Most of the above is accurate.

The transaction between wcg and Bb could be considered a loan.

The gift tax would apply to the extent of the fmv of interest a typical loan of this nature would carry(below market value loan) . A short term loan of 30000 should be less than 13000 in interest.

Now if wcg treats this as business transaction( schedule. C) he might be able to chalk this up as a bad debt expense and reduce his overall tax liability.


The main problem with this claim is proving the loan is ordinary and necessary to your business.
Another issue is proving the debt is worthless

I assume you file schedule c. Wcg?

What part of it wasn't correct? I think it is all right.


I'd agree that you probably could treat it as a loan if you wanted to. But if you treated it as a loan and then a forgiveness of the loan, it wouldn't just be the interest amount that would be a gift ... it would be the entire principal amount plus the interest amount. So it would be $28,000 + the interest that would be the gift. Additionally the interest amount would still be income and would still need to be included on this year's income tax return.

If the date we could say the loan was forgiven was not long after the date of the "loan", then the interest amount should be extremely small. However, as mentioned above, the forgiven principal amount of the loan would still be a gift.

This certainly seems, to me, to mostly closely resemble a contract between two individuals to exchange assets with each asset being the consideration for the other asset and one party did not perform his duty under the contract. It doesn't resemble a gift at all. (It is weird though that the two assets are an equal amount of money and I consider something 2 paragraphs down.)

I hadn't really thought about it being a business transaction. The original poster probably does report as a professional. Maybe it could be characterized as a business transaction.

What is something that may be interesting, and I haven't done any research whatsoever or even thought about this much and I don't know much about the topic, is whether these types of transactions are technically money laundering.



P.S.

Also, a situation just popped in my head where maybe you would want to shift the gift tax responsibility to the donee. Maybe if you were gifting shares in a corporation or membership interests in an LLC or some other asset that was extremely hard to value and you were worried that the IRS would audit and would increase the value from what you reported and you weren't comfortable with possibly owing a larger gift tax then what you had anticipated.

I guess there are probably other situations. I'm just not coming up with any off the top of my head and I would guess that they are pretty rare.



*DISCLAIMER: The above is NOT legal nor accounting advice and none of it should be construed as such.*

He wouldn't forgive the debt. That is the worst move possible.

He would treat it as uncollectable and as a result it could be a business expense depending on several factors. Or a casualty loss/theft loss.


This would be money laundering if the transaction was undertaken specifically to hide the source of income. This is not the case.

This could be considered out right theft which is the casualty loss/theft loss




The IRS may try to contend that you made a 30000$ investment. In which case you'd Get a short term capital loss. That would suck

Yea, I just realized that you probably meant to treat it as having been a loan and now the loan is being defaulted on.

And, am I correct in stating that you are saying that an interest component would be treated as a gift because the "loan" did not provide for any interest. Whereas, had the "loan" provided for interest and was being defaulted on the provided for interest component would NOT constitute a gift.

I don't think I've ever been involved in a situation where a loan is just being defaulted on. I have had many loans or pieces of loans forgiven; often in $13K, $26K, or $52K increments per year for the obvious reason.


*DISCLAIMER: The above is NOT legal nor accounting advice and none of it should be construed as such.*

Lego I think yes?

I'm saying if you loan 30000 dollars at 0 interest then this is considered a below market value loan.
The gift would be the amount of the interest forgone.

If a 30000 loan would normally have a 20% rate for there circumstances. Then the 20% interest forgone is a gift. But you are allowed 13k a person. So the loan has no gift tax consequences

I also considered the casualty loss. Given the 10% requirement though, I'm not sure that would be helpful for the original poster.


I think what would make the most sense would be for this to be a non-business bad debt or as you previously mentioned it could be a business transaction.

As a non-business bad debt, if it meets requirements (one of which as I think was mentioned is that it has to be TOTALLY worthless), it could be deducted on income taxes as a short term capital loss.


*DISCLAIMER: The above is NOT legal nor accounting advice and none of it should be construed as such.*

Yes, ok. I agree with that. (The fact that Brad isn't paying back the "loan" doesn't affect this analysis at all.)



*DISCLAIMER: The above is NOT legal nor accounting advice and none of it should be construed as such.*

If its a bad debt IMO it is a business bad debt. Which is the best case scenario.

Wondering what you think of the IRS contending this was just a bad investment.


Consider this. I'm rich. I loan 10million to a bum off the street with absurdly high interest. Ik he won't repay but ... is it a gift or a loan.

I don't see how a contention could be made that this was a bad investment. What would he even be investing in? It was supposed to be an exchange of assets, not an investment.

I'm pretty convinced that this is a non-performance of contract and is now a bad debt.

I don't know for sure, but I would guess that the original poster likely reports his taxes as a poker or gambling professional. I think a good argument exists that this should be business bad debt as the debt is at least closely related to his trade or business and could possibly be argued to have been created in his trade or business.

Here's a link about business bad debts btw if any other poster wants to read it:

http://www.irs.gov/publications/p535...link1000154201


And as for your question regarding the bum:

Haha, I don't know, man. Love the absurd situation. I guess I'll take the easiest way out and just say that if you know he won't repay, then I'm thinking gift.



Anyway, I gotta go to bed. I was planning to try to get up and get to work earlier tomorrow and we're now 4 hours from when I was hoping to try to get up. Whoops.

Good night.



*DISCLAIMER: The above is NOT legal nor accounting advice and none of it should be construed as such.*

Lol I'm going to bed too.
Gl wcg

Hey, WCG... Congrats on the WSOP cash! ( At least, I believe it was you.. unless it was ANOTHER Douglas Polk )

OP got pwned lmao. Should post a picture of yourself Before and After photo

Booth is at the table next to me in the $1500. Safe to say you have a piece?


Too soon?

lol

Doug I got three girls in town for the weekend that need to be hit on very badly. If that's something you're into hit me up. might lift the spirits.

What you describe sounds like a felony under Nevada law.

I know of brad booth's apology video but has he posted in this thread or the other apology video thread?if so what is his username?

Op in other thread

Exactly...

in my world your buddy is responsible for the introduction

In the OP the friend said he wasn't sure if the transfer was safe.

Must be fun to be a friend in your world.

We dont set our friends up with a publicly known broke ass poker player i live in calgary and i know this fact