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Can I write off an upaid promissory note on my taxes?

Glendora, CA |

I loaned a friend $50,000 and he has since filed bankruptcy. I have a signed promissory note from him. Can I claim this as a loss on my taxes? If so, is there a maximum deduction per year? Does the balance transfer over year-to-year until the entire amount is deducted?

Attorney Answers 1


Yes, as a personal loan you can deduct this as a short - term capital loss. It can be offset against capital gains as are other capital losses. To the extent you do not have other capital losses, you will be limited to $3000 per year, which will carry over until exhausted.

This presentation does not constitute legal, accounting or other professional advice. Only through a personal, confidential consultation with qualified legal counsel can anyone properly evaluate their own unique estate planning challenges and determine what, if any, appropriate legal strategies and tactics should be implemented to meet those challenges.

Circular 230 Disclaimer:

“Nothing in this presentation is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisers regarding the same.”

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