As a result, Rutter took an ordinary deduction on his 2009 tax return, arguing that his loans were "business bad debt." Because if it was the latter, no bad debt deduction of any kind would be permitted. In Rutter, the court took on the factors one-by-one, and the results were not kind to the biochemist. Lacking the formal indicia of a loan, the court concluded that this factor supported characterization as equity. As a result, Rutter was not entitled to a bad debt deduction of any type.

Source: Forbes September 09, 2017 17:37 UTC