Investment losses and taxes?
our relatives invested 200,000 in a business we bought. however everything is beneath my name. I am forced to wallet for personal bankruptcy because adjectives the debts are personally guaranteed the business is impossible. my family know exactly where the money go and how it was spent. they have access to my bank report and the computer etc..I talked to my collapse lawyer and he said we can put our domestic members are 'creditors' so they can 'write off' the 200,000 as a loss.
I am wondering how this will work. how will they benefit from this? will they receive some money from this? how much? if they invested this money contained by Dec05/Jan 06 can they write it off for this years taxes? the business is still a valid corp. I merely don't want them to be at a complete loss and if I can help them somehow to go and get their money back or portion at most minuscule.
what necessary steps to they enjoy to take? and do we hold to file for ruin before they profile for their taxes?
please helpp!
Answers: They have to write bad the bad debt first...
The benefit they win is the tax rate they pay envelope x the loss, and I think it can be amortized over plentiful years as well
It source resembling you relative could deduct it as a impossible debt. Read the source and the Publications it recommends.
Bad debts must be totally worthless to be deductible. You cannot take off a partially worthless nonbusiness discouraging debt. You must establish that you have taken defensible steps to collect the debt and the debt is worthless. It is not necessary to jump to court if you can show that a judgment from the court would be uncollectible. You may clutch the deduction one and only in the year the debt become worthless. A debt becomes worthless when the surrounding facts and circumstances indicate nearby is no longer any chance the amount owed will be rewarded. You do not have to skulk until a debt is due to determine whether it is worthless
For more information on nonbusiness bad debts, refer to Publication 550, Investment Income and Expenses. For more information on business bleak debts, refer to Publication 535, Business Expenses
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