Accounting, Payroll & Pension Issues/builder went bankrupt loss of 20k

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Expert: - 4/1/2009


Question
Hi-  My husband and I gave a builder 20k last year to build a house, before we could sell our house, the builder went bankrupt.  Can we deduct this and how?

Answer
I think this would be treated as a non-business bad debt. The bad debt would show as a short-term capital loss reported on Part 1 of Schedule D attached to your form 1040.  Please attached a detailed explanation to your return of what happened.

Note that the deduction will be subject to capital loss limitations as calculated on Schedule D.

You may need to have proof of bankruptcy filing in your records in case you are questioned about this.

Accounting, Payroll & Pension Issues

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Arthur Naman

Expertise

General accounting and bookkeeping questions. How to do monthly bookkeeping, how to prepare financial reports. How to reconcile accounts.

I cannot answer questions pertaining to pension or retirement planning.

This is not a forum to have homework answered. Please do your own homework.

Experience

30 years' experience doing tax and accounting work

Education/Credentials
MPA from Univ. of Texas at Austin, MBA Golden Gate Univ, San Francisco CA

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