USA dissolving c corp and writting off debt to personal taxes

[dstarkey]

Own a c corporation in wisconsin for 25 years. Loaned the corp over 40K. If we dissolve the corp can the debt be written off personal income taxes? And if so, how?

 

[Marshall]

The answer is complicated by whether the conditions under which you loaned money to your own corporation make the loan a business debt or a non-business debt. Although you might think of it as business debt simply because it is related to a business, that does not make it business debt from your personal tax situation. In many cases, it would be characterized as non-business debt.

The loss on both is deductible, but the non-business bad debt would be a long term capital loss, which must first offset capital gains and then can be deducted from your ordinary income (on Schedule D) at the rate of $3000 per year until it is used up.

 

[Cathy]

thank you so much. What is the defination of a 'business' debt vs a 'non-business' debt? If we have a 'business' debt...how is that written off against our personal taxes?