Question

Lending loss due to my borrower’s bankruptcy

Forum|Forum|3 years ago
February 21, 2023
1 reply
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2 questions.

1. Can I claim a total loss on the money I lended while my borrower’s (BlockFi) bankruptcy procedures are still in process? Or do I have to wait until the bankruptcy is finalized and I know for sure the amount of money my borrower returns to me?

2. I have received 1099-MISC for the interest on this loan. However, per #1, the money are inaccessible due to my borrower’s ongoing bankruptcy procedure, which started in 2022. How do I report this interest?

Not A Product Question

V

Vanessa A

No, you cannot claim it this year if you do not yet know the exact amount of your loss. The debt must be completely worthless in order to claim the loss. You will need to wait until you know for sure the amount that will be worthless in order to claim it as a loss. Then you will need to report it in the same year that it becomes completely worthless. So, if it happens in 2023, you will need to claim it when you file your 2023 taxes.

Why did you receive a 1099-Misc for income you did not actually receive? If you did not receive the interest, then you need to contact the issuer of the 1099-Misc to have them correct it. You would not report income you didn't actually receive.

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