I have a client that foolishly signed a note to a supplier making him personally responsible for some of the corporate debt. The corporation has since gone bankrupt. Of course the supplier is now suing him personally to recover the money. I know it’s probably a “no”, but can anyone think of any way for my client to claim the expense on his personal tax return.
Possibly as an Allowable Business Investment Loss. As a shareholder he did stand to gain at the time he signed the personal guarantee. When owners of small businesses enter into an agreement to obtain credit it is quite common for the supplier to require a personal guarantee – so more of an operational necessity than a foolish mistake.