cpr1955 Posted March 10, 2015 Report Share Posted March 10, 2015 I have a client who loaned his friend a good amount of money to start a business. The business is not doing that well, and my client would like to claim non-business bad debt. I know the rules for filing the loss, but am not sure how it would affect his friend's tax situation, i.e. would the IRS require that the friend report debt forgiveness income? Quote Link to comment Share on other sites More sharing options...
rfassett Posted March 10, 2015 Report Share Posted March 10, 2015 I cannot think of any reason why not unless he is bankrupt or can prove insolvency. He may be able to avoid current tax by adjusting basis of assets, though. Walk through Form 982 and its instructions. Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 10, 2015 Report Share Posted March 10, 2015 The real question here, is this a non business bad debt on which can be shown an attempt to collect the debt or is this debt forgiveness to a friend which is a gift? 1 Quote Link to comment Share on other sites More sharing options...
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