I"m in a partnership that we will likely dissolve in 2016. I have approximately 30k in remaining basis due to loan that I have made to the partnership in which the business has no ability to repay. How do I treat that for tax purposes? A ordinary loss, capital loss or something else?
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John Stancil
Loss on the sale or dissolution of a business would be treated as a capital loss. However, if the loan was made to protect your job it may be classified as a business debt status is allowed if your dominant motive (not just a significant motive) for the loan, was to protect your job. Which motive is dominant is determined by several factors, including the amount of salary as compared to the amount of the investment and loans. If it can be classified as a business bad debt, it would receive ordinary income treatment.
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412 weeks ago
Question Owner
Thank you so much John as I was afraid that was going to be the answer but the regs are what they are. Have a great day!!!!
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412 weeks ago