In article <gedb9g$cp3$1[at]reader1.panix.com> ,
Arthur Kamlet <-To[at]panix.com> wrote:
- quote -

Better yet, just report to the IRS that the borrower (probably) didn't
report the cancellation of debt income, and collect a cut of the
taxes, interest, and penalties the IRS collects as a result.

Seth

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In article <ged902$j0n$1[at]reader1.panix.com> , Seth <sethb[at]panix.com> wrote:
- quote -


Is OP a financial institution? If not, forget the 1099.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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In article <305e1d57-5511-40ac-b948-47c4b8de8ae9[at]p31g2000prf.googlegroups.com> ,
removeps-groups[at]yahoo.com <removeps-groups[at]yahoo.com> wrote:
- quote -

However, you do get to issue the borrower a 1099 showing $4,000
"cancellation of debt income".

Seth

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Oct 28, 7:26 pm, Hooliganz <brettharlow...[at]gmail.com> wrote:

- quote -

Where does $3,600 come from? Your capital loss is just $4,000. The
attorney fees at 40% of $6,000, or $2,400, may be deductible on
Schedule A misc expenses subject to the 2% of AGI limit (only the
amount above 2% of your AGI is deductible), and furthermore the
deduction is not allowed under AMT. However, in order to be
deductible the expense must meet the conditions below, and I think (2)
would qualify it to be deductible.

<Quote source="http://www.irs.gov/publications/p529/
ar02.html#d0e1438"
Other Expenses

You can deduct certain other expenses as miscellaneous itemized
deductions subject to the 2%-of-adjusted-gross-
income limit. These are expenses you pay:

1.

To produce or collect income that must be included in your gross
income,
2.

To manage, conserve, or maintain property held for producing
such income, or
3.

To determine, contest, pay, or claim a refund of any tax.

</Quote
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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Oct 28, 11:49 am, se...[at]panix.com (Seth) wrote:

- quote -

Assuming the 10k is income. If you're an accrual basis taxpayer, then
you would have recorded the 10k as profit when the profit was signed.
Upon receiving 6k there is only a loss of 4k to record. If you're a
cash basis taxpayer (most common for individuals), then the 6k is
income, and the 4k is not recorded. Sounds right?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Yes, it was a nonbusiness personal loan with a contract and
everything. Regrets for the muddiness of the question.

So let's say I settle for $6,000.

And the attorneys take their 40% -- $2,400.

I can deduct the $6,400 ($10,000-$3,600) as a capital loss?

And I assume agreeing to settlement, absent any terms prohibiting such
specifically, does not preclude me from doing so?

Thanks again.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

In article <64ae8251-a177-48a7-b70c-3388e49d8b0c[at]v72g2000hsv.googlegroups.com> ,
Hooliganz <brettharlow123[at]gmail.com> wrote:
- quote -

Why does he owe you $10,000? Was that $10,000 ever income to you?

If you worked for him and the contract said you get $10,000, then no,
the $6,000 is taxable income, the $4,000 has no tax effect. If you
lent him $10,000 cash, then the $4,000 is a loss. (What type depends
on why you lent it.)

Seth

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

That is, say a debtor owes me $10,000.

I agree to settle for $6,000.

Can I take the $4,000 as any kind of deduction? Business loss, unpaid
debt, etc.? Can I also deduct (from my taxes as a loss) any attorney
fees, if the original agreement, and subsequent judgments that the
agreement is valid, agree(s) that debtor pay all attorneys' fees in
the event of default?

I lived in MS and the debtor lived in GA at the time of the agreement;
I live in CA and the debtor lives in FL, if that's relevant.

Thanks for your help!

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >