Question

investment loss

Forum|Forum|5 years ago
February 20, 2021
1 reply
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I invested money in an interest bearing note with an individual in 2017. The note was a legal document for a 5 year period, interest was to be paid out monthly and the original investment returned at the end of the 5 year term. Unfortunately in late 2019 the individual died. The interest payments stopped and his estate defaulted on the note and upon settlement of his estate I received 58% of my initial investment. Can I claim the difference between my initial investment and the settlement received as a loss?

M

MAK70

Yes you can report it as nonbusiness bad debt- it is entered as a capital loss.

See How to Report Non-Business Bad Debt on a Tax Return - TurboTax

B

BillhurleyAuthor

Thank you for your reply. When I enter the loss in Turbo Tax, it says the debt must be completely worthless to be eligible to claim as a loss. The debt was not completely worthless, I received a court settlement for 58% of the original loan amount. I'm wanting to claim the remaining 42% as a loss. Should I just adjust the amounts entered to represent the 42% loss incurred?