In article <gmnmn8$r1m$3[at]aioe.org> , dpb <none[at]non.net> wrote:

- quote -

I also have some loans on Prosper that have reached a charge off status.
In actuallity this can mean one of four things. According to the Prosper
website (http://www.prosper.com/help/topics/l...ebt_sales.aspx) they are:
* In collections: The loan is still actively being collected by a
Prosper-designated post-charge-off collection agency.
* Sold to debt buyer: The loan has been sold to a debt buyer.
Proceeds of sale (if any) are credited to lenders on the loan.
* Paid in full: Although the loan was charged-off, the borrower has
met the loan obligation by paying it in full.
* No value: If a loan cannot be collected any further, and cannot be
sold to a debt buyer, it will be charged-off completely, with the loan
balance reduced to $0.00.

It seems that you can only write them off on your taxes if the status
shows as one of the last three. Mine still remain in an "in collections"
status. One debt that was charged off is a year old, but still remains
"in collections," so I do not believe that I can yet consider this a
capital loss.

Does any one know for certain? I haven't tried contacting Prosper, but
they may say they can't offer tax advice.

--
--
Matthew Tedder <z600boy[at]earthlink.net
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On Feb 9, 5:06*am, "Paul Thomas, CPA" <paulthomascp...[at]bellsouth.netwrote:
- quote -


Prosper is an online microlender, currently seeking a different status
than its current form, presumably with the FDIC. A lender is fully
vetted, as are borrowers, and a lender can choose to lend a large
amount or a small amount, usually $50, as part of a pool of money to
be loaned to someone with a particular borrowing need. Prosper
handles all of the paperwork, tracks and collects the loan payments,
and determines when and if to turn over to the collection agency and
when to write off a loan as uncollectible. The borrower's name is
held by Prosper, as is the lender's name. We simply identify our
loans by numbers on our monthly statement. It tells us the status of
each loan, and when these particular loans were written off we
received an email so informing us. We receive a consolidated
statement at the end of the year reporting all interest earned, the
status of each outstanding loan, and a separate listing of each loan
that was written off. There would be no way to track the individual
loans beyond what Prosper reports. Thus, the evidence to document the
loan status is available only on the Prosper statements and end of
year tax documentation. I made a considerable amount of money from
Prosper, all duly reported on a 1099-INT form, which is why I'd like
to write off the actual losses as well.

I hope this is sufficient to explain the "audit trail" on bad debt.

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Paul Thomas, CPA wrote:

- quote -

Prosper is all on line. That $50 was a piece of a larger loan, likely
$500-$2000, sometimes more. From what I've seen of the system, it would
at least provide a decent trail of details that the IRS should readily
accept. Although, I don't believe there are any signatures involved,
again, this is all on line.
Joe

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"Fearless" <feldesmanm[at]gmail.com> wrote
- quote -


Stop right there. Do you have documentation that was signed and dated
~at~that~time~ that supports each $50 "loan"? This is what the IRS would
be asking for to document that a loan existed in the first place.

If a friend of mine came up and asked to borrow $50, after I got through
laughing at them, I'd probalby hand him (or her) some cash without any
written documentation made. If that friend didn't repay me, I'd not be able
to take a deduction as a loss on the "loan" because I couldn't prove a loan
existed.

If the loans were to different people, keep them separate. If they were
multiple loans to the same individual, and you determined they all are bad
at the same time, then maybe lump them together but accounting for any that
are less than one year / short term loans gone bad.




--
Paul Thomas, CPA
Watkinsville, Georgia

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Fearless wrote:
....
- quote -

To summarize you'll have to do the arithmetic anyway, so it would seem
essentially a trivial extension to do the spreadsheet as an attachment.

--

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- quote -

OK. I see that Schedule D has a spot for this and I can work the
numbers pretty easily. One additional question. Since each
individual loan started out as a transaction of $50, which became
uncollectible at some point mostly in the $40 range, is it preferable
to list each loan separately or should I just lump all 15 of the loans
into a single bundle and totally up the losses? About half the loans
were more than a year old before Prosper charged them off, but the
other half were less than a year old. I'm already at the AMT
threshhold and have discovered that it doesn't make a whole lot of
difference to distinguish between long-term and short-term losses.
I'm already over the $3000 loss limit without even visiting the
Prosper loans and the question to me is whether it is worth the effort
to do 15 worksheets instead of 1. Documentation of all this is
trivial since I have all the Prosper documentation of their efforts to
collect the loan and the report from the collection agency. The
lendees' are anonymous except for information about their credit that
determined whether the loan was worth the original risk. Only Prosper
and the Collection Agency has the individual information.

So, to summarize, individual loan documentation or bundled?

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"Fearless" <feldesmanm[at]gmail.com> wrote
- quote -




Try looking at Schedule D - loans made by someone not in the business of
making loans is a capital transaction. You have in essence a capital loss
when the loan becomes uncollectible.

As always, documentation is a big deal here, as is your attempt to collect.





--
Paul A. Thomas, CPA
Athens, Georgia

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I am a lender through the group Prosper. During 2008, I had about a
dozen relatively small loans charged off because Prosper was unable to
collect payments and the collection agency was unsuccessful as well.
It isn't obvious to me where these loans would be charged off on my
Federal taxes for 2008. I didn't make the loans as a business; I made
them as an individual. The only place I see to write off bad debt is
via a Schedule C, but since we didn't set ourselves up as a
"business", this doesn't entirely make sense to me.

I would appreciate any suggestions the wise people on this group might
have.

Many thanks for your help.

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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. > << ------------------------------------------------------- >