Submitted By: Mary
Answered: September 14, 2015 12:16 pm

I made a loan to my friend who died without repaying me, and there’s nothing in her estate. What do I have to do to claim a nonbusiness bad debt?

You must attach your own statement to your tax return that includes the following information:

  • The transaction was a loan and not a gift (this can be proven by showing a promissory note that included interest and other payment terms).
  • A showing that the debt had value at the end of last year and became wholly worthless this year. For example, a statement from the debtor’s executor regarding the lack of assets in the estate would be helpful here.
  • Proof that you tried to collect on the debt (e.g., you submitted a request for payment from the executor but decided not to sue when you learned there were no assets in the estate).
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Tax Glossary

Alternative minimum tax (AMT)

A tax triggered if certain tax benefits reduce your regular income tax below the tax computed on Form 6251 for AMT purposes.

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