...
- quote -

When the employee was terminated, what was the determination
then? Forgiven, forgotten, just get out?

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MTW wrote:
- quote -

That's the easy way out of course. But the fact remains, it
was not pay, but a loan. Surely the employer got some kind
of signature acknowledging the fact.

Like endorsement of the check containing the memo of the
loan? And recording same on the books contemporaneously?
And the fact that since the employee is the one who reviewed
statements and never objected?

I think a case could be made.

ChEAr$,
Harlan Lunsford

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To deal with this situation, you should check out
www.circlelending.com. This company formalizes and collects
on loans between private individuals. You can use the
company to formalize the bad debt so it can be claimed it as
a loss. Keep in mind that you will need to get the employee
to sign the paperwork proving it was a loan.

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tom wrote:

- quote -

Why not add it to the employee's W-2 ???

MTW

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Facts: Company makes loan to mgmt. employee. No written
loan agreement exists. Purpose of loan was to assist in
purchase of home. Loan carried on books as Employee Loan
Receivable. Said employee reveiws financials each month.
2-3 years pass. No loan payments have been made, none
demanded. Employee is terminated. Question: What to do
with the Loan Receivable? I've contemplated these options
1)Write the loan as business bad debt and report Forgiveness
of debt income to employee. However collection has not been
pursued or contemplated. Collection would prove to be
unsucessful. 2)Make a journal entry taking the loan off the
books and classifying it as distributions to the partners.
As if the partners had made a personal loan to the employee.
Obviously not desireable for the partnership yet 1)it
doesn't inflame the situation and 2)the debt was not
adequately documented and if pursued could result in the
loan being reclassed as W-2 income with the partnership
liable for all resulting payroll taxes, penalities, etc.

Anyone have any opinions on how this should be handled??

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