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But if you loan someone $100 at 20% interest and write it off when it's $1000, it's a $100 deduction.
by jerkstate 7y ago
But if you loan someone $100 at 20% interest and write it off when it's $1000, it's a $100 deduction.
- gruez 7y agoThat's not how write offs work. If you spent $100 on materials making a widget, and valued it at $1000, then somehow lost it (eg. stolen, non paying customer), your profit is -$100[1], not -$1000. Likewise, you can't claim a $1000 loss on that debt, only $100. The only way you can claim $1000 is if you previously recorded the $900 in interest as profit (and paid taxes on it). [1] profit = revenue - cost = 0 - $100 = -$100
- e12e 7y agoIs it? You're holding a contract that stipulates you're owed 1000 dollars... Normally, you'd sell that on for more than the original 100 dollars.