If my client loaned his daughter $100,000 for her business 4 years ago and she stopped making payments, can he take this loss as a tax deduction?

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If my client loaned his daughter $100,000 for her business 4 years ago and she stopped making payments, can he take this loss as a tax deduction?

Also, could it be considered a gift since the daughter is still in business? It is an S-corp.

Asked on December 13, 2012 under Business Law, Georgia

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Absent a bankruptcy filing by the daughter or a lawsuit against the daughter the lack of payment and absence of a demand suggests more of a gift as opposed to writing off a bad debt. From what you have written, I do not see a loss for a bad debt. I suggest that you client consult with a tax attorney or a certified public accountant.


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