Contractor Default on Unsecured Loan for Land I owned a piece of vacant land as an investment. I recently sold it to a contractor/builder & former friend who's company issued me an unsecured Note (I know, stupid!) for the purchase price. The Note was to come due in one year or when he completed & sold the house he was building on the land. Along comes the meltdown of 2008/2009 and the contractor cannot meet his obligations. The house he's building on what used to be my lot is now being foreclosed upon. He has said he cannot meet his obligations and cannot pay me for the land. I filed a judgment against his company, however hold out NO hope of collecting. A couple of questions:
1. Is this a non-business bad debt or a business bad debt?
2. How much can I deduct as the loss?
a. Amount I originally paid for the land many years ago.
b. Amount land was sold to him for -- I have not paid tax on the gain from the sale as it was all this year.
3. Can I include the cost of filing the judgment in the basis/amount of the loss?
Thanks!
Last edited by rleeann : 11-12-2009 at 12:17 PM.
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