Financing in San Francisco>Question Details

sanmarchi, Both Buyer and Seller in Long Beach, CA

Can an individual investor deduct the loss on a short sale of a portfolio loan as an investment expense (Schedule A line 23)?

Asked by sanmarchi, Long Beach, CA Tue May 28, 2013

The individual investor actively manages a small portfolio of loans (notes secured by deeds of trust). The loan (in question) resulted in a short sale as an ordinary and necessary expense incurred to preserve capital held for producing income.

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I don't think so, but that's a question that should be answered by your CPA.

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0 votes Thank Flag Link Wed May 29, 2013
What "loss" do you plan to deduct, SM?
0 votes Thank Flag Link Tue May 28, 2013
Mack,
Thanks for the reply. The individual investor actively manages a small portfolio of loans (notes secured by deeds of trust). The loan (in question) resulted in a short sale (partial loss of principal) as an ordinary and necessary expense incurred to preserve capital held for producing income.

Thanks,
Steve
Flag Wed May 29, 2013
I don't think you can do it - to write off as an expense. If I understand correctly you funded the subject loan at some time before short sale from your capital - your loan portfolio. If so the principal of the loan was an asset on your balance sheet. So when you lost that principal as result of short sale than was capital loss but not the expense. If this correct you can't use this loan as an expense to preserve the same capital which you used when you funded the loan.
0 votes Thank Flag Link Tue May 28, 2013
That sounds like a question for a CPA.
0 votes Thank Flag Link Tue May 28, 2013
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