Yes. A nonbusiness bad debt deduction was allowable for unrecoverable deposits made for construction of residence when construction company becomes insolvent and fails to perform contract. A debtor-creditor relationship must exist in order for the deposit to be considered a loan [Rev. Rul. 69-457].
Taxpayer made a deposit for the construction of a residence. The construction company went out of business and the taxpayer lost the deposit. Can the taxpayer claim a loss?
Modified on: Sun, 5 Feb, 2017 at 7:39 PM
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