One of my Pty Ltd companies (say Company A) lent money to another company which I am also a shareholder in, but we are going to close the company (that received the loan); my question is, can Company A write off the loan?
Also if an individual person has lent money to the company that is closing and it won't be repaid, can an individual also write off that money against any income?
Hi Zet,
The wonderful world of debt forgiveness is very very tricky place.
RE: Intercompany loan. It is possible to write off the loan, but this may result in the entity that receives the debt forgiveness having a tax bill.
RE: Individual. The loss on the loan can really only be written off against income if the individual is in the business of money lending. Otherwise, the loss will likely be a capital loss.
Toby
Hi Zet,
The wonderful world of debt forgiveness is very very tricky place.
RE: Intercompany loan. It is possible to write off the loan, but this may result in the entity that receives the debt forgiveness having a tax bill.
RE: Individual. The loss on the loan can really only be written off against income if the individual is in the business of money lending. Otherwise, the loss will likely be a capital loss.
Toby
Thank you for your response!
What sort of tax would it trigger for the company giving the loan? (as it decreases taxable income, so I'm a bit confused).
Would the debt be written off as a bad debt which would Cr Receivables, Db Bad Debts or would it have to be treated differently because it's an intercompany loan?
Ah, sorry I re-read your answer, yes I get that because the company that is receiving debt forgiveness is technically receiving 'income'. Thanks for that!
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