USA Business loan written off, claim on personal taxes

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I owned a business (S Corporation) that closed last year due to failure. I had loaned the company $40,000 that was still on the books as a loan payable when the business closed. The loan was written off by the corporation. I was told I may be able to deduct the amount on my personal income tax return as a bad debt because the corporation defaulted on it. Is this correct? If so, can you tell me how it is done?

 

[Kerry Claxton]

if it was an S corporation you probably have no basis in the $40,000 loan as it was probably used to allow you to deduct the losses from the business. If you do actually have basis in the loan any loss would likely be a capital loss which would be limited to $3,000 per year.