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Writing off interest and penalties on a loan on a withdrawn IRA to a corporation that goes bankrupt?
Wiki User
∙ 16y ago
I'm not sure what your saying. Presumably, you took a loan against your 401k, and your employer went BK?
1) The filing of BK by your employer, or a creditor, in no way changes your obligation to pay back your debt.
2) a 401K is entirely separate from the company that establishes it for it's employees. Has a different ID#, different trustees, administrators, etc.
3) Presuming you actually incurred a penalty, (which a loan doesn't, unless you can't repay it or such), the penalty is payable to the IRS. They ain't bankrupt, and will likely continue to exist and pursue the funds.
4) The plan will continue under whomever administers it, or you will be required to roll it over into an IRA. That normally is done without penalty, etc....but, you can't have a loan against an IRA.
5) Virtually nothing with the 401k is tax deductible to you...the interest or investment gains earned isn't taxable, hence the writing it off isn't deductible. Penalties (like bounced checks, fines, tickets, etc.) especially when in a personal rather than business context, are virtually never tax deductible.
Wiki User
∙ 16y ago
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