Judgement for corporate debt

[Steve M]

My client was a shareholder in an S-Corp which is defunct. There was a dispute with a vendor who claimed the corp owed her $10K. My client signed an agreement for payment and ultimately paid the $10K-after the corp was terminated. He is now asking me if he can write off the 10K and I told him no. But just want to be sure that I am not wrong. Any opinions are appreciated.

Steve M

[jainen]

>> he can write off the 10K <<

You must know we're going to say, "It depends...." What was the money for? Why did he agree to pay it? You call it a "judgement;" does that mean he was sued? Was he acting as an individual, a corporate officer/employee, an agent of the corporation, a shareholder? (Apparently not the latter, since the much-vaunted liability shield didn't help him this time!) You say the company closed its doors during this process--so what happened to the assets?

Well, I have to admit that even if you told me all this stuff I probably wouldn't know the answer. Better wait for OldJack to weigh in here.

[Steve M]

Thanks jainen,

To answer some of your questions, he was acting as an individual, the corporation had been previously closed and he acted on his own behalf. There were no assets. He was not sued, but signed a document stating that he would pay and he did. It seems to me it is a personal liability since the corp was long gone and I really don't think there is any way he can expense it. But I thought I'd ask. Thanks again,

Steve M

[Bart]

Thanks jainen,

To answer some of your questions, he was acting as an individual, the corporation had been previously closed and he acted on his own behalf. There were no assets. He was not sued, but signed a document stating that he would pay and he did. It seems to me it is a personal liability since the corp was long gone and I really don't think there is any way he can expense it. But I thought I'd ask. Thanks again,

Steve M

What was the 10K used for by the corporation? Was the corporation cash or accrual?