Is this deductible?...

[taxdan]

I have a client that was a 50/50 shareholder in an S-corp restaurant that was bleeding money from 2002 to 2008, finally closing in 2008. He was sued (personally, not the business) for rent not paid for the business and lost. (don't know the specifics) He made payments in 2009 amounting to about $7,000. Can he deduct this anywhere on his personal return, like perhaps on line 21 with an attached description. Thanks for the input.

Dan

[Bart]

I have a client that was a 50/50 shareholder in an S-corp restaurant that was bleeding money from 2002 to 2008, finally closing in 2008. He was sued (personally, not the business) for rent not paid for the business and lost. (don't know the specifics) He made payments in 2009 amounting to about $7,000. Can he deduct this anywhere on his personal return, like perhaps on line 21 with an attached description. Thanks for the input.

Dan

Did the S Corp report on the cash or accrual basis?

[taxdan]

Cash basis.

[Lion EA]

Research whether Sch E page 2 would be appropriate for expenses to close out the business of the S.

[cat1]

Might consider as an additional investment in CO , of sorts, take as a capital loss, especialy if final return of S

is filed in 2009.

Schedule A: Miscellaneous, something or other.

[taxdan]

Thank you very much for the replies. I do appreciate any input and do know that you are all very busy this time of year.

For anyone interested, I think I am going to file a sch E pg 2, check "yes" on line 27, write in "PYA" on line 28 column a (as per instructions), then the amount paid for the lawsuit on line 28 column h. I will then attach a statment explaining the situation as no K-1 will be issued since the business closed up in 2008.

Oh, and I think I will attach a 6198 for further clarification.

If anyone thinks I'm going in the wrong direction with this, please let me know.

Thank you!

Dan