Flashcards in Taxes: Deductions - Losses and Bad Debts Deck (4)
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Taxes:
Deductions - Losses and Bad Debts
Losses
Losses:
- losses on business assets can be deducted
- losses on personal assets cannot unless personal casualty
- part business/part personal treated as two separate assets
Worthless Securities
- totally worthless
- treated as if sold for nothing on last day of year
- character is usually capital
- except corporate investments in 80% owned affiliate, then OL
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Taxes:
Deductions - Losses and Bad Debts
Bad Debts
Bad Debts
- only use direct writeoff ,method
- loans to extent partially worthless
- nonbusiness bad debts also deductible
- whether disguised gift depends on interest charged
- deductible as STCL in year completely worthless
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Taxes:
Deductions - Losses and Bad Debts
Limitations on Deduction of Losses
Limitations on Deduction of Losses
- not section 1231 or investment assets subject to capital asset rules
- if losses > gains = limit $3,000 for individuals
- special rules for section 1244 capital stock
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