The Tax Resources Blog

Posts Tagged ‘income-tax’

Income Tax Bad Debts

Question: Can I write off funeral expenses already paid for an insolvent relative as a bad debt?

I had a relative die and paid the funeral expenses personally, expecting to be paid back by the estate. Subsequently, I found that the estate was insolvent. No one, myself included, is going to probate the estate. There was literally no cash on hand and the debts dwarf the assets, so there’s no way to even get an attorney paid. Can I deduct the funeral expenses from my federal income tax as a bad debt?

Answer: Yes, you can, but the personal bad debt rules are more restrictive than business bad debt.

You subtract it from any capital gains you may have in the same year, and then you can take up to $3000K against ordinary income.

More info here:

http://www.unclefed.com/AuthorsRow/Daily/fwdbaddebts.html

Adam vs the Man: Episode 6 with Stefan Molyneux!