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Ask Howard a Question

Question:
Can a creditor benefit from selling their judgment?

Answer:
Yes, by selling their judgment the creditor's realized loss becomes recognized. The recognized loss can now be taken by a cash basis taxpayer as a tax deduction in the year it is sold.

For an accrual basis taxpayer the recognized loss is the amount of the judgment plus out of pocket expenditures. For a cash basis taxpayer, the tax deduction is limited to out of pocket expenditures. Thus, the tax deduction may be for the out of pocket monies originally expended, to obtain your judgment. Additionally, out of pocket expenditures, such as attorney's fees, not previously deducted could now be deducted.

Lastly, depending on the nature of the taxpayer and the nature of the debt the recognized loss may be characterized as ordinary or capital gains. As always, the information contained herein is for general information. You should consult your tax professional before taking any action in your individual situation..

For answers to your questions contact Howard Schwartz @estate1@bellsouth.net

Profile

Howard Schwartz is an attorney admitted to the bar in New York and Florida. He is also a CPA. Mr.Schwartz is originally from New York and graduated from Brooklyn College with a B.S. in Accounting,he later graduated from New York Law School. Howard was employed by Deloitte, Haskins & Sells CPA firm before relocating to Florida where he joined a Ft. Lauderdale Law Firm. In 1985 Howard Started his own law firm which accepts cases primarily in taxation and estate planning.

Mr. Schwartz has taught various accounting, tax and legal courses; including cost/managerial accounting, individual and corporate taxation and business law at Brooklyn College. He has lectured at the Florida Institute of Certified Public Accountant's annual convention and for local chapters of the Florida Institute of Certified Public Accountant's. Howard has also lectured for various brokerage firms, insurance companies and their clients.