In Owens v. Commissioner, TC Memo 2017-157, the Tax Court held that a  $9.5 million bad deduction could be claimed as a business bad debt.  The taxpayer argued that he was in the trade or business of lending money. Conversely, the IRS argued that the taxpayer was not  in the business of lending money, that the debts in question were not actually debts and, even if they were debts, the loan did not become worthless in the year he claimed the loss.

Ultimately, the Tax Court held that the taxpayer could claim a full deduction for the bad debt to treat it as a business bad debt,, which would allow him a significant net operating loss.

See full case at Owens v. Commissioner, TC Memo 2017-157.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.