A business bad debt, generally, is one that comes from operating your trade or business and is deductible as a business loss.All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses. An architect made personal loans to several friends who were not clients. They are deductible only as nonbusiness bad debts because the architect was not in the business of lending money and the loans do not have any relationship to her business. For information on business bad debts of an employee, see Publication 529, Miscellaneous Deductions.If the exception is properly coded in box 7 of your 1099-R form, you do not need to fill out Form 5329.If someone owes you money that you cannot collect, you have a bad debt.
If your bad debt is the loss of a deposit in a financial institution, see If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt.
It is not necessary to go to court if you can show that a judgment from the court would be uncollectible.
You must only show that you have taken reasonable steps to collect the debt.
They include nuclear materials couriers, United States Capitol Police, Supreme Court Police and diplomatic security special agents.
This applies to distributions from governmental defined benefit and defined contribution plans for employees who separate from service after reaching 50 years of age.