While the economy attempts to recover from the challenges brought on by the COVID-19 pandemic, inflation, and rising interest rates, businesses should evaluate whether losses may be claimed on their 2022 returns related to worthless assets such as receivables, property, 80% owned subsidiaries or other investments.
Business bad debts can be wholly or partially written off for tax purposes. A partial write-off requires a conforming reduction of the debt on the books of the taxpayer; a complete write-off requires a demonstration that the debt is wholly uncollectible as of the end of the year.
Losses related to worthless, damaged, or abandoned property can sometimes generate ordinary losses for specific assets.
Businesses should consider claiming losses for investments in insolvent subsidiaries that are at least 80% owned and for certain investments in insolvent entities taxed as partnerships.