The Leones wrote:

- quote -

Deposits with a contractor who becomes insolvent may be
written off as a nonbusiness bad debt (equivalent to a
short-term capital loss). See IRS Pub 550 Chapter 4 for
more information.

This would be considered a theft (not a bad debt) if the
contractor intended to rip off his clients by stealing their
deposits. In this instance it would go on a Schedule A
under the rules for casualties, disasters and thefts. This
is a two-step process that reduces the loss to $900 and then
only allows a deduction if all the items in this category
exceed 10% of AGI.

--

Alan
http://taxtopics.net

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"The Leones" <leone91[at]home.com> wrote:

- quote -

It appears to me that this loss would go on Form 4684 for
casulaty and theft. However, the $1,000.00 is subject to
some tax calculations. First, it is reduce by a $100.00
floor and then it is further reduced by 10% of your adjusted
gross income. After this calculation, the number is
transferred to Schedule A for itemized deductions. It might
wind up that you get no tax benefit from this loss because
of your adjusted gross income being too high.

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not sure if there is a deduction here but...

we had a contract with a person to install cabinets in our
house and we paid a deposit of $1,000 and found out that he
closed his business and left town. Is there a deduction for
this type of theft?

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