What documentation do I need to write off a loan as bad? In connection with the sale of one of my rental properties, I gave a second mortgage to someone who now is unable to pay. The first mortgage is substantial and most likely will go unsatisfied. The second mortgage loan I made is considerable. (J.H., Las Vegas, Nevada)

There are two types of bad debts: business and nonbusiness.

The nonbusiness bad debt is deductible in ... Log in to view full article.