if this large uncollected amount is deductible, even
> though it exceeds original loan.
Um, no. Sorry. But he's only at a tax loss for the amount of cash he
actually lost. If that's been recovered already, then the remainder - the
unpaid interest, etc and so on - was never in his possession, was never
recorded or reported as taxable income, so there is nothing to deduct beyond
that.
Legal fees may be deductible on Schedule A though.
--
Paul A. Thomas, CPA
Athens, Georgia
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